Investigating the role of private equity in healthcare: Identifying key areas of focus
The U.S. healthcare industry, valued at a staggering $5 trillion, has become a prime target for private equity investment, drawn by its dependable cash flow. This trend is increasingly visible, with private equity firms acquiring more and more health-care providers.
These acquisitions often follow a leveraged buyout model, primarily funded by debt. This strategy allows private equity firms to pool money from well-off investors, but the closely held nature of these firms makes them less transparent.
The Boston Globe's investigation, "Inside Steward Health Care: A Boston Globe Spotlight Team report," offers valuable insights into this realm. The investigation, which compiled documents from courts, flight records, and SEC filings, highlighted the Steward Health Care crisis - a for-profit chain of hospitals filing for bankruptcy. This incident underscores the broader issue of private equity in healthcare.
Erin Fuse Brown, Joseph Betancourt, and Chris Cumming, panelists discussing the dangers of private equity in health care, emphasised that private equity firms prioritize financial gain over the optimal operation of healthcare entities for the benefit of patients and medical personnel. Strategies such as cost-cutting and staff reduction can lead to increased patient care costs.
Advocacy groups like Take Medicine Back are rallying against corporate interests in health care, advocating for a system that prioritises patient care and the well-being of medical professionals.
To navigate this industry, experts like Cumming recommend focusing on medical facilities first instead of private equity. Brown advises relying on state governments, especially those with ownership transparency laws like Massachusetts and New York, for information on private equity ownership. Massachusetts, for instance, has opened a provider registry as a state-level initiative aimed at increasing transparency in private equity ownership.
The New York LLC Transparency Act, set to go into effect in 2026, is another example of ownership transparency laws implemented by states like New York. These laws are crucial in ensuring a more transparent healthcare industry.
The U.S. spends the most on health care but has the least to show for it, according to Joseph Betancourt. This discrepancy raises concerns about the long-term effects of private equity investment on the quality and accessibility of healthcare services.
Brown suggests starting reporting on private equity from the ground up, by identifying specific platforms and practices, rather than focusing on top-level funds. This approach can provide a clearer picture of the impact of private equity on the healthcare industry.
In 2024, 6.5% of physicians characterized their practice as private equity-owned. As the trend continues, it's essential to continue the conversation about the role of private equity in healthcare and its potential implications for patients and healthcare providers.
Cumming recommends speaking to doctors, particularly those in emergency medicine, for insights into the impact of private equity on healthcare. Their first-hand experiences can offer a unique perspective on the industry's transformation.
As the healthcare industry continues to evolve, understanding the role of private equity will be crucial in ensuring a system that prioritises patient care and the well-being of medical professionals.
