Private Equity and Healthcare Systems

Authored By: Debanjoli Chowdhury Art By: Claire Ma “Private equity. The very term continues to evoke admiration, envy, and - in the hearts of many public company CEOs - fear,” said the Harvard Business Review (1). This sentiment hasn’t changed over the years: private equity’s influence has only continued to grow, and its sights are now set on the healthcare industry. According to Bain & Company, global healthcare private equity rose to $115 billion in 2024, with five transactions exceeding $5 billion compared with two deals in 2023 and one in 2022 (2). Studies have shown that from 2003 to 2017, private equity acquisitions have occurred predominantly in the Mid-Atlantic and Southern US, and private equity hospitals were more likely to be for profit, and located in urban areas (3). Additionally, studies have estimated the local market share of each private-equity acquired firm within ten physician specialties at the Metropolitan Statistical Area (MSA) level, and have overall seen that private-equity acquired firms exceed 30% in 108 MSA specialty markets and exceed 50 percent in 50 of those markets (4). This demonstrates how private equity has significant market share and is taking over in the business side of healthcare. But how does this affect patient care?

Studies have shown that acquisition by private equity firms leads to adverse health outcomes. According to a quasi-experimental evaluation of hospital quality and outcomes conducted by physicians from Harvard Medical School, Massachusetts General Hospital, and Beth Israel Deaconess Medical Center, private equity acquisition is associated with a 25% increase in adverse health outcomes, specifically a 27% increase in falls and a 38% increase in central line-associated infections. Surgical site infections have also doubled, even as private-equity hospitals performed 8% fewer surgical procedures. These statistics were taken from a population that uses Medicare. This increase in adverse events came along with a shift towards younger Medicare beneficiaries and clinically and socioeconomically lower-risk patients. However, with their increased lean towards lower-risk patient populations, their coded disease burden also increased, suggesting worsening health outcomes overall compared to control hospitals. These researchers have found that despite these events, there has been a reduction in in-hospital mortality. However, this may also be due to the relatively younger population in private-equity hospitals, fewer of which are dually eligible for Medicare and Medicaid, suggesting different socioeconomic backgrounds for patients in private-equity hospitals versus controls (5).

If private-equity acquisition leads to these adverse health outcomes, then why do hospitals agree to these deals? Essentially, private equity firms target hospitals struggling and try to help them by providing capital and technology to the practice. Usually, this targets hospitals in more remote areas, such as rural areas, in order to burden them with debt and eventually sell them for a profit. These strategies have seen results, as acquisition has been associated with a $432 decrease in cost per adjusted discharge and a 1.78 percentage point increase in operating margin (6). It is quite lucrative, but it often comes at the expense of proper medical equipment, staffing, and other environmental factors that are key to an overall positive experience as a patient. For example, private equity acquisition of hospitals has been associated with increased hospital-acquired adverse events despite a lower number of admitted Medicare patients, suggesting that private-equity acquired hospitals are providing poorer care for Medicare patients (5). Additionally, in a study conducted by Harvard Medical School physicians, which compared 73 private equity-acquired hospitals and 293 matched control hospitals, they found that patient ratings declined at private equity hospitals (65.0% to 65.2%) compared to an increase in control hospitals (66.2% to 69.2%). Additionally, the percentage of patients who would recommend the hospital also decreased in private-equity hospitals (66.9% to 65.5%) compared to control hospitals (68.2% to 69.3%). These statistics reflect how private-equity hospitals have lower ratings and lower patient satisfaction. Additionally, hospital staff responsiveness ratings were also lower for private-equity-acquired hospitals, showing that the budget cuts common in private-equity-acquired hospitals bring short-staffed hospitals and lower quality in patient care, which causes huge problems for healthcare delivery in impacted communities, especially those in remote areas that may not have readily available access to healthcare services (7).

References

Kaplan, S. N., & Strömberg, P. (2007). The strategic secret of private equity. Harvard Business Review. https://hbr.org/2007/09/the-strategic-secret-of-private-equity

Bain & Company. (2025). Year in review and outlook: Global healthcare private equity report 2025. https://www.bain.com/insights/year-in-review-and-outlook-global-healthcare-private-equity-report-2025/

Abdelhadi, O, et al. (2024). Private Equity-Acquired Physician Practices and Market Penetration Increased Substantially, 2012-21. Health Affairs, 43(3). https://doi.org/10.1377/hlthaff.2023.00152 https://www.healthaffairs.org/doi/10.1377/hlthaff.2023.00152

Offodile, A., et al. Private Equity Investments in Health Care: An Overview of Hospital and Health System Leveraged Buyouts, 2003-17. Health Affairs, 40(5). https://doi.org/10.1377/hlthaff.2020.01535

Kannan, S., Bruch, J., & Song,Z. (2023). Changes in Hospital Adverse Events and Patient Outcomes Associated With Private Equity Acquisition. JAMA. 2023;330(24):2365-2375. doi:10.1001/jama.2023.23147 https://jamanetwork.com/journals/jama/fullarticle/2813379

Cerullo, M. et al. (2022). Financial Impacts and Operational Implications Of Private Equity Acquisitions of US Hospitals. Health Affairs, 41(4). https://doi.org/10.1377/hlthaff.2021.01284

Bhatia, A, et al. Changes in Patient Care Experience After Private Equity Acqusition of US Hospitals. JAMA, 2025 Feb 11;333(6):490-497. doi: 10.1001/jama.2024.23450 https://pubmed.ncbi.nlm.nih.gov/39786740/