“Private equity has invested nearly $1 trillion into U.S. health care since 2006. While private equity’s investment in health care only represents a small portion of the massive U.S. health care system, the industry has made critical contributions benefiting providers and patients alike. These investments have funded research into deadly diseases like Alzheimer’s and Parkinson’s, expanded and renovated facilities, modernized medical records and health care data, and made other needed investments.” – American Investment Council
The last decade has seen a tidal wave of private equity (PE) investment into U.S. hospitals, outpatient centers, nursing homes, and physician practices. Indeed PE acquisitions of physician practices is up 6 fold over the past decade or so. The capital flows freely—but does the quality of care grow with the profits? Is patient safety sacrificed for the bottom line?
Some say private equity is revitalizing healthcare with much-needed money for investments in healthcare modernization and improved efficiency. Others argue it is compromising safety by cutting corners and prioritizing financial return over human outcomes.
Private equity firms manage Billions of healthcare capital per year in the US. These arrangements often inject the funds that hospitals need to improve and can’t find elsewhere. Money is needed for electronic health records, imaging systems, and even basic capital improvements that can get greenlit faster with better funding mechanisms.
In some cases, performance metrics improve post-PE-acquisition. A Duke-led analysis found declines in in-hospital and 30-day mortality among PE-backed hospitals for certain conditions like AMI. A study in 2021 revealed no evidence of increased patient mortality or readmission rates at PE-acquired hospitals.
Private Equity investment strategies may improve management discipline and accountability. PE-backed hospitals often introduce the use of financial Key Performance Indicators, advanced analytics, and centralized procurement strategies that bring operational discipline to previously siloed, sluggish, inefficient systems. We need to work on how these same quantitative approaches can improve patient centeredness, timeliness of care delivery, access to care, clinical effectiveness and efficiency and of course Safety!
The Commonwealth Fund reported in 2023 that there is no evidence that PE investment in healthcare leads to improved quality of care. The same report points towards evidence that mortality increased in nursing homes bought by PE firms. The data is not clear. It is not an either or proposition. The conclusion one can draw is that more research is needed on how PE affects quality.
One ought not be categorically against private investment in healthcare. There are many hospitals and other concerns currently owned, at least in part, by PE firms. We ought to be concerned about what happens when clinical complexity is managed like a commodity, and short-term financial return outpaces long-term safety planning. We ought to be thinking about how capital infusions can be used to improve quality, safety and innovation.
We must stop pretending PE firms are one size fits all monoliths. Some firms invest responsibly; Others work more aggressively to improve their bottom lines. The old myth that big business is evil does not fly…and by the way, healthcare is Big Business! We need to work to make American healthcare the best and safest it can possibly be. What matters most is transparency, data sharing, and evidnce based care — especially when patients may have no say in who owns the hospital where their lives may hang in the balance.
More to come…
Selected References
“Hospitals Depend on Private Equity to Support Better Patient Outcomes and Improve Efficiencies”
“How Should We Assess Quality of Health Care Services in Organizations Owned by Private Equity Firms?” La Forgia, A et.al
“Changes in Hospital Adverse Events and Patient Outcomes Associated With Private Equity Acquisition.” Kannan, et.al.
https://jamanetwork.com/journals/jama/fullarticle/2813379
“What Happens When Private Equity Takes Over a Hospital: New analysis shows alarming increase in patient complications.” Miller, J
https://hms.harvard.edu/news/what-happens-when-private-equity-takes-over-hospital
What hospitals are owned by PE? Find out here:
https://airtable.com/appZYwbt3vioNrb95/shricxhAQSjpv5ec8/tbl058jjL6qNMqzkM
“Private Equity is Improving Healthcare.” American Investment Council