Abstract

Over the past two decades, private equity (PE) firms-private investors that use large pools of money to buy into and restructure companies-have become increasingly involved in U.S. healthcare ownership and management. PE's goal of acquiring quick financial gains is typically accomplished by assigning debt to the facilities and practices it buys, cutting labor costs, changing services to the most lucrative, upcoding diagnostic codes to raise prices, and merging, shutting down, or selling practices. This study shows that private equity has expanded into nearly every corner of U.S. healthcare, and in some sectors, such as hospitals, nursing homes and physician specialties, quite significantly. The PE business model is theorized to be incompatible with high quality, efficient, accessible healthcare. Empirical research supports this framework to some extent. Few studies find evidence for better healthcare quality/patient outcomes or lower expenditures. A few studies find better access in profitable areas for PE, and three find lower operating costs and/or higher operating margins, which may have negative impacts in other healthcare system outcomes. A few studies show no difference in various healthcare system outcomes. Otherwise, the preponderance of studies indicates worse or mixed (mostly worse) outcomes with PE ownership. PE involvement in healthcare is greater in the U.S. than Europe, but there is potential for it to reach similar levels in Europe. Federal and state policy initiatives to regulate PE in U.S. healthcare are in the incipient stage and would benefit greatly by more research on PE's impacts.