A body of published academic data suggest that private equity ownership of healthcare providers frequently comes with higher costs and reduced quality, according to a systematic literature review published last week in the BMJ.
Fifty-five empirical studies spanning settings from nursing homes and hospitals to physician groups and specialty care facilities were “robust enough to confirm that [private equity (PE)] ownership is a consequential and increasingly prominent element in healthcare, warranting surveillance, reporting and possibly increased regulation,” researchers wrote in the journal.
The “most unequivocal evidence” included in the review related to healthcare costs, with the researchers finding consistent associations with PE ownership and increased charges and negotiated payer rates.
More mixed—though still leaning toward detrimental—was PE ownership’s impact on care quality. A frequent offender among the data was PE-owned healthcare providers’ staffing, with some included studies noting lower staffing density and turnover.
Studies included in the review broadly outlined an increase in the prevalence of PE-owned healthcare providers within the last couple of decades, the researchers wrote. However, studies related to the impact of PE ownership on patient outcomes and providers’ operating costs were in short supply, which the researchers said indicated a need for more research in these areas.
“Proponents of PE in healthcare have argued that PE firms use their managerial expertise to implement operational and financial changes and improve the acquired company’s value after an acquisition,” the researchers wrote in the journal.
“While the findings of this review suggest that PE firms do produce organizational changes, we found evidence that these changes are often reflected in greater costs to patients and payers. The fact that no consistently positive effects of PE in healthcare were identified also provides an evidentiary basis to remain cautious about claims that PE ownership is a self-evident benefit to healthcare provision,” they wrote.
The systematic review sought studies of any empirical design between 2020 and 2023 that focused on PE ownership of a healthcare provider. Researchers excluded studies that solely focused on other healthcare organizations such as medical device companies, as well as those in which the PE-owned providers were also connected to another non-PE owner.
These criteria yielded 55 studies, 47 of which focused on PE ownership among U.S. healthcare providers. Two researchers then independently classified the measured outcomes of each as “beneficial,” “harmful,” “mixed” or “neutral.”
Seventeen of the studies described PE ownership’s impact on nursing homes, making them the most often reviewed setting of the review. “Similar to the overall results,” these studies suggested impacts that were mixed but leaning toward detrimental, researchers wrote.
The other most frequently measured settings among the included studies were hospitals (nine studies), dermatology settings (nine studies), ophthalmology settings (seven studies) and general physician groups (five studies).
The researchers noted that the studies they reviewed “captured only a short time horizon before and after PE ownership,” and that the full, longitudinal impacts of PE ownership are still in need of exploration. They also acknowledged that several of their included studies “did not appropriately control for confounding variables, influencing the risk of bias scores.”
PE has caught the attention of policymakers, lobbying groups, legislators and regulators alike. Critics have pointed fingers at these investors for a range of issues affecting the industry, including contract labor price gouging, aggressive patient billing, reduced access, increased spending, reduced quality and dangerous consolidation.
Those on the other side of the fence argue that PE is vital to the industry for its ability to increase a healthcare organization’s scale and, subsequently, its bargaining power against other major players such as large payers.