Report: Nonprofit-private equity joint ventures worth scrutiny

A new report from the Private Equity Stakeholder Project (PESP) documents the proliferation of nonprofit-private equity joint ventures as an increasingly prevalent but under-regulated strategy for PE expansion into U.S. healthcare. The analysis identifies at least 568 healthcare facilities operating through such arrangements, though the authors acknowledge this represents only a partial accounting based on publicly available data, suggesting the true scale is substantially larger.

The prevalence of this structure is particularly pronounced among established PE healthcare operators. Lifepoint Health, owned by Apollo Global Management, exemplifies this trend, operating nearly two-thirds of its hospital portfolio through joint venture arrangements rather than direct ownership. More broadly, the data indicates that over 20% of all PE-owned hospitals utilize joint venture configurations with nonprofit health systems as their operational vehicle.

These arrangements extend well beyond traditional hospital operations. The report documents PE-backed joint ventures across multiple healthcare subsectors including inpatient rehabilitation facilities, hospice providers, home health agencies, behavioral health services, ambulatory surgery centers, and urgent care networks. This diversification across care settings demonstrates a systematic strategy rather than isolated transactions, yet regulatory frameworks have not evolved to address the complexity and potential risks inherent in these structures.

The report identifies several strategic advantages driving PE adoption of the joint venture model. First, partnerships with existing nonprofit providers facilitate market expansion by leveraging established licenses, provider networks, and regulatory standing. Second, joint ventures allow PE firms to circumvent state-level ownership restrictions that prohibit non-physicians from owning medical practices. Third, they enable PE investors to avoid the operational and reputational friction of converting established nonprofit health systems to for-profit entities. Finally, joint ventures provide access to private capital while creating revenue opportunities through real estate transactions—a practice the report connects to recent high-profile health system bankruptcies.

Despite acknowledging potential business benefits, the PESP report concludes that PE-backed joint ventures retain the financial and operational risks characteristic of direct PE healthcare buyouts. The lack of regulatory evolution to monitor these increasingly complex ownership structures raises investor, operational, and patient care considerations for institutional stakeholders monitoring PE activity in the healthcare sector.