I think it’s safe to say we all hope the doctors we use and the hospitals we got to have our best interests in mind. Certainly, we hope our doctors listen to us, carefully diagnose what ails us, and develop treatment plans that will help us be as healthy as possible. And we hope our hospitals have adequate, well-trained staff who can meet our needs. Simply put, our healthcare providers should do their best without considering about how much money we will make them. However, the world of medicine is taking a hard hit from private equity firms and for-profit healthcare providers. Can you trust private equity owned hospitals and other healthcare providers? What about other types of for-profit hospitals and providers?

What’s the problem?

Nonprofit hospitals, hospices, and nursing homes do not operate with profits in mind. Instead, their main purpose is to serve their clients as best they can. Conversely, for-profit facilities, including those owned by private equity (PE) firms, generally put profits first. Importantly, although both aim to make money, private equity tends to have higher expectations for profits.

Alarmingly, in recent years, private equity firms have invested $1 trillion to become significant players in many sectors of the health care industry, including hospitals, nursing homes, doctor practices, mental health facilities, and emergency department staffing companies.

Importantly, to finance their healthcare investments, PE owners typically slash operating expenses to increase earnings thereby appealing to new buyers in a few years. This approach may include eliminating workers or replacing highly paid workers with lower paid ones, using cheaper supplies, pressuring doctors to perform more profitable procedures, and using aggressive billing and collection practice,

Unsurprisingly, PE firms want high returns on their investments – often in just three to five years – which can conflict with the goal of delivering affordable, accessible, high-value health care.

Early evidence shows that private equity acquisition is associated with increased charges, reduced staffing, treating a decreased proportion of Medicare patients, and increased net income. Clearly, this makes investors rich. But it also brings significant scrutiny from academics, providers, and lawmakers. And begs the question: can patients trust private equity owned hospitals and other healthcare providers?

How many private equity owned healthcare providers are there?

Many! And it’s growing steadily and likely won’t stop until the government steps in. Below are a few examples of the growing involvement of private equity firms in US healthcare.

Hospitals.

According to the Private Equity Stakeholder Project, there are a notable number of private equity owned hospitals. Their data as of January 2024:

Approximately 460 US hospitals are owned by private equity firms, representing:
- 8% of all private hospitals.
- 22% of all 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.
Texas has 97 private equity-owned hospitals – the most of any state.
New Mexico has the highest proportion of private equity-owned hospitals (38%).
Almost a quarter (22.5%) of private equity-owned facilities are psychiatric hospitals.

Doctor practices.

For decades, doctors have been giving up their individual practices as they become part of hospital systems. A 2019 study by the Physicians Advocacy Institute, found that almost 75% of doctors work for a hospital or corporate owner. And corporations bought 13,600 doctor practices in 2021!

Alarmingly, the number of doctor practices purchased by private equity firms has soared, with a 2023 analysis finding that private equity owns over 30% of practices in nearly 1/3 of metropolitan areas.

Nursing homes.

Experts estimate that for-profit groups own over 70% of America’s nursing homes, with an estimate between 5% – 11% of facilities owned by private equity firms. Interestingly, while the number of nursing homes owned by for-profit entities has remained fairly steady, more and more are owned by private equity firms, real estate investment trusts, and complicated ownership structures. In fact, since 2000, private-equity firms have invested $100 billion in nursing homes.

As with other PE acquisitions, they aim to increase efficiency and reduce expenses.

Hospice agencies.

Importantly, over the past 30 years, the hospice industry transformed from mostly nonprofit providers to for-profit businesses. In fact, approximately 70% of hospice agencies are for-profit businesses, with many national chains owning multiple agencies. In 2023, experts estimated that 16% of US hospice agencies were owned by PE firms or publicly traded companies.

Emergency room staffing companies.

Importantly, 25% of ERs are staffed by private equity-based firms. And the largest company, TeamHealth, staffs nearly 500 emergency departments in the US, providing doctors for 8.6% of the country’s ERs.

Can you trust private equity owned hospitals and other healthcare providers?

Unfortunately, private equity ownership of hospitals has led to troubling impacts across the US. According to the Private Equity Stakeholder Project, private equity firms have:

Who does this hurt? Healthcare workers and patients. The focus on profits among hospitals owned by PE has led to:

Dangerous conditions.
Hospital closures.
Reduced access to services.
Declining care quality.
Fraud.

Research shows patients do worse at private equity owned hospitals.

Clearly, our ability to trust private equity owned hospitals depends on their ability to provide quality care to their patients. Unfortunately, that is not always the case.

A 2023 study evaluated the change in quality of care and patient outcomes after PE companies acquire hospitals. Researchers examined over 662,000 hospitalizations at 51 private equity–acquired hospitals and over 4 million hospitalizations at 259 matched control hospitals using Medicare claims data.

Importantly, the study found a 25.4% increase in hospital-acquired conditions in private equity owned hospitals. The increase was driven by a 27.3% increase in patient falls and a 37.7% increase in central line–associated bloodstream infections, despite using 16.2% fewer central lines. Additionally, surgical site infections doubled at PE hospitals, despite an 8.1% reduction in surgical volume (study authors note small volumes of surgical patients at PE hospitals makes this difference harder to pinpoint).

Interestingly, this increase in adverse events occurred despite the fact that private equity owned hospitals likely have younger patients who have lower risks of incidents. Importantly, the authors state these findings suggest poorer quality of inpatient care.

An NBC News report uncovers employee concerns at HCA hospitals.

photo of a tired, stressed female doctor or nurse sitting, with her hand on her head, looking down - doctors and nurses are stressed out by the changes brought by Private Equity Owned Hospitals HCA is a health care giant that owns 182 hospitals and 125 surgery centers across 20 US states and in the UK. Some of their 284,000 employees expressed concerned that HCA’s focus on profit harms patient safety and care. During an NBC News investigation, 11 current and six former HCA employees in five states stated they believe the company intentionally understaffs its hospitals, helping to keep earnings high but increasing the risks of adverse patient outcomes.

Moreover, a new study of HCA’s staffing by a union representing some of its employees found the company’s overall staffing levels were recently below the average for other hospitals in 19 of the 20 states where it provided care. Additionally, current and former HCA employees told NBC News there are insufficient patient-to-staff ratios, without staff available to perform non-nursing jobs. Employees reported the burdens on nursing staff cause patient care to suffer.

For instance, one ICU nurse reported that low staffing levels force he and other nurses to leave the ICU to deliver patients to other areas of the hospital for tests, a job normally handled by patient transporters. When the nurses leave the ICU to take a patient elsewhere, the remaining nursing staff must watch additional patients, creating a “major patient safety issue“.

These studies illustrate that we should think twice before we trust a private equity owned hospital!

Another study shows the impact of private equity ownership of healthcare providers.

photo of a female doctor speaking with a senior male patient A 2023 review of 55 studies evaluated the impact of private equity ownership of a variety of healthcare providers. The PE owned providers, which spanned 8 countries, included a range of healthcare settings, with nursing homes the most commonly studied setting. The second most common settings were hospitals and dermatology clinics. Other settings studied included ophthalmology, general doctor groups, gastroenterology, orthopedics, and surgical centers.

The analysis found that PE ownership was consistently associated with increases in costs to patients and/or payers. And PE ownership was associated with mixed to harmful impacts on quality of care provided. In some cases, PE ownership was associated with reduced nurse staffing levels or a shift towards lower nursing skill mix.

In conclusion, they found no consistent benefits to PE ownership.

The impact on care at private equity owned doctor practices.

Private equity ownership of doctor practices impacts both patients and doctors.

Doctors don’t love working for private equity firms and other corporations.

photo of a tired, stressed female doctor sitting at her desk with a cup of coffee - doctors generally don't enjoy working for Private Equity Owned Hospitals and other healthcare clinics Interestingly, in a survey of internal medicine doctors, 61% reported negative views regarding the involvement of private equity in healthcare. Only 10.5% viewed private equity involvement in healthcare as positive, and 28.8% were neutral.

Furthermore, doctors employed by PE firms were less likely to report high professional satisfaction compared with doctors who didn’t work for private equity-owned clinics (45% vs 74%). Additionally, doctors in PE-owned practices reported having less autonomy (less freedom in decisions) than non-PE clinics (48% vs 66%).

In another survey, conducted by Physicians Advocacy Institute, doctors who work under new management reported feeling a lack of autonomy and a greater focus on financial gains. Concerningly, over 50% of employed doctors reported that changes in practice ownership reduce the quality of patient care.

Furthermore, 45% of doctors reported worsening relationships with their patients, primarily due to decreased appointment time and communication issues.

photo of a cog wheel chasing a dangling carrot shaped like a dollar sign - Private Equity Owned Hospitals provide incentives to make doctors see more patients and earn more money Alarmingly, 70% of those employed by corporate employers stated their employer used incentives or penalties to increase the number of patients they see each day. And 47% said practice protocols or incentives have led them to adjust a patient’s treatment options to reduce costs. Finally, 45% of respondents reported policies that influence or limit their ability to choose medications for their patients.

So why do so many doctors sell their practices or join hospital groups? The American Medical Association found the top reason doctors sell their practices is for higher reimbursement rates which they need to remain financially viable. Additionally, doctors need money to keep up with the high costs of running a practice, including legal compliance and technological investments, such as complex electronic health records.

What kinds of doctors’ practices do PE firms buy?

PE firms have been acquiring doctor practices in fields that allow them to conduct elective procedures in outpatient settings, such as dermatology, ophthalmology, gastroenterology, and others. Since patients generally pay out-of-pocket for elective procedures – often at premium prices – the profit margins can be huge.

Additionally, PE firms are acquiring commonly outsourced specialties like radiology and anesthesiology.

How can PE owned doctors’ practices impact patients?

As described above, the focus on earning money and building value can impact the type and quality of care provided.

photo of a doctor showing a patient a plastic heart model to demonstrate a point For instance, PE firms are “racing” to buy up cardiology practices since Medicare’s 2020 rule allowed for reimbursement for cardiac procedures performed in ambulatory surgery centers. Unfortunately, experts believe that moving cardiac procedures to outpatient settings – combined with private equity investment – may increase the risk of unnecessary procedures since there is a financial incentive to perform more procedures, even if patients don’t need them. For example, ProPublica and the New York Times reported on doctors who performed dozens of unneeded vascular procedures, leading some patients to have their legs amputated.

The impact of private equity ownership of nursing homes.

With an aim to increase efficiency and reduce expenses, PE-owned nursing homes cut staff and increase the number of residents, leading to safety and quality issues.

In 2019, researchers measured how PE ownership impacted nursing home residents. They evaluated resident outcomes (such as mobility and self-reported pain) at 100+ private equity nursing homes. Importantly, they discovered that when private equity firms acquired nursing homes, deaths among residents increased by an average of 10%.

Staff cuts harm nursing home patients.

Unsurprisingly, cost-cutting hurts nursing home patients – a particularly vulnerable group. Since staffing is often the largest operating expense for nursing homes, PE firms generally cut staff. Which is a huge problem since the availability of nurses is the most important determinant of quality of care.

A reduction in nursing staff can cause a wide range of preventable problems, including the following issues:

Increased falls, due to fewer hands to help residents get to the bathroom or into bed.
Less frequent bathing.
Increased dehydration, malnutrition, and weight loss.
Higher self-reported pain levels.
Increased pressure sores.
Higher number of infections.
Increased trips to the emergency room.
Increased hospitalizations.

PE firms maximize nursing home occupancy.

The more patients, the more money they can make. Nursing homes get paid a flat rate by Medicare and Medicaid per patient. They do not adjust the rate they pay based on quality, resident satisfaction, or reputation. Therefore, PE firms have incentive to increase the number of patients while decreasing expenses.

Certainly, more patients and less staff is a recipe for disaster. For instance, in a home owned by a large national chain, a resident waited over 6 hours for help after urinating in her briefs because the aide was overseeing 50 patients!

For more information on nursing home issues, read Nursing Home Safety Issues.

Private equity hospices put profits first.

It’s easy to see why PE firms want to buy hospices. Alarmingly, hospice companies “can expect some of the biggest returns for the least amount of effort of any sector in American health care“. Why? Medicare pays providers a set rate per patient per day, regardless of how much care they provide. And Medicare distributes pays using an honor system, so inferior care can continue unquestioned.

When considering the pros and cons of hospice care, you must understand the differences in staffing and operations between for-profit and nonprofit hospice providers. For-profit hospices, including those owned by PE firms, visit patients less often and deliver less care.

For more information, read Pros and Cons of Hospice Care.

Private equity owned ER staffing firms present challenges for patients and doctors.

PE firms that staff emergency rooms seek to reduce the money spent on doctors – their top expense. To save money, PE firms replace doctors with nurse practitioners (NPs) and physician assistants (PAs) who can do many of the same tasks as doctors, but for less than half the pay.

Certainly, doctors have significantly more training than NPs and PAs. Critics worry that without doctor oversight, patients may be vulnerable to misdiagnoses, higher medical bills, and inadequate care.

And a recent study of NPs in Veterans Health Administration emergency rooms indicated that patient care may suffer without the involvement of doctors. The study found that NPs providing emergency care without doctor supervision or collaboration increased the length of time in the ER by 11% as compared to ER doctors. Additionally, care by an NP raised the 30-day preventable hospitalizations by 20%, although the overall risk of readmission remained very small.

In addition to reducing the number of doctors on duty, many emergency room doctors feel the PE firms’ “mission is not compatible with the best practice of medicine“. ER doctors report the PE’s emphasize speed and high patient volume over patient safety, as well as treatment protocols that are unsuitable for certain patients.

One ER doctor reports a deterioration in care after a PE firm became her employer. For instance, the time spent by patients in the waiting room increased, sometimes by as much as 15 hours. Alarmingly, the number of patients she saw on her shifts doubled.

What’s the US government doing about private equity’s stake in healthcare?

Fortunately, the increase in private equity’s acquisition of hospitals, doctor groups, and other healthcare providers has caught the attention from the US government. The government’s concern focuses on the quality of care provided given the incentives of PE to quickly generate financial returns on investments.

Steps taken to increase our collective trust in private equity owned hospitals and healthcare providers include:

In 2023, the Centers for Medicare and Medicaid Services (CMS) finalized a rule that requires all nursing homes and skilled nursing facilities that accept Medicare payments to disclose if they are owned by a private equity company.

In 2023, the Federal Trade Commission (FTC) sued an anesthesia medical group and its private equity backers, alleging anticompetitive practices that drove up the cost of healthcare.

Additionally, in 2023, a congressional field hearing was held to discuss corporate greed in healthcare with for-profit providers and private equity firms.

And in 2024, Sen. Gary Peters launched a congressional inquiry seeking information on whether PE investments in emergency doctor staffing firms leave hospital emergency departments unprepared.

Importantly, on July 25, 2024, Sen. Markey and Congresswoman Jayapal introduced the Health Over Wealth Act. This legislation would require greater transparency for PE firms and for-profit companies that own healthcare practices and facilities. The legislation’s safeguards would protect workers, patients, and healthcare quality, access and safety. Additionally, it would create stronger accountability measures for corporate greed and close tax loopholes that help real estate investment trusts make money off of healthcare properties. Read a summary of the proposed bill here.

Staffing rule changes for nursing homes and other long-term care facilities.

On April 22, 2024, the Centers for Medicare & Medicaid Services (CMS) affirmed its commitment to hold nursing homes accountable for providing safe and high-quality care by issuing the Minimum Staffing Standards for Long-Term Care (LTC) Facilities and Medicaid Institutional Payment Transparency Reporting final rule.

This rule contains new comprehensive minimum nurse staffing requirements, which aim to significantly reduce the risk of residents receiving unsafe and low-quality care, including having an RN onsite 24/7. Some facilities will be exempt from some parts of the requirements due to workforce unavailability or other factors, especially a concern in rural areas.

CMS expects implementation to take several years.

What about state governments?

Interestingly, states can create and enforce their own regulations which can restrict the influence of private equity firms in healthcare. In fact, more than 30 states have these laws. However, the regulations have many exemptions and are often unenforced, even in California and Texas, which have the strictest rules.

Who owns your healthcare provider’s practice or facility?

You should know who controls your healthcare providers. Given that you cannot always trust private equity owned hospitals and healthcare providers, you should make informed choices about where you receive care. Ideally, it’s best if you can avoid doctors and healthcare facilities run by private equity firms. Of course, this is easier said than done! It can be hard to figure out who owns your doctor’s practice. And if you live in a rural area, you may not have choices.

However, there are steps you can take.

Firstly, you can ask your doctor or other provider who owns them. If you get a name, you can search online to see what kind of entity it is.

Secondly, use Medicare’s CareCompare website to look up ownership of hospitals, hospices, nursing homes/rehab facilities, and long-term care facilities. Search by name or location and scroll down until you see the ownership category.

Thirdly, if your provider has a website, check it out. If the website has a .org address, it should be a nonprofit organization. And the site should include a declaration of its nonprofit status. However, if you find dozens of locations listed, it’s likely owned by a for-profit corporation (although not necessarily a PE firm).

Finally, large academic teaching hospitals are universally nonprofit. So the hospital, and the doctors they employ, will not be under the control of a private equity firm.

Additionally, try these suggestions: