Private
equity
ownership
of
healthcare
facilities
has
led
to
significant
problems
—
including
hospital
closures,
reduced
staffing
and
compromised
healthcare
services
—
showing
the
need
for
regulation,
a
new
report
shows.
The
report
was
published
in
March
by
the
NYU
Stern
Center
for
Business
and
Human
Rights.
It
analyzed
peer-reviewed
health
outcomes
research,
bankruptcy
records
and
transaction
data.
It
also
examined
case
studies
from
health
systems
like
Steward
Health
Care
and
Prospect
Medical.
NYU
Stern
details
that
private
equity
firms
have
invested
more
than
$1
trillion
in
debt-financed
healthcare
deals
in
the
last
decade.
Some
studies
show
that
private
equity
ownership
increases
in-hospital
complications
by
25%
and
reduces
nursing
staff
by
4.4%.
In
addition,
private
equity
ownership
of
nursing
homes
correlates
with
11%
higher
patient
mortality
rates.
Research
also
shows
that
private
equity
ownership
increases
the
risk
of
bankruptcy
by
10
times.
In
just
2023
alone,
there
were
34
bankruptcies
of
PE-backed
healthcare
businesses.
Steward
Health
and
Prospect
Medical
are
examples
of
health
systems
that
went
bankrupt
following
private
equity
ownership.
Steward
Health
was
owned
by
PE
firm
Cerberus
Capital
Management
from
2010
to
2021
and
went
bankrupt
in
2024,
while
Prospect
Medical
Holdings
was
owned
by
Leonard
Green
&
Company
from
2010
to
2021
and
went
bankrupt
in
2025.
These
bankruptcies
disproportionately
harmed
low-income
and
rural
communities.
“The
private
equity
model
needs
to
be
adapted
for
the
healthcare
sector,
because
otherwise,
they’re
an
unhealthy
fit.
Here,
on
the
one
side,
you
have
a
business
model
that
is
based
on
public
anonymity,
legal
immunity,
remote
and
financialized
ownership
and
a
lack
of
self-restraining
norms.
On
the
other
side,
you
have
a
sector
where
all
the
stakes
are
life
and
death,”
said
Michael
Goldhaber,
author
of
the
report,
in
an
interview.
That
said,
Goldhaber
noted
that
the
report
is
not
advocating
for
a
ban
of
private
equity
in
healthcare.
PE
firms
do
offer
benefits,
like
providing
capital
and
improving
operational
efficiency.
But
there
is
a
need
for
reform,
he
said.
The
report
provides
several
recommendations
to
private
equity
investors
for
self-reform.
Self-regulation
can
be
a
way
to
avoid
“harsher”
government
regulation,
Goldhaber
said.
These
reforms
include:
-
Provide
ongoing
public
reporting
on
company
finances,
as
well
as
ownership,
workforce
details,
patient
outcomes
and
customer
satisfaction. -
Avoid
sale-leaseback
deals
or
debt-funded
dividends,
and
don’t
burden
healthcare
companies
with
new
financial
obligations
that
could
make
them
vulnerable
during
revenue
downturns. -
Keep
a
maximum
ratio
of
debt
to
cash
flow,
which
would
help
prevent
cost-cutting
measures
that
could
harm
care
quality
or
lead
to
facility
closures. -
Don’t
cut
essential
services,
shut
down
facilities
or
reduce
staff
or
wages
except
in
urgent
situations
and
only
with
regulatory
approval.
The
report
also
provides
recommendations
to
state
and
federal
governments
on
how
to
regulate
private
equity
in
healthcare,
including:
-
State
legislatures
should
give
health
regulators
the
authority
to
block
or
place
conditions
on
healthcare
acquisitions. -
States
should
use
the
review
process
for
deals
to
enforce
specific
requirements. -
Federal
and
state
lawmakers
should
deter
sale-leaseback
deals
and
debt-funded
dividends
by
making
companies
that
use
these
practices
ineligible
for
government
healthcare
payments. -
Lawmakers
should
hold
parent
or
controlling
entities
accountable
when
their
portfolio
companies
commit
fraud
against
government
healthcare
programs,
if
the
investors
knew
about
the
misconduct
and
failed
to
report
it. -
Congress
should
require
private
equity
firms
to
disclose
detailed
financial
information
to
the
SEC
and
restrict
access
to
401(k)
investments
for
firms
that
do
not
comply.
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