Fighting The Harmful Impacts Of Private Equity On Our Economy, Public Pension Funds And Healthcare System

WHEREAS, private equity controls roughly $14.7 trillion assets,[1] employs more than 11.7 million workers[2] and manages more than $4 trillion of workers’ deferred wages in pension funds while charging high fees, making them an important determinant of AFT members’ pension fund risk and returns, as well as a major force shaping our national economy; and

WHEREAS, private equity also owns a growing share of our healthcare system, with private equity firms having acquired $750 billion in healthcare assets over the past decade, contributing to an ever more broken healthcare system, as evidenced by AFT’s Code Red campaign; and

WHEREAS, a recent study[3] in the Journal of the American Medical Association shows that hospitals being taken over by private equity firms is meaningfully associated with poorer quality outcomes for patients; and

WHEREAS, the private equity business model—with its emphasis on debt financing and short-term ownership—leads to draining capital, loading companies with debt at the expense of their long-term financial health, and slashing staffing and supplies well below what is needed to provide effective patient care; and

WHEREAS, the harmful impacts to healthcare delivery in our communities are especially dire for vulnerable populations like communities of color, patients in rural areas and Medicare recipients;

WHEREAS, there are now a growing number of cases of the collapse of healthcare systems following their acquisition by private equity firms, including Steward in Massachusetts and Prospect in Connecticut, creating pressure for state intervention to maintain our communities’ continued access to vital healthcare services; and

WHEREAS, private equity-owned hospitals have been implicated in serious violations of workers’ rights and patient care impacting healthcare workers across the country, including AFT members at LifePoint/ScionHealth, owned by Apollo Global Management; and

WHEREAS, in many cases, when private equity-owned hospitals eliminate services or close hospitals, private equity funds and their managers enjoy increased profit while patients lose access to life-saving medical care, workers lose jobs, and our communities suffer both economically and medically, highlighting a profound misalignment of interests; and

WHEREAS, public pension funds, including those investing the retirement savings of AFT members, have invested in private equity funds that buy up healthcare companies; and

WHEREAS, AFT members are participants in, and their deferred wages are contributed to, these same pension funds, the combined assets of which account for more than $3 trillion; and

WHEREAS, some public pension funds have begun to adopt policies to ensure that private equity firms and funds adhere to a set of labor standards to prevent some of their worst abuses; and

WHEREAS, in a recent Fortune article[4] on labor standards in private equity, AFT President Randi Weingarten and North America’s Building Trades Unions President Sean McGarvey highlighted the “virtuous economic cycle” created when companies operate grounded in respect for workers’ rights and the economic harm when they don’t; and

WHEREAS, private equity firms have contributed to the privatization of public services, including notably private prisons, which undermines the funding base of public pension funds by removing contributors; privatization, combined with economic upheaval caused by the private equity business model and its tax-related impacts, creates an existential threat to our defined-benefit pensions; and

WHEREAS, private equity firms promise, but may not consistently deliver, higher uncorrelated risk-adjusted returns, for which they charge fees that are much higher than the fees charged by public asset managers; and

WHEREAS, the U.S. Securities and Exchange Commission has found that private equity funds frequently do not disclose all of the fees they charge their investors, including AFT members’ pension funds, or offer sufficient information about their returns for investors to assess the accuracy of their claims; and

WHEREAS, the SEC’s efforts to protect investors, including AFT members’ pension funds, have been met with opposition from right-wing courts and members of Congress; and

WHEREAS, our public pension funds are exposed to considerable risk due to poor management of private equity-owned businesses, especially but not exclusively in healthcare, and the lack of public transparency and disclosure required of private equity-owned companies entirely hides those risks; and

WHEREAS, some AFT members serve as trustees overseeing their pensions and have pushed for greater transparency and accountability from private equity firms regarding the risk created by their business model and activities;

WHEREAS, the Biden administration has taken decisive action to address these critical issues on behalf of working Americans and their retirement security, including but not limited to the SEC’s promulgation of its Private Funds Rule to increase transparency on fees and returns; the Federal Trade Commission/Department of Justice/Department of Health and Human Services investigation into the many impacts of private equity ownership on our national healthcare infrastructure; and a recent White House convening of asset owners, consultants and private equity firms to promote fair labor standards:

RESOLVED, that the AFT will develop and promote a set of accountability standards to help trustees establish minimum labor standards they expect private equity firms, funds and their portfolio companies to abide by; will support trustees in adopting those policies at their funds; and will support trustees in working with pension staff and consultants to ensure that those policies are meaningfully implemented; and 

RESOLVED, that the AFT will work with public pensions across the United States to inform trustees of the risks associated with private equity investments, including in healthcare, and to engage with the companies and asset managers on investment risks stemming from the undermining of our social safety net and healthcare system; and

RESOLVED, that the AFT will educate the public on the effects that private equity healthcare ownership has on patients, communities and taxpayers; and

RESOLVED, that the AFT will support, defend and seek to strengthen the SEC’s Private Funds Rule; and

RESOLVED, that the AFT, in concert with its affiliates, will support public pension fund trustees’ efforts to push for maximum, regular, consistent and disaggregated disclosure of fees and returns data, as required by the implementation of the SEC Private Funds Rule, with public disclosure being a high standard, to assess whether public pension funds are in fact getting the risk-adjusted returns private equity promises; and

RESOLVED, that the AFT will develop a set of standards for trustees to address the aforementioned risks to our pensions, and urge fiduciaries of our funds to, consistent with their fiduciary duties, seek to limit investments in companies that aim to outsource public services impacting the fiscal health of our pension funds; and

RESOLVED, that the AFT will work at the state and federal levels to expand regulatory oversight of private equity, including calling on the FTC to rigorously investigate, bring enforcement actions, and issue rules related to healthcare acquisitions by private equity and their management practices, and to prevent healthcare acquisitions that pose risks to the stability and solvency of vital community health services; and

RESOLVED, that the AFT will support legislation, such as the federal Health Over Wealth Act and the Stop Wall Street Looting Act, that increases transparency for private equity firms and curbs their worst abuses, and will work with affiliates to promote state legislation that addresses the many risks to our communities, providers and healthcare infrastructure detailed in this resolution.