Private Equity and Hospitals: Dangerous to Your Health

Many hospitals, especially in rural areas, are in financial distress. They may look for a financial bail-out. To the rescue may come private equity firms. They will offer themselves as savvy business managers who will infuse needed capital, make the hospital more efficient, eliminate waste, and increase revenue.

So what happens when private investors buy your local hospital?

Here is one answer, from the Journal of the American Medical Association, Dec. 26, 2023 See the Original Article

The authors compared 51 hospitals that had been acquired by private equity before and after the purchase, and also compared them to 259 similar hospitals that had not been acquired.

The short version:

The purchased hospitals had more falls, more blood stream infections, more transfers to other hospitals, and more surgical site infections. The length of stay was shorter, but patients were more likely to go to a nursing home at discharge than to home.

The authors conclude: “These findings heighten concerns about the implications of private equity on health care delivery.”

The duty of private equity firms is to return “value” to the shareholders, that is, to make money. They are not charities.

The usual playbook is to cut costs by purchasing less expensive goods, hiring less staff or less expensive staff, increasing prices, shutting down services that do not turn a profit, “increasing productivity” by producing more expensive services and increasing prices, and at the end of the rainbow, selling at a profit to another company. This is business 101.

This may be the route to a healthier bank balance. However, it may not be the way to produce healthier patients or communities.

Seller beware.