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Limiting supplies to cut costs puts patients' lives in jeopardy.

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How a private equity firm prioritized profits over patients at its hospitals

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How is the government fighting back against Private equity in healthcare?

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How is the government fighting back against Private equity in healthcare?

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The Joe Biden administration is trying to take action against Private Equity firms with the help of the with the help of the Federal Trade Commission. Some of the methods to keep a watchful eye on private equity firms are leveraging new rules, congressional investigations, and increased state oversight, to name a few.

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US government targets healthcare private equity: Top points for risk management | DLA Piper

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The risk factors are intensifying as Congress contemplates legislation specifically targeting healthcare private equity, and as the FTC focuses more attention on this industry.

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Private equity, staffing, and supplies. 

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Private equity, staffing, and supplies. 

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Private equity firms look to reduce spending by cutting staff, hiring lower credentialed staff, outsourcing expensive medical treatments, and limiting the medical supplies available to the facility. In turn, these cuts create insufficient treatment of patients, lower staffing numbers, inadequate medical supplies, and staff burnouts. All of these issues create unsafe conditions for patients and lower the quality of care received.

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Private equity firms are buying up hospitals, nursing homes and ER operations. The drive for profits can run counter to helping patients, critics say.

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The cost of claims rose from $206 per claim to $285 per claim.

Total encounters rose from 138.1 to 191.1.

While the number of encounters rising may seem good it is more likely that the physician groups are providing low quality care.

Insurers payments rose by 16.5%.

Care prices rose by 26.0%.

Patients in acquired nursing homes were 8.7% more likely to be hospitalized and 11% more likely to need an emergency room visit.

Annual Medicare costs were 3.9 % higher per patient in nursing homes.

Nursing home deaths increased by 1.7%, 20,150 residents died in 12 years in acquired nursing homes.

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Private equity firms argue they bring value to health care. Critics of private equity's approach say the intense drive for quick profit puts patients at risk. We look at the research.

There were more than 1,400 private equity deals in health care last year totaling $208.7 billion, more than double the 664 transactions, valued at a total of $58.5 billion, in 2016, according to PitchBook Data, Inc., a Seattle-based firm that tracks mergers and acquisitions.

Private equity firms are companies focused on generating quick and substantial profits through acquisition and sales of businesses. They typically sell the acquired businesses within three to seven years for a higher price. This short-time commitment is one of the defining characteristics of private equity firms, according to the industry's trade association, the American Investment Council. In comparison, health insurance plans and even other for-profit companies buy hospitals, nursing homes and physician practices with an aim of holding onto them for a long time, according to Erin C. Fuse Brown, director of the Center for Law, Health & Society at Georgia State University.

Private equity firms owned 11% of U.S. nursing homes, along with 4% of U.S. hospitals as of 2021, according to the Medicare Payment Advisory Commission ( MedPAC), a nonpartisan independent legislative branch agency that advises Congress. Private equity firms also acquired at least 2% of physician practices in the U.S. from 2013 to 2016, an estimate that does not take into account previous acquisitions, according to MedPAC. Private-equity firms have continued to expand in primary care since 2016, according to MedPAC.

Private equity firms argue they bring value to health care businesses through improved management techniques and investment in newer technologies.

Critics of private equity's approach say the intense drive for quick profit puts patients at risk, because the firms cut staffing costs and make financial arrangements that commit the resources of acquired companies to paying back loans and associated interest.

"Private equity's business model involves buying companies, saddling them with mountains of debt, and then squeezing them like oranges for every dollar," Rep. William J. Pascrell Jr. (D-NJ) said at a 2021 hearing he chaired about these firms' health care operations.

It has been challenging to study how private equity ownership affects the care of patients, due in part to the difficulties in tracking down details about acquisitions. The Biden administration this year has made more data public about the ownership of nursing homes, intending to aid researchers. But the public reporting to date on these sales has been fairly murky.

The owners of private equity firms often borrow money for these purchases and then look to use revenue and assets of the acquired business to manage this debt. For example, firms sometimes sell the buildings owned by hospitals and nursing homes to other companies they own. They may then proceed to charge the hospitals and nursing homes rent for buildings they used to own. This results in a new expense for hospitals and nursing homes, diverting money they might have otherwise used on patient care.

Private equity firms also can charge fees for management and monitoring services to the nursing homes. In addition to these costs, some of the funds nursing homes receive for patient care go toward paying debt that private equity firms used to buy these businesses.

Tax advantages for private equity firms

Pascrell's been among the chief watchdogs of private equity firms. He has been seeking to have Congress address a loophole in the tax code that makes it more lucrative for owners of private equity firms to manage companies, including ones involved in health care.

Traditional business owners and managers have salaries that are taxed the same way as other employees. But executives in private equity firms have a more complex system for getting paid, which lowers their tax payments. They typically receive a management fee equal to 2% of assets under management plus 20% of the profits generated by their fund.

The 2-percent fee is subject to ordinary income and Medicare and Social Security taxes. But the 20% of profits are considered "carried interest" and taxed at lower capital gains rates, write Fuse Brown and coauthors in their 2021 report, " Private Equity Investment As A Divining Rod For Market Failure: Policy Responses To Harmful Physician Practice Acquisitions." The report was published by a joint initiative of the nonprofit Brookings Institution and the University of Southern California's Leonard D. Schaeffer Center for Health Policy and Economics. In the report, the authors recommend that the federal government take steps to remove tax advantages for private equity firms across the board, putting them on a more level playing field with other companies. They also note how the private equity firms have excelled in finding "market failures" in the U.S. medical system that can be exploited for high profits.

Surprise medical billing

Private equity firms, for example, played a large role in the phenomenon called surprise medical bills, Fuse Brown and her co-authors write.

They purchased practices that employ emergency room physicians and anesthesiologists. In many cases, the doctors were not part of agreements between health plans and the hospitals where they worked. Patients who had medical insurance were then often surprised to get large out-of-network bills from physicians who provided care at hospitals that were not in-network with the patients' health plans. (The Journalist's Resource covered this issue in June 2020; see "Surprise billing: Why consumers with medical insurance still may face major health care expenses.")

Congress addressed this in a December 2020 law that took effect earlier this year. The law on medical bills, known as the No Surprises Act, was included in a larger legislative package, including annual spending bills as part of the 2021 Consolidated Appropriations Act.

But there are ongoing battles between the Biden administration and physician groups, some of which have significant private equity investment, about how the rule is being implemented.

The Federal Trade Commission also has signaled greater interest in private equity's role in health care. The FTC in 2020 began a broad look into consolidation of physician practices, a trend driven in large part by hospital acquisitions.

State-level policy efforts

State lawmakers and regulators have also been looking at the influence of private equity on health care. California state Sen. Sydney Kamlager last year introduced bill SB 642, the Patients Over Profits Act. This would expand on the state's existing restrictions on what's called the corporate practice of medicine, with "significant effects in the private equity healthcare space," according to a post from the Los Angeles-based Pacific Health Law Group PC.

The corporate practice of medicine doctrine "prohibits corporations from practicing medicine or employing a physician to provide professional medical services," explains a brief from the American Medical Association.

The bill appears to have stalled - at least for now - but it's drawn notable attention from law offices that advise private equity firms. The law firm Polsinelli issued an alert about the bill in May 2021, warning that it would limit certain contractual arrangements between professional medical corporations and entities owned by people other than physicians, such as private equity investors.

Last year Massachusetts Attorney General Maura Healy announced a record settlement agreement for a health care fraud case involving a private equity firm.

HIG Capital agreed to pay almost $20 million to resolve claims that its South Bay Mental Health Center fraudulently billed Medicaid for services provided by unlicensed, unqualified, and improperly supervised staff members. The settlement arose from a lawsuit initially filed by a former employee who used a federal whistleblower-protection law, known as the False Claims Ac t, to report this improper treatment of patients.
Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization
Yashaswini Singh, Zirui Song; et al. JAMA Health Forum, September 2022.

The acquisition of a physician practice by private equity firms appears to result in doctors making larger insurance claims for their services as well as increasing the number of patients they see, Singh and her co-authors report. These findings raise questions about the "market-driven influence" that private-equity firms bring to health care, they write.

Their study focused on three specialties in which private equity firms have been active in recent years: dermatology, gastroenterology, and ophthalmology.

The authors identified 578 practices that private equity firms acquired after 2015 and then created a control group of 2,874 similar practices under independent ownership. They then looked at how doctors in these practices had billed insurance plans between Jan. 1, 2015 and Dec. 31, 2020. Among the measures considered was the average allowed amounts per claims, meaning the price negotiated by insurers.

The practices owned by private equity firms on average allowed claims of $206 per patient before acquisition and $285 after, an increase of $79. That was $20 more than the increase in the control group of practices, where the average allowed claims rose by $59 from $201 to $260.

In practices owned by private equity firms, the total number of services, including procedures, referred to as total encounters, rose during the study period from 138.1 to 191.1, an increase of 53 encounters. In the control group, the number of encounters rose by 19.7 from 123.8 to 143.5.

The gains seen in practices owned by private equity firms may reflect changes in practice operations, such as expanding hours, branding and advertising, or broadening referral networks, Singh and her co-authors write. But they also could be a signal of increased use of what's called low-value care, meaning services unlikely to do much to help patients preserve or improve their health, they write.
Association of Physician Management Companies and Private Equity Investment With Commercial Health Care Prices Paid to Anesthesia Practitioners
Ambar La Forgia, Amelia M. Bond; et al. JAMA Internal Medicine, February 2022.

Patients paid more for anesthesia if it was delivered by a doctor employed by a physician management company, with the tab rising even higher if that firm had received private equity funding, according to this cohort study of more than 2.2 million claims for privately insured patients.

The prices ultimately paid by insurers increased by 16.5%, or about $116.39, when anesthesia services were delivered by employees of management companies, compared with other physicians' hospital staff, the authors write. Further slicing the data to look at management companies in which private equity had invested, the authors report that prices for care by management companies without private equity investment rose by 12.9%, or about $89.88. But those for management companies with private equity investment, the increase was 26.0%, or $187.06.

The study focused on data from 2012 to 2017 for people seen at hospital outpatient departments and ambulatory surgical centers. To create their comparison groups, La Forgia and colleagues tracked down details about the ownership of anesthesia practices. They used a mix of corporate filings with the U.S. Securities and Exchange Commission, which are public documents, and data from consulting groups such as Irving Levin and SDC Platinum.

To track how much health plans paid, they worked with the nonprofit Health Care Cost Institute. HCCI data included claims for patients insured by Aetna, Humana, and UnitedHealthcare, three of the largest US health insurers. Identifying details for patients are removed from the claims data.

The authors suggest that physician management companies may have had superior negotiating tactics, resulting in higher payments. Strategies may have included threatening to move anesthesiologists out of networks, they suggest. "We did not find evidence that practitioners moved out of health plans' networks except for a modest increase in the year the contract started," they write. "However, the mere threat may be sufficient to influence negotiating dynamics between PMCs and insurance companies."
Association of Private Equity Investment in US Nursing Homes With the Quality and Cost of Care for Long-Stay Residents
Robert Tyler Braun, Hye-Young Jung; et al. JAMA Health Forum, November 2021.

People living in certain nursing homes owned by private equity firms were more likely to end up in emergency rooms and to be hospitalized for conditions for which better care might have prevented these episodes, the authors write. In this study, they focused on what health policy researchers call ambulatory care-sensitive visits. These include complications from conditions such as diabetes.

People living in private equity-owned nursing homes were 11% more likely to have an ambulatory care-sensitive emergency room visit and 8.7% more likely to be hospitalized, the authors write. This contributed to higher costs for Medicare, which pays for health care such as ER visits and hospital stays for most people 65 years and older in the United States. The authors estimated Medicare costs were 3.9% higher, or $1,080 more annually, per patient in nursing homes owned by private-equity firms compared to those living in other for-profit nursing homes.

To do this study, the authors created two comparison groups. They identified 302 nursing homes owned by private equity firms, with a total of 9,632 residents, and then found 9,562 comparable homes owned by other for-profit companies, with a total of 249,771 residents. They then compared information from Medicare claims and data from the giant health program on the quality of homes, known as the Minimum Data Set assessments for the period from 2012 to 2018.

The authors compared resident outcomes at private equity-owned facilities with resident outcomes at 9,562 other for-profit nursing homes, which included 249,771 long-stay residents during the study period.
Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes
Atul Gupta, Sabrina T. Howell; et al. National Bureau of Economic Research, February 2021.

Staying in a nursing home owned by a private-equity firm increases the probability of death during the stay and the subequent 90 days by 1.7 percentage points, report Gupta and his coauthors.

This finding was based on an analysis of records from the Centers for Medicare & Medicaid Services and a search to uncover deals in which private equity firms had bought nursing homes, Gupta and colleagues write. An estimated 20,150 lives were lost during the 12-year study period, compared with what would have happened if those patients were in other kinds of nursing homes, Gupta and colleagues write. In the paper, they note differences between nursing homes owned by private equity firms and those with other kinds of ownership, such as nonprofit organizations or businesses without the same kind of compelling incentives to cut costs.

Beyond the higher mortality rate, Gupta and colleagues find worse performance for private-equity-owned firms on several measures, including use of antipsychotic medicines and higher reported pain scores.
Private Equity Investments in Behavioral Health Treatment Centers
Benjamin Brown, Eloise O'Donnell, and Lawrence P. Casalino. JAMA Psychiatry, March 2020

Private equity firms have also shown marked interest in recent years in behavioral health services, which help people manage mental illnesses or substance use disorders. In 2016, private equity transactions accounted for 60% of all acquisitions in the field of behavioral health care, note the authors of this Viewpoint article.

The influx of private equity has helped to expand access to medication-assisted treatment for opioid addiction. But there are no peer-reviewed data yet to show how the involvement of private equity firms affects the quality and cost of behavioral health care, they write.

"Private equity firms bring business expertise and much-needed capital to behavioral health treatment and may introduce standards of care that benefit patients," they write. "On the other hand, some physicians (and patients) might be uneasy about this 'corporatization' of behavioral health care and the intense pressure on PE firms to generate short-term profits."

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The impact of private equity ownership in health care

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Private equity firms have spent billions of dollars acquiring hospitals and nursing homes. We look at what the reserach says about that.

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Increase in falls and infections after private equity acquisition:

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Increase in falls and infections after private equity acquisition:

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Studies show that after a private equity firm has acquired a hospital, patients experience:

25% increase in hospital-acquired conditions/adverse events

27% increase in falls

38% increase in central line infections, even though the placement of central lines has decreased by 16%

Increase in bed sores among Medicare patients.

There was a 0.1% decrease in deaths, but it is also noted that acquired hospitals were more likely to transfer sick patients to other hospitals.

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At a Glance

After hospitals were purchased by private equity firms, patients had a substantial increase in infections, falls, and other adverse events.

Acquisition of hospitals by private equity may lead to poorer health outcomes for patients in addition to increased costs for society.

Local hospitals might be owned by the university next door, by a non-profit organization, or by a for-profit company. Over the last decade, more and more hospitals have been purchased by private equity firms.

The private equity model involves using investor money-and additional debt-to purchase an asset like a hospital. The firm typically then cuts operating costs, often sells the real estate portion, and attempts to re-sell the entity for a profit after several years.

Previous research from a team led by Dr. Zirui Song from Harvard Medical School found that, on average, private equity acquisitions of hospitals lead to increased costs for society. However, the impact of private equity on the quality of medical care hasn't been clear.

To help measure this potential impact, Song's team looked at hospital-acquired conditions. These are health problems acquired during a hospital stay that a person did not have beforehand. They can include infections, blood clots, falls, and other adverse events.

The team looked at Medicare data on hospital-acquired conditions collected between 2009 and 2019. They compared the incidence of such conditions between 51 hospitals acquired by private equity during that period and 259 hospitals not owned by private equity firms (control hospitals). Hospitals in the two groups were matched by year studied, type of ownership, geographical location, and other factors.

The researchers also included individual factors associated with health care outcomes, such as race and ethnicity, in their analyses. Hospitalizations were studied from up to 3 years before to up to 3 years after private equity acquisition. The study, which was funded in part by NIH, was published on December 26, 2023, in JAMA.

The analysis showed that hospitals saw a 25% increase in hospital-acquired conditions after acquisition by private equity firms relative to the control group. This increase was mainly driven by a spike in infections after the placement of a central line (a type of IV inserted near the heart to deliver drugs, fluids, or other substances) and an increase in falls.

Private equity acquisition was associated with a 27% increase in falls. It was also associated with an almost 38% increase in infections after central-line placement. This increase occurred even though the hospitals owned by private equity placed 16% fewer central lines overall.

Overall, deaths decreased by 0.1% in private equity hospitals during the period studied. However, private equity-owned hospitals were more likely to transfer sick patients to other hospitals during their stay. This likely meant that more seriously ill patients were transferred away before their deaths. In addition, after a hospital's acquisition by private equity, the people admitted were slightly younger and less likely to be socially or economically disadvantaged than patients at control hospitals.

"We had previously found that private equity acquisitions led to higher charges, prices, and societal spending," Song says. "Now, we're learning that there are also downstream concerns for the clinical quality of care delivered to hospital patients."

-by Sharon Reynolds

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Infections and falls increased in private equity-owned hospitals

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After hospitals were purchased by private equity firms, patients had a substantial increase in infections, falls, and other adverse events.

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Something that could immediately be done is holding informational meetings at my local library or rec center to bring awareness to my community of the issues caused by private equity in healthcare. I would post a flyer and invite neighbors to come out and voice their opinions and feelings on the matter. There is power in numbers and it could prompt further actions from the communities.

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Private Equity in healthcare, a growing trend.

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Private Equity in healthcare, a growing trend.

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In 2021, private equity in healthcare acquired 515 medical facilities for the sum of 151 billion.

Private equity firms own about 22.5% of psychiatric hospitals.

Texas, at 97, leads with the most private equity-owned hospitals.

Private Equity firms own about 460 hospitals in the United States.

22% of the equity-owned hospitals are proprietary for-profit hospitals, and 8% of all private hospitals.

About 26% of the acquired hospitals are in rural areas.

The attached link will show you equity-acquired information by state and even has a private equity map of the United States.

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Key Points

Approximately 460 US hospitals are owned by private equity firms. That represents:

8% of all private hospitals

22% of all proprietary for-profit hospitals

At least 26% of private equity-owned hospitals serve rural populations.

A handful of private equity firms dominate the list of private equity-owned hospitals: Apollo Global Management (Lifepoint Health, ScionHealth), Equity Group Investments (Ardent Health Services), One Equity Partners (Ernest Health), GoldenTree Asset Management and Davidson Kempner (Quorum Health), Surgery Partners (Bain Capital), and Webster Equity Partners (Oceans Healthcare).

Texas has the most private equity-owned hospitals (97).

New Mexico has the highest proportion of private equity-owned hospitals (38%).

Nearly a quarter (22.5%) of private equity-owned facilities are psychiatric hospitals.

This tracker was updated in January 2024. For notes on this update, see here.

Jump to the PESP Private Equity Hospital Tracker

Jump to the interactive map of PE-owned hospitals in the U.S.

Private equity ownership of hospitals has drawn scrutiny in recent years as some private equity hospital acquisitions have produced troubling impacts for patients and workers across the country. We have seen private equity firms aggressively loot safety net hospitals, strip out valuable real estate, cut critical but less profitable services, and exploit government funding programs designed to support and stabilize healthcare access.

The consequences have been borne by healthcare workers and the communities they serve. Private equity's hospital profiteering has resulted in dangerous conditions, closures and reduced access to services, declining quality, and fraud.

Despite the threat they pose to critical healthcare services, private equity firms are largely able to operate in the shadows. Limited regulation of hospital ownership, particularly of the predatory financial practices sometimes employed by private equity investors, makes accurate and up-to-date data on private equity in hospitals difficult to generate and maintain.

In recent years researchers have conducted a handful of essential studies analyzing both the extent of private equity hospital ownership and its impacts (see for example: Anaeze C. Offodile II et al., " Private Equity Investments in Health Care: An Overview of Hospital and Health System Leveraged Buyouts, 2003-17," and Sneha Kannan et al., " Changes in Hospital Adverse Events and Patient Outcomes Associated With Private Equity Acquisition "). Overall, though, there is a dearth of research in the space. Particularly challenging is the ever-changing investment landscape; private equity firms typically own healthcare companies for just four to six years, buying and selling frequently enough that existing research loses relevance quickly.

In creating the Private Equity Hospital Tracker, we aim to provide an accurate, up-to-date, and accessible tool to pierce the veil of private equity hospital ownership.

Private equity investment in healthcare has grown dramatically in recent years, reaching an all-time high in 2021 of 515 deals valuing $151 billion.[1] Healthcare is second only to IT as the most popular target for private equity investment.[2]

The growing presence of private equity in healthcare is concerning. The private equity business model, which is characterized by the pursuit of outsized profits over short periods of time and a reliance on high levels of debt, is in many ways incompatible with providing quality affordable healthcare.

Hospitals are some of the largest institutions impacting patients, communities, and workers that have been targeted by private equity. For example, Bain Capital's $33 billion takeover of HCA Healthcare in 2006 was at the time the largest leveraged buyout in private equity history.[3] Today, some of the biggest hospital chains in the country are private equity-owned, including LifePoint Health (Apollo Global Management) and Ardent Health Services (Equity Group Investments).[4]

Private equity firms often seek to double or triple their investment over 4-7 years. The pursuit of these outsized return expectations over relatively short time horizons can lead to cost-cutting that hurts care. In addition, use of high levels of debt can divert cash from operations to interest payments and dividends paid out to private equity owners.

Below are some financial tactics characteristic of private equity investment:

High leverage: Private equity firms often utilize significant amounts of debt then buying companies. Firms typically buy companies through leveraged buyouts, whereby a private equity firm finances a substantial portion of an acquisition by taking out a loan secured by the company it is buying. High leverage can divert cash away from operations to paying interest on debt and leave companies more at risk for restructuring or bankruptcy.

Sale-leaseback of real estate: Private equity firms that own hospitals sometimes conduct sale-leaseback transactions, where the firm will sell the hospital's real estate to a third party and lease it back. While these transactions provide a quick way to monetize real estate and generate cash, they can leave hospitals with fewer assets and higher monthly lease payments.[5]

Debt-Funded Dividends: Some private equity firms siphon money out of companies they own through dividend recapitalizations, where a private equity firm directs its portfolio company to take on new debt and use the proceeds to pay the private equity owner a cash payout. These transactions can unnecessarily load healthcare providers with debt. While the private equity firm in these situations makes money, the healthcare provider often does not receive proceeds from the loan and still must pay it back, leaving it more vulnerable to market conditions and with fewer resources to support operations as it pays its monthly debt service payments.[6]

Roll-ups: Private equity companies often conduct "roll-ups" by buying up multiple companies in the same industry segment and merging them under the same corporate umbrella. These transactions can allow firms to take advantage of economies of scale. However, a wide body of research has shown that provider consolidation leads to higher healthcare prices for private insurance and public healthcare programs like Medicare.[7]

Fees: Private equity firms often charge management or advisory fees to the companies they own, which can cost companies millions of dollars each year. Fees are typically stipulated in a Management Services Agreement between the private equity firm and a company that it controls. In some cases, companies must pay fees to the private equity firm even for services never rendered ("accelerated monitoring fees"). These fees can further drain a company's cash away from hospital operations into the pockets of investors.[8]

We tracked 457 hospitals owned or operated by private equity firms. That represents approximately 8% of all private (non-government-owned or operated) hospitals (5485 facilities total).

For context, most community hospitals (58%) in the US are non-profits.[9] Of the country's proprietary for-profit hospitals, private equity-owned facilities represent approximately 22% of hospitals (of 1,870 facilities total).

Hospital Systems and Private Equity Firms
We identified dozens of different private equity firms that own or operate hospitals; however, a small number of firms own most of them.

By far the largest private equity owner and operator of hospitals is Apollo Global Management. We tracked at least 224 hospitals through Apollo's two health systems Lifepoint Health and ScionHealth.

The two companies are the result of a series of hospital acquisitions by Apollo, which in 2018 bought Lifepoint and merged it with another hospital chain, RegionalCare Hospital Partners.[10] Then in December 2021 Lifepoint acquired large acute care hospital chain Kindred Healthcare. As part of the transaction, Lifepoint shifted some of the acquired facilities and some of its existing hospitals into a new company called ScionHealth, which is also controlled by Apollo.[11]

See our report on Lifepoint Health: " Apollo's Stranglehold on Hospitals Harms Patients and Healthcare Workers " (January 2024)

Equity Group Investments owns 32 hospitals throughout Texas, Oklahoma, Idaho, Kansas, New Mexico, and New Jersey through its hospital system Ardent Health Services.[12]

Read more about Ardent Health Services in our report on rural healthcare: " Private Equity Descends on Rural Healthcare " (February 2023)

One Equity Partners owns Ernest Health, which operates at 31 acute rehab and long-term acute care facilities in 11 states: Arizona, California, Colorado, Idaho, Indiana, Montana, New Mexico, Ohio, South Carolina, Texas, Utah, and Wyoming.[13]

GoldenTree Asset Management and Davidson Kempner together own Quorum Health, which they acquired after it filed for bankruptcy in 2020.[14] As of September 30, 2022, Quorum operated 21 hospitals in rural and mid-sized markets in 13 states. Due to its lender credit agreement related to the bankruptcy, Quorum is actively selling hospitals to generate cash to meet its financial obligations.[15]

Bain Capital is the largest owner of Surgery Partners, which operates approximately 145[16] surgical facilities in 32 states. Although Surgery Partners is currently publicly traded, Bain Capital continued to be the largest investor with a 40% stake as of September 30, 2023. In a December 2023 filing with the SEC, Surgery Partners noted that "Although we are not a 'controlled company' within the meaning of the corporate governance standards of Nasdaq, Bain Capital will continue to be able to strongly influence or effectively control our decisions."[17]

The top owner of psychiatric hospitals is Webster Equity Partners, which owns hospital chain Oceans Healthcare.[18]
* This number includes Surgery Partners' hospital locations. It differs greatly from the total number of Surgical Partners facilities (approximately 145) because our tracker does not include ambulatory surgery centers or other outpatient locations.
Note: The numbers reflected in our tracker are an approximation. In many cases they differ from what hospital systems or private equity firms report. These differences may be the result of recent transactions, inaccuracies in CMS source data, and/or limited publicly available information on facility ownership.

Mapping Private Equity Hospital Ownership
The state with the most PE-owned hospitals is Texas, with 97 facilities. This represents 18% of the state's private hospitals.

While New Mexico has fewer private equity-owned hospitals (17 facilities), the state has the highest proportion of private equity-backed hospitals compared to all private non-government hospitals at 38%.

In Wyoming, three of the state's 8 private hospitals are private equity-owned, representing 38% of private hospitals. However, 21 of Wyoming's 29 hospitals are government-owned.

At least 122 (27%) of the private equity-owned facilities serve rural populations. Private equity firms have a growing presence in rural healthcare services.

See our report on private equity's growing influence in rural healthcare: " Private Equity Descends on Rural Healthcare " (February 2022)

Types of Hospitals
Non-specialty acute care hospitals were the most common type of private equity-owned hospital at 160 (35.0%) facilities. The second most common were rehabilitation hospitals, at 117 (25.6%) facilities, followed closely by psychiatric facilities at 103 (22.5%) facilities. Long term acute care facilities (LTACH) were the least common, at 76 facilities (16.6%).

The high volume of psychiatric hospitals reflects private equity's broader interest in behavioral health, which has been a top investment target for private equity investment.

See our reports on private equity investments in behavioral health:

" The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth " (February 2022)

" Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity " (September 2020)

Quality Ratings
CMS assigns an overall star rating between 1 and 5 for hospitals that summarizes quality information collected by CMS, including mortality, safety, readmission, patient experience, and timely and effective care. According to CMS, "The overall rating shows how well each hospital performed on an identified set of quality measures compared to other hospitals in the U.S. The more stars, the better a hospital performed on the available quality measures."

Just 111 (24%) of the 457 hospitals we tracked had CMS star ratings available, which we believe to be an insufficient amount of data to glean trends in private equity ownership. However, the distribution of ratings is shown below for reference alongside the national average.[19]

Of the 111 facilities with star ratings available, private equity-backed facilities lagged behind national averages with a greater proportion of 1-, 2-, and 3-star facilities and a lower proportion of 4- and 5-star than the national average. For example, 2-star facilities represented 32.4% of private equity-backed facilities compared to the 21.7% national average and 1- star facilities represented 12.6% of PE-backed facilities compared to the 8.1% national average. Meanwhile, 5 star-facilities represented just 5.4% for private equity compared to the 15.7% national average.[20]

Our list is based on Center for Medicare and Medicaid Services' (CMS) lists of all Medicare-enrolled hospitals, including acute care hospitals and specialty hospitals (long-term acute care, rehabilitation, children's, psychiatric, and religious hospitals).[21]

We identified hospitals that are private-equity-owned through a combination news searches and the data provider Pitchbook, which tracks private equity firms and deals. We also consulted the CMS database "Hospital All Owners Information," which provides ownership information self-reported by facilities.[22] This data was in most cases insufficient on its own to trace private equity ownership but provided helpful clues.

It is likely that there are hospitals that we failed to identify - private equity firms are generally not required to disclose acquisitions, so many deals are not publicly disclosed. Our list provides an approximation based on the best available data.

What counts as Private Equity?
We include traditional private equity buyouts as well as growth/expansion capital investments. We also include hospitals that are operated by PE firms through more complex ownership structures, such as joint ventures with non-profits or academic health systems.

We do not include venture capital (VC) investments in our count of private equity-owned facilities, but we have indicated where we have seen VC investments in our list.

Rural vs Urban
As a basis for data on rurality, we used data from the Cecil G. Sheps Center for Health Services Research on rural hospitals in the US.[23]

We calculated rurality based the following factors:

Rural status based on the definition used by the Federal Office of Rural Health Policy (FORHP) and the hospitals' payment designation with CMS (provided by the Sheps Center).

CMS rural payment designations: sole community hospital (SCH), Medicare-dependent hospital (MDH), rural referral center (RRC), and critical access hospital (CAH).

This data was last updated in January 2024. Here is a summary of the most significant changes:

The data on rehabilitation hospitals we used in the original version of this tracker was incomplete. This version added almost 900 rehabilitation hospitals that were not originally reflected. 67 of those additions are PE-owned.

The update reflects corrections to facilities that were incorrectly labeled as not PE-backed. The most significant additions were 20 new Lifepoint Health facilities and 15 new ScionHealth facilities.

A handful of hospitals were removed as PE-owned due to sales, including 6 facilities previously owned by Quorum Health and one facility owned Pipeline Health.

A 2021 study published in Health Affairs looked at private equity acquisitions of short-term acute care hospitals between 2003-17. The study identified a total of 42 private equity acquisitions involving 282 unique hospitals for the period. [24]

The Health Affairs study had one notable outlier: 57% of the total hospital acquisitions (161 hospitals) were the result of Bain Capital and KKR's 2006 acquisition of HCA,[25] one of the largest hospital buyouts in history. HCA went public in 2010, so those hospitals are not included in our tracker.[26]

Another 2021 study published in the Annals of Internal Medicine identified 130 hospitals under private equity control in 2018. Most hospitals identified in the study were in the South, considered rural and in zip codes with a lower median household income. The study also found fewer full-time-equivalent employees per occupied bed and lower average patient experience scores among private equity-owned hospitals, though the researchers note that these measures "do not fully capture quality of care" and that "additional research is necessary to identify and characterize the mechanisms underlying these differences."[27]

In December 2023, a study published in the Journal of the American Medical Association (JAMA) found that rates of hospital-acquired complications for patients increased by 25% at hospitals after they were purchased by private equity firms. The increase was driven by a 27% increase in falls, which tend to happen on the general floors of the hospital; a 38% increase in central line infections, which are associated with ICU care; and a doubling of the rates of surgical site infections. The study drew from Medicare Part A claims data for hospital stays between 2009 and 2019 at 51 private equity-acquired hospitals compared against 259 matched control hospitals (non-PE-owned).[28]

Hospital Management Companies
Some non-profit or publicly owned hospitals are operated by private-equity-owned management companies. Many of these management relationships are not publicly disclosed, so it is difficult to know the extent to which private equity firms manage public and non-profit facilities.

One such company is Ovation Health (formerly QHR Health), owned by private equity firm Grant Avenue Capital since 2021, which focuses on independent and rural hospitals.[29] On its website, Ovation calls itself the "The premier provider of shared services to independent hospitals, health systems, and their leadership across the nation." It currently has over 375 hospital management clients across 47 states.[30]

Hospitals that are managed by private equity-owned companies like Ovation are not yet captured in our tracker, but we intend to include these facilities when more data becomes available.

Tracking Sale-Leasebacks
Many private equity-backed hospitals have gone through sale-leaseback transactions, selling their underlying real estate to a third party, typically a REIT, and leasing it back. We have begun tracking hospitals that have executed sale-leaseback transactions, and have included preliminary data in the tracker. We intend to build upon this data in future updates to the tracker.
See Our Other Work on PE-Owned Hospitals
Apollo's Stranglehold on Hospitals Harms Patients and Healthcare Workers (January 2024)

How private equity raided safety net hospitals: Pipeline Health (July 2023)

Private Equity Descends on Rural Healthcare (February 2023)

How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag (November 2022)

Steward Health Care Reaches $4.7 Million Settlement to Resolve Allegations of False Claims Act Violations (June 2022)

Apollo Global Management Completes Merger of Kindred Healthcare and LifePoint Health, Shifts Some Hospitals to New Company (January 2022)

Private Equity Firms Reap Payouts After Hospital Chain Received $1.6 Billion in CARES Act Support (September 2021)

[1] "Healthcare Private Equity Market 2021: The Year in Review" (Bain & Company, March 16, 2022), bain.com/insights/year-in-review-global-healthcare-private-equity-and-ma-report-2022/.

[2]https://www.bain.com/globalassets/noindex/2023/bain_report_global-private-equity-report-2023.pdf pg. 27.

[3] Kevin Dowd, "This Day in Buyout History: KKR, Bain Capital Complete the Biggest LBO Ever | PitchBook," Pitchbook News, November 17, 2017, https://pitchbook.com/news/articles/this-day-in-buyout-history-kkr-bain-capital-complete-the-biggest-lbo-ever.

[4] Anna Falvey, "100 of the Largest Hospitals and Health Systems in America | 2023," Becker's Hospital Review, February 28, 2023, https://www.beckershospitalreview.com/lists/100-of-the-largest-hospitals-and-health-systems-in-america-2023.html.

[5] Brian Spegele, "How a Small Alabama Company Fueled Private Equity's Push Into Hospitals," Wall Street Journal, February 14, 2022, sec. Markets, https://www.wsj.com/articles/hospitals-private-equity-reit-mpt-steward-11644849598.

[6] Eileen O'Grady, "Dividend Recapitalizations in Health Care: How Private Equity Raids Critical Health Care Infrastructure for Short Term Profit" (Private Equity Stakeholder Project, October 2020), https://pestakeholder.org/reports/dividend-recapitalizations-in-health-care-how-private-equity-raids-critical-health-care-infrastructure-for-short-term-profit/.

[7] Karyn Schwartz et al., "What We Know About Provider Consolidation," KFF (blog), September 2, 2020, https://www.kff.org/health-costs/issue-brief/what-we-know-about-provider-consolidation/.

[8] Eileen Appelbaum and Rosemary Batt, "Fees, Fees and More Fees: How Private Equity Abuses Its Limited Partners and U.S. Taxpayers" (Center for Economic and Policy Research), accessed March 24, 2023, https://www.cepr.net/report/private-equity-fees-2016-05/.

[9] "Fast Facts on U.S. Hospitals, 2022 | AHA," American Hospital Association, accessed March 23, 2023, https://www.aha.org/statistics/fast-facts-us-hospitals.
[10]https://www.wsj.com/articles/lifepoint-health-agrees-to-apollo-buyout-1532347207?mod=article_inline
[11] "LifePoint Health Completes Kindred Healthcare Transaction," December 23, 2021, https://lifepointhealth.net/news/2021/12/23/lifepoint-health-completes-kindred-healthcare-transaction.

[12] "Ventas and Equity Group Investments Announce Completion of Ardent Transactions," press release, Ventas and Equity Group Investments, August 4, 2015. https://www.businesswire.com/news/home/20150804006878/en/Ventas-Equity-Group-Investments-Announce-Completion-Ardent ; Ardent Health Services website, accessed January 2024. https://ardenthealth.com/systems.

[13] "Portfolio," One Equity Partners, accessed March 1, 2023, https://www.oneequity.com/portfolio ; Ernest Health website, accessed January 2024. https://ernesthealth.com/our-hospitals/.

[14] Case M.9845 - DAVIDSON KEMPNER CAPITAL MANAGEMENT / GOLDEN TREE ASSET MANAGEMENT / QUORUM HEALTH CORPORATION, No. 32020M9845 (European Commission, Directorate-General for Competition May 28, 2020). https://ec.europa.eu/competition/mergers/cases/decisions/m9845_112_3.pdf

[15] "Moodys Downgrades Quorum Health Corporations CFR to Ca; Outlook Negative," Moodys Investor Service, January 30, 2023, https://www.moodys.com/research/Moodys-downgrades-Quorum-Health-Corporations-CFR-to-Ca-outlook-negative-PR_473331#:~:text=The%20outlook%20is%20negative.,in%20the%20next%20few%20quarters.

[16] While Surgical Partners operates approximately surgical locations, only a fraction of these appear in our hospital tracker. This is because the tracker only includes CMS-designated hospitals, and would not reflect ambulatory surgery centers, physicians' practices, or other outpatient locations.

[17] Surgery Partners prospectus supplement filed with the Securities and Exchange Commission dated December 14, 2023. https://www.sec.gov/Archives/edgar/data/1638833/000110465923126902/tm2332214-9_424b7.htm#sATPS. Pg. S-3.

[18] "Oceans Healthcare Secures New Capital Partner, Eyes Accelerated Growth," Oceans Healthcare (blog), February 1, 2022, https://oceanshealthcare.com/ohc-news/oceans-healthcare-secures-new-capital-partner/.

[19] "National distribution of the Overall Hospital Quality Star Rating," Overall hospital quality star rating, Centers for Medicare and Medicaid Services. Based on July 2023 results. Accessed January 2024. https://data.cms.gov/provider-data/topics/hospitals/overall-hospital-quality-star-rating/

[20] National averages are drawn from CMS data as of July 2023. We subtracted hospitals for which there are no ratings available. Percentages are based on all rated hospitals.

[21] See the CMS Hospital General Information dataset: https://data.cms.gov/provider-data/dataset/xubh-q36u. See the CMS Long-Term Care Hospital - General Information: https://data.cms.gov/provider-data/dataset/azum-44iv . See CMS Inpatient Rehabilitation Facility - General Information: https://data.cms.gov/provider-data/dataset/7t8x-u3ir. All accessed January 2024.

[22] Centers for Medicare and Medicaid Services, "Hospital All Owners Information," CMS database, accessed February 2023. https://data.cms.gov/provider-characteristics/hospitals-and-other-facilities/hospital-all-owners.

[23] UNC Sheps Center List of Hospitals in the U.S. (2022 dataset). https://www.shepscenter.unc.edu/programs-projects/rural-health/list-of-hospitals-in-the-u-s/.

[24] Anaeze C. Offodile II et al., "Private Equity Investments In Health Care: An Overview Of Hospital And Health System Leveraged Buyouts, 2003-17," Health Affairs 40, no. 5 (May 1, 2021): 719-26, https://doi.org/10.1377/hlthaff.2020.01535.

[25] Anaeze C. Offodile II et al., "Private Equity Investments In Health Care: An Overview Of Hospital And Health System Leveraged Buyouts, 2003-17," Health Affairs 40, no. 5 (May 1, 2021): 719-26, https://doi.org/10.1377/hlthaff.2020.01535.

[26] "KKR, Bain's HCA Files for up to $4.6 Billion IPO," Reuters, May 7, 2010, sec. Business News, https://www.reuters.com/article/uk-hca-idUKTRE6464I420100507.

[27] Joseph Bruch, Dan Zeltzer, and Zirui Song, "Characteristics of Private Equity-Owned Hospitals in 2018," Annals of Internal Medicine 174, no. 2 (February 2021): 277-79, https://doi.org/10.7326/M20-1361.

[28] Kannan S, Bruch JD, Song Z. 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/article-abstract/2813379

[29] QHR Health Becomes Independent Company Through Acquisition by Grant Avenue Capital," QHR Health, June 1, 2021, https://www.prnewswire.com/news-releases/qhr-health-becomes-independent-company-through-acquisition-by-grant-avenue-capital-301303045.html

[30] Ovation Healthcare website, https://ovationhc.com/why-ovation-healthcare/. Accessed January 2024.

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PESP has created the Private Equity Hospital Tracker A current list of all private equity-owned hospitals in the U.S. Key Points Approximately 460 US hospitals are owned by private equity firms.

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How Private equity is investing in healthcare.

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How Private equity is investing in healthcare.

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Hannah Norman visual reporter at KHN breaks down private equity in healthcare with the help of Yashaswini Singh, a healthcare economist at John Hopkins University.

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How Private equity is investing in healthcare.

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How Private Equity Is Investing in Health Care

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Private equity firms are for-profit firms that buy out struggling hospitals to make a profit for their investors. They use one of the following strategies to profit off of the hospitals:

1. Private equity firms, with wealthy investors, take out loans using the hospital as collateral. They then use those loans to profit and pay back their investors leaving the hospital in debt.

2. Private equity firms sell the hospital's assets, facilities, and land to other investors, now forcing the already struggling hospital to have to pay rent to the investors.

3. The Private equity firm quickly resells the assets to other big companies for a larger sum.

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Concerns over how private equity is affecting health care access, quality, and costs in the United States have exploded in the past few years, reflecting the growing activity of private investors in health care markets.

Private equity investors spent more than $200 billion on health care acquisitions in 2021 alone, and $1 trillion in the past decade. Private equity firms have long been active in hospital, nursing home, and home care settings. But recently, acquisitions of physician practices have skyrocketed, especially in high-margin specialties like dermatology, urology, gastroenterology, and cardiology. A recent study showed that in 13 percent of metropolitan areas, a single private equity firm owns more than half of the physician market for certain specialties.

Given their potential impact on the cost, quality, and access to health care in the U.S., these developments have generated considerable interest among federal and state policymakers.

What is private equity?

Strictly speaking, private equity in health care is a form of for-profit ownership reflecting investment in health care facilities by private parties. In general, for-profit health care organizations can take two forms: private or public.

Public, investor-owned organizations sell shares to the public that trade on a stock exchange. UnitedHealth Group, which now owns thousands of physician practices, is one example. Another is Hospital Corporation of America. These organizations are regulated by multiple federal laws and agencies, including the U.S. Securities and Exchange Commission.

Shares of private, investor-owned organizations - such as private equity-owned firms - are not traded on public markets. As such, they aren't required to follow the same regulations as public companies.

As a form of ownership, private equity is not new to health care. A variety of private investors have invested in and owned health care facilities in the past. These have included individual physicians who invest in and own their for-profit private practices and pay taxes on their earnings. Physicians and other private investors have long owned health care facilities, such as specialty hospitals, dialysis units, ambulatory surgical centers, and imaging units.

What's different now about private equity in health care?

There have been two key shifts in recent years. The first is in who's doing the investing. Instead of physicians or small groups of investors using their own funds, investors now also include firms that manage funds for large groups of wealthy individuals or institutions. Fund managers and their investors may have little knowledge of health care, viewing it as just another market opportunity.

The second change relates to how they're investing. Aggressively pursuing quick profits, some private equity firms are taking out loans, using their newly acquired health care facilities as collateral. The loans are used to pay back investors quickly and handsomely, while the health care organizations carry the debt. Another strategy is to sell the health care organization's land, facilities, and other capital assets to other investors. The proceeds from the sales generate returns for fund managers and their investors. Health care organizations then rent those assets back from the new owners.

A third approach to getting a quick return is to flip the asset - selling the newly purchased health care organization to another buyer, such as a publicly traded company like CVS or Amazon, for a large multiple of the original price. To attract such a buyer, however, the private equity firm must boost the organization's profits, which usually requires rapidly cutting costs, raising prices, or increasing the number of services provided.

All these strategies are legal, but until recently they hadn't been deployed as widely or intensively in health care.

How does private equity impact health care costs, quality, and access?

More research is needed on how private equity ownership affects health care costs, quality, access, and equity. So far, the results on cost are clearest. Given its short-term financial focus, private equity tends to increase health care prices and utilization - and thus costs - to both patients and the larger society. Some new private owners of health care facilities may adopt reforms that make care more efficient and reduce costs, thus improving value. And there are examples of promising innovations, such as CareMore, a privately funded organization that reengineered care for high-risk elderly individuals. But in general, it's much easier, and more common, for private owners to raise prices and volumes and to focus on high-margin services.

Regarding quality, there is no evidence that private equity ownership leads to systematic improvements in care. In fact, a widely cited study of nursing homes acquired by private equity owners showed a 10 percent increase in mortality among Medicare patients. However, there haven't been additional studies demonstrating such dramatic, harmful effects.

In terms of access to care and equity, the financial pressures on acquired facilities to pay rent or repay loans are raising alarms about possible bankruptcies and closures of hospitals, nursing homes, and other health care facilities. This is especially concerning for those serving poor and rural communities, since these entities tend to be less lucrative financially.

Why are private equity firms investing in health care?

Several factors have driven private equity's attraction to health care in recent years. One has been the low cost of capital resulting from low interest rates, which has spurred an influx of investors seeking to earn a piece of the $4 trillion health care economy.

A second factor has been the increasing commercialization of health care, which has made it more acceptable for private investors to treat health care - traditionally a nonprofit sector - like other markets. In fact, some nonprofit health care organizations have begun to look more and more like their for-profit brethren. Nonprofits have sought near-monopoly power in local markets through widespread mergers and acquisitions, which have enabled them to raise prices sharply. Compensation for nonprofit executives has also skyrocketed, as have their organizations' capital reserves.

A third factor has been the ongoing failure of the U.S. health care system to deliver value and keep Americans healthy. With falling life expectancy, increasing maternal mortality, glaring inequities, soaring costs, and punishing medical debt, our health system is ripe for disruption. Private investors - with their energy, fresh perspective, and capital - offer hope for change.

What's next for private equity in health care?

As interest rates rise and investors pick the low-hanging fruit in health care, it seems unlikely that private equity will maintain its current rate of expansion into the sector, at least for the short term. Public scrutiny of private investment in the health sector is also increasing, as concerns grow about the effects on costs, quality, equity, and access.

Policymakers' first step in addressing these concerns will likely include new transparency rules to make it clear who owns private, for-profit health care organizations. Congress is considering such requirements, and the Security and Exchange Commission has issued a new rule requiring increased transparency about the identity of investors in private equity arrangements. It seems doubtful, however, that greater transparency rules alone could slow private equity's penetration of health care markets.

Other potential changes include reforming antitrust laws to open the sale of local physician practices to scrutiny. The Federal Trade Commission recently sued a private equity firm that has been trying to dominate the anesthesia market in areas of Texas.

Some scholars believe that private equity serves as a divining rod for failures in our current health care market. Investors, they believe, are simply exploiting the system's weaknesses for profit. In this sense, the growth of private equity is a symptom, not the cause, of our health system's failure to meet the needs of Americans.

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Concerns over how private equity is affecting health care access, quality, and costs in the United States have exploded in the past few years. Learn more.

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I chose this topic because it was a new concept introduced to me in Chapter 1 of my AH 224 class. I have been in the medical field for a while and had no idea private equity was buying up hospitals. Even though I was fully aware of Hahnemann Hospital's closing, I did not truly understand the fall of a hospital that was vital to our community. This prompted me to want to look into the private equity issues in healthcare.