The Campaign for Accountability released a statistical analysis in June comparing seventy-one hospitals acquired by private equity firms with seventy-one closely matched peers. The result was specific enough to be difficult to argue away: private equity-owned hospitals collected $669 more in operating profit per patient after acquisition. Their operating margins were 6.5 percentage points higher, roughly a thirty-one percent increase. For privately insured and self-insured patients, where hospitals have more freedom to set prices, the gap widened to 10.4 percentage points.
The analysis combined hospital financial data from the National Academy for State Health Policy with the Private Equity Stakeholder Project's ownership tracker. It found no statistically significant reduction in operating costs per patient at PE-owned hospitals. Costs did not fall. Charges rose.
What the arithmetic means
The standard case for private equity involvement in any industry is that financial discipline produces efficiency: lower costs, better operations, competitive pricing. In healthcare, the analysis finds the opposite. The higher margins come from the revenue side, not the cost side, and they are most pronounced where price-setting power is greatest.
Private equity firms have made more than $1 trillion in healthcare investments over the past decade, according to research from NYU Stern's Center for Business and Human Rights. The number of healthcare businesses acquired rose from 352 in 2010 to 937 in 2020. Between 2019 and 2023, sixty-five percent of physician practice acquisitions were completed by PE firms.
A separate transaction illustrates the scale of the current market: CD&R and McKesson agreed in early October to acquire Option Care Health, the nation's largest independent provider of home infusion services, at an enterprise value of $5.8 billion and a thirty-seven percent premium over the prior week's closing price. Option Care serves more than 308,000 patients annually. CD&R is expected to hold about fifty-one percent of the resulting company.
The billing layer
The Campaign for Accountability report also examined billing practices at Steward Health, the company created after Cerberus Capital Management converted a nonprofit hospital chain into a for-profit entity. A former nurse billing auditor alleged that a Massachusetts team systematically reclassified patient charts into more expensive billing categories. A moderate emergency room visit could be elevated to the most severe level, he said, and the team could "only upcharge."
Steward has since faced significant financial distress, with several facilities closing or transferring to other operators. The pattern it represents — sale-leaseback transactions on hospital real estate, debt-funded dividends, and billing optimization — is not unique to Steward. NYU Stern's research found that PE-owned healthcare companies maintain debt-to-cash flow ratios more than double those of public healthcare companies, which constrains their ability to absorb revenue shocks.
The data from the Campaign for Accountability analysis does not resolve what policy should do about it. What it does is replace an argument about whether PE ownership changes hospital behavior with a specific number for how much it changes the bill.
Topics healthbusinessprivate equityhospitalshealthcare costs
