How Wide Is the Spread of PE Hospital Ownership?

Nothing like an evidence-based reality check to blow away special-interest rhetoric.

In this case, rhetoric says private equity (PE) firms are taking over hospital ownership. The reality check is no, they’re not.

The reality check comes courtesy of a new study in Health Affairs Scholar with the straight-forward title, “Three Facts About Private Equity in the U.S. Hospital Sector.” Nothing ambiguous about that. Maybe the lack of ambiguity is because the seven researchers who did the study are all from business schools, not public health schools, at five different universities. It’s just business.

The researchers identified 556 short-term, acute-care hospitals that PE firms acquired through 139 deals over the 25-year study period of 2000 through 2024. Here are the three things the researchers found:

• The percentage of hospitals owned by PE firms peaked at 7% in 2011 and has slipped back down to just 3.5% of all hospitals by 2024.
• Two-thirds of PE-owned hospitals changed ownership hands within five years of an acquisition. The most common transactions were an initial public offering or sale to another PE firm.
• PE-owned hospitals are located in a small number of geographic markets with two-thirds of people in the country living in a hospital referral region that doesn’t have a PE-owned hospital.

“Taken together, these patterns suggest that although PE activity in the hospital sector has grown over the past two decades, PE remains a small share of the national short-term acute care hospital market,” the researchers said.

Maybe that’s a good thing. We know that other research has connected PE ownership of hospitals with poorer outcomes like higher patient mortality rates and readmission rates. We know from reading media accounts that PE ownership of hospitals hasn’t been particularly good for patients, staff or communities.

We also know from reading or listening to 4sight Health blog posts, commentaries and podcasts that PE is neither inherently good nor evil. It’s amoral like nuclear power. It’s how you use PE that matters.

And now, thanks to researchers from the business schools at Washington, Duke, California, Illinois and Indiana universities, we know PE ownership of hospitals is limited and not spreading like an outbreak of a communicable disease across the country.

It’s similar to knowing that hospital closures happen as much in urban areas and in rural areas, and most hospitals that close aren’t safety-net hospitals. I wrote about that reality check in “Clearing the Air Over Hospital Closings.”

Don’t you just love facts? I do. Facts are the foundation of building better healthcare.