What Happens When Private Equity Firms Buy Hospitals?
Private equity firms have been acquiring hospitals and health systems in increasing numbers, leading to debate about the effect of private equity on costs, quality, and access. Supporters of private equity cite its ability to improve operations, promote innovation, provide access to capital, and adopt managerial best practices. At the same time, critics point to potential downsides such as surprise billing and staff reductions. However, a study of 42 leveraged buyouts of hospitals by private equity firms from 2003 to 2017 found that private equity ownership did not lead to worse clinical outcomes and improved financial performance by cutting costs and boosting revenues. Nevertheless, future policy discussions around private equity in healthcare should focus on strategies to align economic incentives and oversee private equity firms’ capital resources and management expertise to maximize patient benefits. The study analyzed and offered suggestions in critical areas such as:
- The Impact on Hospitals’ Finances and Operations
- The Effect on Clinical Outcomes
- Policy Implications
- Loopholes in Payment Policies
- Community Needs
- Physician Autonomy
- Antitrust Policy
What Happens When Private Equity Firms Buy Hospitals? (Cerullo, Yang, McDevitt, Maddox, Roberts, Offodile, HBR, 3/20).
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