America’s healthcare system is being invaded. But the intruders do not come from Venezuela, Mexico, and Haiti as Donald Trump might want you to believe, sucking up resources and hollowing out care for everyone else. No, they come from Penn, Harvard, and Stanford, clad in suit and tie and armed with clubs for hitting the links after (or during) a ‘hard’ day’s work. They are private equity.
Private equity (PE) firms pool money from wealthy investors, use the funds to buy businesses, then implement changes inside those companies to increase their value. After five to ten years, PE firms usually sell the businesses or take them public, netting a tidy profit for the firm and its investors.
PE firms argue that this process streamlines operations and thus reduces costs for consumers. But while ‘efficiency’ is their claim, maximizing profits is PE’s ultimate aim. And this goal tends to come at the expense of everything and everyone else.
A damning U.S. Department of Health and Human Services report released in January during the waning days of the Biden Administration chronicles the damage that PE firms are doing to the U.S. healthcare system in the name of maximizing shareholder value. The authors extensively reviewed published research and revealed for the first time a selection of hundreds of solicited comments from patients, physicians, and academic researchers, many with firsthand experience of PE’s toxic intrusion into healthcare.
In 2010, PE firms purchased 352 healthcare businesses, touching inpatient services and outpatient services, elder and disabled care, and pharmaceuticals. Ten years later, purchases rose to 937, representing $806 billion.
This buying spree has resulted in the most concentrated healthcare system in our nation’s history, with fewer companies competing in the market. Reduced competition has undeniably contributed to a long-term trend that affects every single American: the rapidly rising cost of healthcare relative to inflation.
Take, for example, a common tactic of PE firms: the roll-up merger. They’ll buy numerous competing healthcare practices in a geographical area and merge them into one entity. With competition stifled in the region, the PE firm proceeds to jack up prices.
How much do PE firms hike costs? The HHS report summarized the findings of numerous studies. Hospitals acquired by PE firms increase prices by 7 to 16 percent, while smaller physicians’ practices increase prices 4 to 20 percent.
And that’s not all, evidence suggests that PE-owned practices provide more unnecessary services and order more high-profit margin tests and procedures. At the same time, PE-owned firms are more likely to cut staff and lower wages relative to practices that aren’t PE-owned.
One board-certified dermatologist described to HHS the detrimental effects of a PE takeover.
“I was forced to see 45 patients daily with 1 medical assistant,” she wrote. “This was unsafe. I am sure documentation was missed. I was routinely told by patients they called with problems and never heard back…I knew that I was going to be the one to go down when something bad happened and I left because I refused to take that fall.”
The doctor’s comment alludes to another disturbing reality of PE takeovers in healthcare: the quality of care tends to languish. An influential 2023 systematic review performed by researchers at Columbia University found as much. Another study released that year by the National Bureau of Economic Research showed that PE ownership of nursing homes is associated with an 11% increase in mortality amongst residents.
While the Biden administration and eight states instituted or proposed regulations on private equity in healthcare, the Trump administration is likely to lower barriers for the industry.
“Based on history and campaign promises, the new administration is anticipated to continue focusing on Federal deregulation,” Ron Present, a partner and healthcare expert at consulting firm Armanino, wrote last month. This will lower barriers to entry and reduce compliance costs, making it easier for PE firms to invest in healthcare companies.”
PE’s invasion of healthcare has increased costs and worsened quality of care. Because of the way the health insurance market in the US works, this trickles outward, and we all pay for it.
“The rising cost of healthcare is one of the economy’s most significant drivers of inequality,” the HHS researchers wrote. “It operates like a head-tax on every working family, putting enormous economic strain on vulnerable communities and the broader economy.”
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