Report Highlights Private Equity’s Lesser-Known Strategy: Nonprofit Joint Ventures

Private equity's healthcare expansion strategy is increasingly moving beyond direct acquisitions toward joint ventures with nonprofit health systems, a structural shift documented in a new report from the Private Equity Stakeholder Project (PESP), a nonprofit organization focused on transparency and accountability in PE operations. While PE's acquisition of hospitals, physician practices, and other healthcare providers has drawn significant regulatory and public scrutiny—particularly following major bankruptcies at operators like Steward Health Care and Prospect Medical Holdings—the joint venture model represents a less visible but potentially more expansive pathway for capital deployment.

Joint ventures, as defined in the PESP report, involve two or more parties creating a single enterprise where each contributes capital, labor, assets, skills, experience, or knowledge, with shared control and profit/loss distribution. For PE firms, this structure offers strategic advantages over traditional acquisitions: expansion into new markets while benefiting from nonprofit partners' regulatory standing, community relationships, and institutional credibility. Critically, joint ventures allow PE firms to share financial risk with nonprofit counterparts—a material consideration given recent high-profile failures in the PE-backed healthcare space—while potentially operating under different regulatory frameworks than direct acquisitions would trigger.

PESP's research identified more than 500 healthcare facilities currently operating within nonprofit-private equity joint venture arrangements. These facilities span a broad spectrum of the healthcare sector, including hospitals, inpatient rehabilitation centers, hospice operations, home health services, behavioral health providers, ambulatory surgery centers, and urgent care facilities. The researchers acknowledge this figure likely represents an undercount, as the 500+ count reflects only publicly identifiable arrangements. The actual number of PE-nonprofit joint ventures remains partially obscured, potentially limiting regulators' and policymakers' visibility into PE's total footprint within the healthcare system.

This joint venture proliferation raises questions about regulatory oversight and accountability. The structure's complexity—involving shared control and distributed financial responsibility—may create ambiguity regarding which entity bears fiduciary responsibility for patient outcomes, operational compliance, and financial sustainability. As PE continues to expand its healthcare presence through partnerships rather than outright ownership, state and federal regulators may face challenges in monitoring and enforcing accountability standards comparable to those applied to traditional PE acquisitions.