Private Equity

Over the past decade, private equity firms* have invested in, acquired, and consolidated healthcare facilities at an astonishing rate. From 2018 to 2022 alone, global healthcare buyouts by private equity firms were about $450 billion.¹ Over the last five years, healthcare deals (beyond just hospitals) have accounted for 15 to 21 percent of total private equity deals.²

Private equity firms typically use capital from institutional investors and high net worth individuals, along with large amounts of debt, to acquire companies. They usually seek to sell their holdings within three to five years for significant returns.³

Hospitals, physician practices, fertility clinics, nursing homes, and hospice facilities have all been targeted by private equity.⁴ The number of deals across 10 physician specialties increased from 75 in 2012 to 484 in 2021—a six-fold increase within a decade.⁵ For fertility clinics, a 2020 study found that private equity’s involvement in women’s healthcare accelerated starting in 2017,⁶ and a 2021 study estimated that 15 percent of fertility clinics had a private equity affiliation.⁷ A 2021 study looking at nursing homes identified 79 private equity deals covering 302 nursing homes across 37 states.⁸ And a 2023 study found that the portion of Medicare hospice patients in private equity–owned facilities increased from 5 percent in 2013 to 14 percent in 2021.⁹

A recent systematic review of the impact of private equity ownership on healthcare operators was not positive.¹⁰ The review included 55 studies across eight countries, with the majority (47) of the studies focused on the United States. From nursing homes and dermatology to gastroenterology and orthopedics, the review concluded that private equity ownership was most consistently associated with increases in costs to patients or payers. It also found mixed to harmful impacts on quality with reduced nursing staff levels or a shift toward lower nursing skill mix. The review did not identify any consistently beneficial impacts of private equity ownership.

It’s worth spending an extra moment on one of the private equity nursing home studies included in the review. This study found that private equity ownership increased mortality by 11 percent.¹¹ That’s about as bad as it gets in terms of a quality outcome. The increase in costs to patients or payers isn’t good, but it’s perhaps unsurprising. The increase in mortality—arguably the most important of all quality measures—is shocking. The authors state that “declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect.” This is just one study, but the possibility of these types of results should have all of us nervous about private equity’s move into healthcare.

–D. A.

*For a deeper exploration of private equity’s predatory tactics in healthcare and the devastating effects, see “How Private Equity Has Looted Our Hospitals” here. (return to article)

Endnotes

1. R. Braun et al., “Association of Private Equity Investment in US Nursing Homes with the Quality and Cost of Care for Long-Stay Residents,” JAMA Health Forum 2, no. 11 (November 2021): e213817.

2. R. Braun et al., “Changes in Diagnoses and Site of Care for Patients Receiving Hospice Care from Agencies Acquired by Private Equity Firms and Publicly Traded Companies,” JAMA Network Open 6, no. 9 (2023): e2334582.

3. A. Borsa et al., “Evaluating Trends in Private Equity Ownership and Impacts on Health Outcomes, Costs, and Quality: Systematic Review,” BMJ 382: e075244.

4. A. Gupta et al., “Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes,” NBER Working Paper No. 28474, National Bureau of Economic Research, February 2021; and A. Gupta et al., “Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes,” Review of Financial Studies 37, no. 4 (2024): 1029–77.

5. M. Chernew, M. Pany, and L. Dafny, “Two Approaches to Capping Health Care Prices,” Health Affairs, March 31, 2022, healthaffairs.org/content/forefront/two-approaches-capping-health-care-prices; and U. Reinhardt, “Why Single-Payer Health Systems Spark Endless Debate,” BMJ 334, no. 7599 (April 28, 2007): 881.

6. Federal Trade Commission, “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” press release, September 21, 2023, ftc.gov/news-events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-scheme-suppress-competition-anesthesiology-practices-across.

7. R. Pifer, “Judge Dismisses FTC’s Antitrust Suit Against Welsh Carson,” Health Care Dive, May 14, 2024, healthcaredive.com/news/ftc-welsh-carson-usap-lawsuit-texas-dismissed/716080.

8. Federal Trade Commission, “Federal Trade Commission, the Department of Justice and the Department of Health and Human Services Launch Cross-Government Inquiry on Impact of Corporate Greed in Health Care,” press release, March 5, 2024, ftc.gov/news-events/news/press-releases/2024/03/federal-trade-commission-department-justice-department-health-human-services-launch-cross-government.

9. California Department of Health Care Access and Information, “Access Market Consolidation,” hcai.ca.gov/affordability/ohca/assess-market-consolidation.

10. National Academy for State Health Policy, “A Tool for States to Address Health Care Consolidation: Improved Oversight of Health Care Provider Mergers,” blog, November 12, 2021, nashp.org/a-tool-for-states-to-address-health-care-consolidation-improved-oversight-of-health-care-provider-mergers.

11. E. Prager and M. Schmitt, “Employer Consolidation and Wages: Evidence from Hospitals,” American Economic Review 111, no. 2 (2021): 397–427.