Private Equity and Its Impact On Hospital Quality and Safety

“Private equity has invested nearly $1 trillion into U.S. health care since 2006. While private equity’s investment in health care only represents a small portion of the massive U.S. health care system, the industry has made critical contributions benefiting providers and patients alike. These investments have funded research into deadly diseases like Alzheimer’s and Parkinson’s, expanded and renovated facilities, modernized medical records and health care data, and made other needed investments.” – American Investment Council 2024

The last decade has seen a tidal wave of private equity (PE) investment into U.S. hospitals, outpatient centers, nursing homes, and physician practices. Indeed, PE acquisitions of physician practices are up sixfold over the past decade or so. The capital flows freely—but does the quality of care grow with the profits? Is patient safety sacrificed for the bottom line? Private equity (PE) refers to financial services firms whose business involves investing in privately held companies with the goal of improving the company’s operations and ultimately selling that company for a profit. Private equity firms, which raise capital from institutional and high-net-worth investors, act as a way for private company owners to obtain more capital to advance their businesses. PE may also help the private company go public. The important point is that the PE firm does not lend money to the business owner—they buy into the business. That is what “equity” means: they become owners.

In this analysis, we will discuss healthcare businesses such as hospitals, surgery centers, physician practices, radiology centers, and others. Private equity firms may sometimes deploy a strategy that involves borrowing heavily against the acquired entity’s assets and cash flow, then extracting value through cost-cutting, revenue optimization, and quick resale—typically within 3 to 7 years. Though not entirely uncommon, most private equity investments are not long-term in nature. In healthcare, this model can create a dynamic tension: debt and financial pressure erode the availability of capital resources for clinical operations, which can lead to layoffs that may degrade care delivery and compromise safety. As PE ownership of healthcare companies continues to rise, it becomes increasingly important to ask whether patient safety is being negatively impacted or improved.

Some say private equity is revitalizing healthcare with much-needed funds for investments in healthcare modernization and improved efficiency. Others argue it is compromising safety by cutting corners and prioritizing financial return over human outcomes.

Private equity firms manage billions of dollars in healthcare capital per year in the U.S. These arrangements often inject the funds that hospitals need to improve and cannot find elsewhere. Money is needed for electronic health records, imaging systems, and even basic capital improvements that can be approved faster with better funding mechanisms.

In some cases, performance metrics improve post-PE acquisition. A Duke-led analysis found declines in in-hospital and 30-day mortality among PE-backed hospitals for certain conditions, such as AMI. A study in 2021 revealed no evidence of increased patient mortality or readmission rates at PE-acquired hospitals.

Private equity investment strategies may improve management discipline and accountability. PE-backed hospitals often introduce financial Key Performance Indicators, advanced analytics, and centralized procurement strategies that bring operational discipline to previously siloed, sluggish, inefficient systems. We need to explore how these same quantitative approaches can improve patient-centeredness, timeliness of care delivery, access to care, clinical effectiveness and efficiency, and, of course, safety. The Commonwealth Fund reported in 2023 that there is no evidence that PE investment in healthcare leads to improved quality of care. The same report notes evidence that mortality increased in nursing homes acquired by PE firms. The data is not clear, and it is not an either-or proposition. The conclusion is that more research is needed on how PE affects quality.

The Clinical Impact: What does the data Say?

Hospital Adverse Events Increase Post-Acquisition by PE

A 2023 JAMA study by Bruch et al. compared over 600,000 Medicare admissions at PE-owned hospitals to over 4 million at matched controls. The researchers examined hospital-acquired patient safety events among Medicare patients, comparing those treated at private equity-acquired hospitals against matched controls at non-PE hospitals. Over a ten-year period, they found that patients experienced a 25% increase in hospital-acquired patient safety incidents when treated at PE hospitals. Statistically significant increases were observed in falls and hospital-acquired infections, such as central-line–associated bloodstream infections and surgical site infections. This occurred despite PE hospitals placing fewer central lines and performing fewer surgeries. In-hospital mortality, however, decreased slightly at PE hospitals compared to control hospitals, while there was no change in 30-day mortality after hospital discharge.

After PE acquisition, hospital-acquired adverse events increased significantly:

• Patient falls: +27%
• Central line infections (CLABSIs): +38%
• Total hospital-acquired patient safety events: +25%

Quality of Care Often Declines after PE Takes Over

A 2023 BMJ systematic review analyzed 55 studies across multiple healthcare sectors and found evidence that PE ownership had a negative effect on the quality of care delivered. The researchers found that:

• 21 studies showed worsened quality
• 12 showed improved quality
• 6 showed mixed or no change

How Can PE Ownership Harm Patient Safety?

Theoretically, PE firms seek to improve the revenue above expenses of a healthcare operation in order to increase its profitability.

This may result in:

1. Reduced Staffing and Increased Turnover
   Healthcare is very labor-intensive. Most hospitals allocate the highest percentage of their budgets to human resources, including physicians, nurses, and technicians. Cost-cutting often begins with clinical labor. Lower nurse-to-patient ratios (fewer nurses per patient) and rising nursing turnover are associated with more medical errors, delayed response times, and care omissions.

2. Resource Diversion
   Debt servicing obligations may reduce investment in safety infrastructure, such as infection control, EHR upgrades, and professional development.

3. Commercial Needs Over Clinical Prioritization
   PE firms frequently expand profitable services (e.g., elective surgery) and de-emphasize unprofitable ones (e.g., complex chronic care or geriatrics), even when the latter are vital to patient safety.

4. Data Opacity and Weak Oversight
   Unlike publicly traded health systems, PE-owned entities may not publicly report clinical outcomes, safety metrics, or internal incidents. This limits transparency for regulators and patients.

Are There Benefits to PE Ownership?

It is not all doom and gloom. To be fair, some PE-backed organizations have modernized healthcare operations, implemented system-wide safety protocols, and deployed advanced data analytics. In fragmented sectors, such as dental care or behavioral health, consolidation can potentially improve standardization. The positive impact of PE investment depends on ethical leadership and reinvestment in high-reliability systems of care for quality improvement.

Policy Recommendations: Safeguarding Safety in a Financialized System

To align PE activity with patient-centered care, stronger healthcare leadership and oversight is necessary:

• Leadership of any healthcare concern ought to prioritize quality care and patient safety
• Public reporting of quality metrics by all PE-owned entities
• Limits on debt-to-revenue ratios in PE-backed clinical organizations ought to be regulated by States
• Certificate of Need evaluation ought to be focused on quality and patient safety, not just market share
• Regulatory requirements for reinvestment of earnings into quality improvement, patient safety, infection prevention, staff education and staffing.

 Conclusion: First, Do No Harm

Private equity is reshaping the U.S. healthcare system—and not always for the better. The evidence is compelling: PE ownership may be associated with worse outcomes, higher rates of harm, and reduced clinical accountability.

If capital is to serve healthcare, rather than destabilize it, public policy and health system leadership must demand greater transparency, enforce safety guardrails, and prioritize patient outcomes over investor returns. One should not be categorically against private investment in healthcare. Many hospitals and other healthcare entities are currently owned, at least in part, by PE firms. The concern arises when clinical complexity is managed like a commodity and short-term financial return outpaces long-term safety planning. We should focus on how capital infusions can be used to improve quality, safety, and innovation.

We must stop pretending PE firms are one-size-fits-all monoliths. Some firms invest responsibly, while others work more aggressively to improve their bottom lines. The old myth that big business is evil does not hold—and, by the way, healthcare is big business! We need to work to make American healthcare the best and safest it can be. What matters most is transparency, data sharing, and evidence-based care—especially when patients may have no say in who owns the hospital where their lives may hang in the balance. In healthcare, profit should not come before patients. These goals do not need to be mutually exclusive, but ethical, proactive leadership is the key to success.

Resource:

What hospitals are owned by private equity? Find out here. Airtable PE Hospital Tracker. https://airtable.com/appZYwbt3vioNrb95/shricxhAQSjpv5ec8/tbl058jjL6qNMqzkM

References

1. American Investment Council. (2024). A Partner to Healthcare: How Private Equity Complements and Strengthens the Health Care Industry. https://www.investmentcouncil.org/healthcare/#:~:text=Private%20equity%20plays%20a%20critical,and%20made%20other%20needed%20investments

2. American Investment Council. (2024). Hospitals depend on private equity to support better patient outcomes and improve efficiencies. https://www.investmentcouncil.org/hospitals-depend-on-private-equity-to-support-better-patient-outcomes-and-improve-efficiencies/

3. Borsa, A., Bejarano, G., Ellen, M., & Bruch, J. D. (2023). Impacts of private equity ownership in healthcare: A systematic review. BMJ, 382: e075244.

4. Bruch, J. D., Gondi, S., Song, Z., et al. (2023). Changes in hospital adverse events and patient outcomes associated with private equity acquisition. JAMA, 330(24): 2365–2375.

5. Harrington, C., Olney, B., Carrillo, H., & Kang, T. (2012). Nurse staffing and deficiencies in the largest for-profit nursing home chains and chains owned by private equity companies. Health Services Research, 47(1 Pt 1): 106–128.

6. Healthcare Dive. (2024). Private equity-backed hospices underperform nonprofits in key areas. https://www.healthcaredive.com/news/privateequity-hospice-underperform-JAMA/734279

7. Kannan, S., et al. (2023). Changes in hospital adverse events and patient outcomes associated with private equity acquisition. JAMA 2023; 330;(24): 2365-2375.

8. La Forgia, A., et al. (2025). How should we assess quality of health care services in organizations owned by private equity firms? AMA Journal of Ethics, 27(5), E385–391.

9. Miller, J. (2024). What happens when private equity takes over a hospital: New analysis shows alarming increase in patient complications. Harvard Medical School News. https://hms.harvard.edu/news/what-happens-when-private-equity-takes-over-hospital