In the decades leading up to the Covid-19 pandemic, acquisitions of hospitals and health systems by private equity firms soared, sparking debate about how the growing influence of PE in U.S. health care would affect costs, quality, and access. Supporters of PE cite its established track record of creating value for companies and investors across a variety of industries by improving operations, promoting an innovative culture, providing access to capital to support infrastructure improvements like IT systems and new facilities, leveraging economies of scale, and adopting managerial best practices. Critics point out the downsides of PE’s focus on maximizing returns such as surprising patients with costly bills, scaling back nursing staff, and avoiding low-margin service lines primarily used by vulnerable populations. Critics also question whether PE funds’ relatively short life cycle of seven to 10 years might have negative implications for the entities they acquire and, as a result, for the communities and patients those entities serve.
Research: What Happens When Private Equity Firms Buy Hospitals?
A study of 42 leveraged buyouts produced surprising findings that should guide policy reforms.
March 20, 2023
Summary.
The topic of private equity firms acquiring hospitals and health systems in the United States has sparked a fierce debate for years about whether the deals were good or bad for communities they serve. A study of 45 leveraged buyouts produced some surprising findings that should guide regulators when considering reforms.