Review suggests that costs tend to rise and quality falls at acquired healthcare providers

Private equity ownership of healthcare services such as nursing homes and hospitals is associated with harmful impacts on costs and quality of care, suggests a review of the latest evidence published by The BMJ today.

No consistently beneficial impacts of private equity ownership were identified, and the researchers say these results confirm the need for more research on private equity ownership in healthcare and possibly increased regulation.

Private equity firms use capital from wealthy individuals and large institutional investors to buy companies, and, after a relatively brief period of ownership, sell them for substantial returns. Over the past decade, private equity firms have increasingly invested in, acquired, and consolidated healthcare facilities, with global healthcare buyouts exceeding $200bn (£157bn; €184bn) since 2021 alone.

But despite much speculation, it’s still not clear what impact private equity ownership of healthcare operators has on costs, quality of care, and health outcomes.
To address this uncertainty, researchers analysed the results of 55 studies (47 focused exclusively on the US) published in peer reviewed journals in the past two decades.

Nursing homes were the most commonly studied settings, followed by hospitals and dermatology facilities. The studies were designed differently, and were of varying quality, but the researchers were able to allow for that in their analysis.

Nine of 12 studies showed higher costs to patients or payers at health facilities owned by private equity firms (harmful impact), three found no differences, and none showed lower costs (beneficial impact).

Private equity ownership was also associated with mixed to harmful impacts on quality. Of 27 studies that assessed healthcare quality, 12 found harmful impacts, three found beneficial impacts, nine found mixed impacts (some quality measures declined, some improved), and in three the results were neutral.

Health outcomes showed both beneficial and harmful results, as did costs to operators, but the volume of studies for these outcomes was too low for any definitive conclusions to be drawn.

When nursing homes were analysed separately, private equity ownership often had mixed impacts on quality, but the researchers point out that more evidence suggests a degradation rather than an improvement in quality, such as a decrease in nurse staffing or a shift to lower nursing skill mix.

The researchers acknowledge that they did not differentiate between different types of private equity investment and ownership, and were unable to assess larger possible impacts of private equity on access to care. And because most of the included studies occurred in the US, the impacts identified may not apply to all global settings.

Nevertheless, they say this study fills a gap in the current literature on private equity ownership in healthcare, and presents emergent patterns related to private equity ownership that other studies have been unable to synthesise.

As such, they say: “The results of this study confirm the need for increased rigorous research on private equity ownership in healthcare, particularly its impacts on health outcomes and system costs and in other non-US settings, such as Europe.”

“This said, the current body of evidence is robust enough to confirm that private equity ownership is a consequential and increasingly prominent element in healthcare, warranting surveillance, reporting, and possibly increased regulation.”

“Unfortunately, it is much harder to identify legislative solutions to quality problems at provider organisations owned by private equity firms,” says journalist Merrill Goozner, in a linked editorial.

He acknowledges that a few US states “have begun contemplating closer scrutiny of proposed private equity acquisitions” but says public officials “clearly need new and more effective tools for reviewing and approving the terms of private equity’s involvement in healthcare.” 

The best time to stop the deterioration in healthcare quality associated with takeovers is before it starts, he writes. “Higher quality studies on patient safety and outcomes and the effect of private equity takeovers on communities would greatly bolster the case for legislators proposing stricter regulations.”


Notes for editors
Research: Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review doi: 10.1136/bmj-2023-075244
Editorial: Private equity takeovers are harming patients doi: 10.1136/bmj.p1396
Journal: The BMJ

Funding: None

Link to Academy of Medical Sciences press release labelling system:

Externally peer reviewed? Yes (research); No (linked editorial)
Evidence type: Systematic review; Opinion
Subject: Private equity investment