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Private Equity Issue Brief


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Published on Sep 15, 2022

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Over the past decade, private equity acquisitions of health care companies have risen sharply. Estimated annual deal values have gone from $41.5 billion in 2010 to $119.9 billion in 2019, for a total of approximately $750 billion in just 10 years. The soaring interest from some private equity firms in turning a quick profit by acquiring fee-for-service medical providers (such as some physician specialties and ambulance services), raises questions about this type of private equity’s role in the nation’s health care system and what it means for the future of health care.

Key Takeways

  • Private equity investment in fee-for-service health care ventures is at an all-time high. Following a decade of growing interest in short-term investments in hospitals, freestanding emergency departments, nursing homes, and physician practices, the COVID-19 pandemic caused an even sharper rise in recent years.
  • Many private equity firms follow a 3 to 7-year time horizon for entering and exiting new markets. When private equity firms apply a short-term profit-driven business model to the unique nature of our nation’s health care system, the consequences can be dire for patients, consumers, and the availability of quality health care in the future.
  • Hospitals owned by private equity firms bring in nearly 30% more income than hospitals owned by other entities by using a number of tactics to boost revenue including cutting staffing and supplies; pressuring providers to bill for unnecessary services, and up-coding claims.
  • The need for those private equity firms to achieve high returns on investment on a fast time horizon is in direct conflict with the goal of lower health care costs for all Americans and greater investments in quality and safety.
  • Additional short-term profit focused private equity growth could further inflate health care costs. Congress, state governments, and regulators at the federal and state level should prioritize reforms that remove some of the incentives and opportunities for such private equity firms to exploit patients for profit.