The recent collapse of two private equity-backed healthcare companies — Los Angeles-based Prospect Medical Holdings and Dallas-based Steward Healthcare — have resulted in significant pushback on PE involvement in healthcare from individual states, Quartz reported July 17.
Here are six takeaways from the article:
1. The nonprofit Private Equity Stakeholder Project reported that 460 U.S. hospitals were owned by PE firms in 2024. Additionally, the number of PE-owned physician practices increased from 816 in 2012 to 5,779 in 2021.
2. At least 13 states – most recently Maine, Pennsylvania and Oregon — have passed or are considering legislation to restrict private equity activity in healthcare.
3. A November 2024 article published in Health Affairs found growing evidence that PE ownership leads to “mixed to harmful impacts” on the quality of patient care, often correlated with lower staff-to-patient ratios and increased use of unnecessary procedures, according to the report.
4. In January, a bipartisan report by the Senate Budget Committee, titled “The Harmful Effects of Private Equity on the U.S. Health Care System,” concluded that PE-ownership of hospitals leads to “reduced services, compromised patient care and even complete hospital closures.”
5. PE investors are trying to rehabilitate their reputation in the healthcare space, as evidenced by the formation of the Association for Responsible Healthcare Investment earlier this year. The organization said it is “committed to promoting responsible private investment in healthcare that enhances patient care, strengthens the healthcare system and upholds the highest ethical standards.”
6. However, eliminating PE from healthcare investment would not end the “financialization” of healthcare, Vikas Saini, president of the Lown Institute, told Quartz.
“These laws won’t stop other acquisitions that are very similar,” he said, noting that UnitedHealth Group owns more than 2,200 medical practices. “How is corporate ownership any different than private equity? We have a healthcare system in which profit is the driver no matter who the player is.”
