by
Gus Iversen, Editor in Chief | August 02, 2023
As private equity becomes increasingly common in healthcare, new research suggests these investments are generally associated with higher costs to patients and payers.
The study, out of the University of Chicago, is being touted as the first systematic review of global private equity ownership trends in medical settings. The results run counter to some of the promises typically surrounding these deals, such as reduced operational inefficiencies and leveraging economies of scale to improve care.
“Over the last few decades, private equity activity in healthcare has exploded, with financial institutions buying up hospitals, nursing homes and fertility clinics — pretty much every area of healthcare,” said Joseph Dov Bruch, Ph.D., assistant professor of Public Health Sciences at the University of Chicago, who is the study’s co-senior author. “News reports have highlighted increasing investment by private equity and a number of studies have set out to examine the phenomenon, but until now there has been no large systematic review of global private equity activity in healthcare. This study is intended to fill that gap.”
Bruch and his research team looked at 55 previous academic research studies from 2000 onward that investigated private equity in healthcare and performed a systematic review across four dimensions: healthcare quality, cost to payers and patients, cost to healthcare operators and health outcomes.
Across the four dimensions, private equity investment was most closely associated with up to a 32% increase in costs for payers and patients,
according to a UChicago summary of the findings. Of the 55 studies in the analysis, 12 looked at this dimension, with nine showing increased costs. Private equity ownership was also associated with mixed to harmful effects on healthcare quality, while the impact on health outcomes and operator costs was inconclusive.
Although the influence of the financial sector has grown across many fields, “private equity is uniquely interested in healthcare because of the many loopholes and cost-cutting strategies that exist within this industry,” said Bruch.
Proponents of private equity have argued the cash infusions from financial firms provide direct downstream benefits for patients. However, this hypothesis was not supported by the results of the team’s review. The authors did not identify any consistently beneficial impacts of private equity ownership.
