Key Takeaways
- • A systematic review of 55 academic studies published in The BMJ on July 19, 2023 found private equity ownership of healthcare providers is generally associated with higher costs to patients and payers, with costs up to 32 percent higher in the most closely associated findings.
- • The review found mixed to harmful effects on healthcare quality, while impacts on health outcomes and operator costs were inconclusive.
- • The authors identified no consistently beneficial impacts of private equity ownership in healthcare, contradicting the claim that PE infusions benefit patients.
- • Private equity acquisitions of healthcare assets, including hospitals, nursing homes and fertility clinics, have increased in every studied setting since 2000, according to the review.
- • The findings may inform antitrust regulation and corporate practice of medicine debates, and the research team is extending its work to venture capital, management consultants, lenders and REITs.
Summary
A research team supervised by University of Chicago health policy researcher Joseph Dov Bruch, PhD, Assistant Professor of Public Health Sciences, has found that private equity investment in healthcare is generally associated with higher costs to patients and payers, according to a systematic review published July 19 in The BMJ. The study is described by UChicago Medicine as the first systematic review of global private equity ownership trends in medical settings.
The researchers identified 55 prior academic studies on private equity in healthcare and assessed them across four dimensions: healthcare quality, cost to payers and patients, cost to healthcare operators, and health outcomes. Across these dimensions, private equity investment was most closely associated with up to a 32 percent increase in costs for payers and patients. Ownership was associated with mixed to harmful effects on quality, while the evidence on health outcomes and operator costs was inconclusive. The authors found that private equity activity has grown in every studied healthcare setting since 2000.
Proponents of private equity have argued that financial firms' capital provides downstream benefits for patients. The review did not support this hypothesis, and the authors did not identify any consistently beneficial impacts of private equity ownership. Bruch said the findings show no clear indication that private equity makes healthcare more efficient through reduced administrative burden, streamlined processes or technology advances.
The researchers said they hope the study will raise awareness among providers, policymakers and the public of the financial sector's growing role in healthcare, and that providers may need to pay closer attention to the financial burden on patients. They also expect the findings may prompt policy discussion on antitrust regulation and corporate practice of medicine laws. Bruch noted that patients may not be able to detect changes in care, but that they should know a hospital, nursing home, physician practice or fertility center may be private equity-owned, with firms holding specific financial targets that may influence care decisions.
Bruch described private equity as "a symptom of a health system that is becoming increasingly financialized" rather than solely a bogeyman. The study, titled "Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review," was co-authored by Alexander Borsa of Columbia University, Geronimo Bejarano of the University of Texas, and Moriah Ellen of the University of Toronto and Ben-Gurion University of the Negev. The team is continuing research into venture capital, management consultants, financial lenders and real estate investment trusts in healthcare.
The researchers identified 55 prior academic studies on private equity in healthcare and assessed them across four dimensions: healthcare quality, cost to payers and patients, cost to healthcare operators, and health outcomes. Across these dimensions, private equity investment was most closely associated with up to a 32 percent increase in costs for payers and patients. Ownership was associated with mixed to harmful effects on quality, while the evidence on health outcomes and operator costs was inconclusive. The authors found that private equity activity has grown in every studied healthcare setting since 2000.
Proponents of private equity have argued that financial firms' capital provides downstream benefits for patients. The review did not support this hypothesis, and the authors did not identify any consistently beneficial impacts of private equity ownership. Bruch said the findings show no clear indication that private equity makes healthcare more efficient through reduced administrative burden, streamlined processes or technology advances.
The researchers said they hope the study will raise awareness among providers, policymakers and the public of the financial sector's growing role in healthcare, and that providers may need to pay closer attention to the financial burden on patients. They also expect the findings may prompt policy discussion on antitrust regulation and corporate practice of medicine laws. Bruch noted that patients may not be able to detect changes in care, but that they should know a hospital, nursing home, physician practice or fertility center may be private equity-owned, with firms holding specific financial targets that may influence care decisions.
Bruch described private equity as "a symptom of a health system that is becoming increasingly financialized" rather than solely a bogeyman. The study, titled "Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review," was co-authored by Alexander Borsa of Columbia University, Geronimo Bejarano of the University of Texas, and Moriah Ellen of the University of Toronto and Ben-Gurion University of the Negev. The team is continuing research into venture capital, management consultants, financial lenders and real estate investment trusts in healthcare.
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