Introduction and summary
Over the past two decades, private equity firms have aggressively acquired health systems, hospitals, physician practices, nursing homes, and other health care facilities. This has reshaped the health care industry, with concerning consequences.1
Private equity funds are partnerships that acquire companies, restructure them with a focus on increasing revenue, and then sell them at a profit within a short timeframe—usually three to seven years.2 The goal is to generate high returns for investors in the fund, not to build long-term value. In a fund’s portfolio, any one investment target need not survive in the end as long as the overall portfolio generates significant returns for its investors.3 Private equity investments in health care ballooned from only $5 billion in 2000 to an estimated $104 billion in 2024.4
Private equity firms can relieve health care providers of administrative responsibilities, infuse capital, enhance revenue cycle management, introduce operational efficiencies, and rescue failing health care systems.5 But private equity firms’ focus on short-term revenue generation and investor profit also can lead them to strip acquired facilities of their assets, force those entities to raise prices through anticompetitive practices, reduce staffing to dangerously low levels, avoid investment in critical infrastructure, and eliminate vital services—to the detriment of patients, workers, and entire communities. For this reason, private equity fund ownership is concerning in the health care space, where quality of care and patient safety are in the public interest and should be a health care entity’s highest priorities.
Private equity fund ownership is concerning in the health care space, where quality of care and patient safety are in the public interest and should be a health care entity’s highest priorities.
Not all private equity funds engage in all the harmful practices detailed in this report, nor are private equity funds alone responsible for consolidation, increased costs, low wages, reduced services, and facility closures in health care services. In fact, private equity is part of a larger trend toward the corporatization of health care, where profits are the primary priority.6 Giant public companies including UnitedHealth, CVS, and HCA Healthcare, and even nonprofits such as Ascension Health and CommonSpirit Health, are among the corporations that have consolidated health care markets in the past decade.7 But private equity funds deserve specific attention, as unscrupulous actors in private equity have been particularly skilled at consolidating markets, raising prices, and compromising care while skirting regulatory enforcement.
The federal government has taken a number of steps in recent years to investigate the impact of private equity in health care, including through congressional hearings and investigations scrutinizing private equity ownership of health care institutions.8 In February 2024, the Federal Trade Commission (FTC), U.S. Department of Labor, and U.S. Department of Health and Human Services (HHS) issued a joint request for information on consolidation and corporate ownership in health care, naming private equity funds as entities of particular concern.9 The responding summative report from HHS concluded, “The harmful effects of private equity in the health care delivery system deserves (sic) ongoing scrutiny and greater research.”10
Because private equity funds do not have to comply with the same rules that public companies and investment funds do, the industry remains largely opaque, making it difficult for policymakers to know when intervention is needed or to assess private equity funds’ full impact on health care.11 This limited oversight has led to important regulatory gaps that Congress and state policymakers must address through legislation.12 Additionally, the executive branch and its regulatory agencies have an important role to play in increasing oversight and enforcement efforts to prevent anticompetitive behaviors. This report presents five immediate concerns that Congress and regulators should consider when crafting legislation and administrative rules, along with policy recommendations to mitigate private equity’s harms on the health care system.
See also
1. Private equity firms burden acquired health care organizations with unmanageable debt
Private equity firms typically purchase hospitals and other health care providers by leveraging large amounts of debt and using the value of the acquired entities as collateral. This makes the acquired health care facilities responsible for servicing the debt repayments.13 As a result of this “debt loading,” the cash flow that the acquired hospitals or providers previously used to pay staff, stock supplies, maintain facilities, or upgrade equipment must be redirected to paying off loans.14
Private equity firms also often sell an acquired entity’s real estate in a practice known as a “sale-leaseback” or “asset stripping,” forcing the acquired facility to pay rent for buildings and land it once owned.15 This places additional financial pressure on acquired health care facilities, increasing the likelihood of default, bankruptcy, and closure.
While these practices can be harmful to patients and jeopardize the financial sustainability of an acquired entity such as a hospital or nursing home, private equity firms can use the money generated by debt loading and asset stripping to distribute multimillion-dollar payments to investors in the private equity fund.16 Because the acquired companies hold the debt from private equity transactions, the private equity fund managers and investors are protected from liability for default.17 Funds can then abandon their investments if the businesses fail—after extracting significant profits from those investments. A 2025 report from the Senate Budget Committee detailed multiple instances of private equity firms that added hundreds of millions of dollars in debt to the books of acquired health care facilities, extracting significant short-term profits while ultimately abandoning those investments—leaving them to struggle to stay afloat or to shut down entirely.18
For example, in 2010, private equity firm Leonard Green & Partners, L.P. (LGP) acquired a majority stake in Prospect Medical Holdings, a five-hospital system in Southern California, in a $363-million deal primarily financed by debt.19 Over the next decade and a half, Prospect grew to include 16 hospitals across five states.20 A 2021 investigation by the Rhode Island attorney general found that aggressive, debt-funded expansion and asset stripping increased Prospect’s financial liabilities from $451 million in 2015 to nearly $1.6 billion in 2019.21 The Senate report and outside investigations allege that under the ownership of LGP, as Prospect’s revenue was directed to debt service and lease payments, quality at Prospect hospitals deteriorated, services were reduced, and multiple facilities closed.22 When Prospect filed for Chapter 11 bankruptcy in January 2025, it claimed to hold $2.3 billion in debt.23 Meanwhile, between 2012 and 2020, LGP directed more than half a billion dollars toward investor dividends and preferred stock redemptions.24
According to the Private Equity Stakeholder Project, in 2023 at least 21 percent of the health care companies that filed for bankruptcy, and nearly 90 percent of the health care entities in the United States that Moody’s Investors Service rated as having a high risk of default, were owned by private equity firms.25
Case Study: Hahnemann University Hospital
Until its closure in 2019, Hahnemann University Hospital, a safety-net hospital in Philadelphia, was the primary teaching hospital for the Drexel University College of Medicine.26 In January 2018, Hahnemann was struggling financially when it was acquired along with St. Christopher’s Hospital for Children for $170 million by private equity firm Paladin Healthcare through Paladin’s subsidiary, American Academic Health System (AAHS).27 The deal included $120 million in high-interest loans taken out against the assets of the hospitals and the sale of four buildings on the hospital campus to a joint venture between AAHS and Harrison Street Real Estate Capital, an outside real estate firm. This meant that Hahnemann had to pay rent on property it formerly owned to the private equity subsidiary that acquired it.28
Hahnemann’s financial position worsened after the acquisition by AAHS.29 In 2019, AAHS arranged more high-interest loans from yet another private equity firm, as well as from Harrison Street Real Estate Capital.30 The resulting debt—combined with existing rent obligations—increased the financial pressure on the hospital to the point that it was at risk of default. Vendors began refusing to provide basic supplies because the hospital hadn’t paid its bills.31 Subsequently, Hahnemann Hospital laid off 175 employees and was sued by union employees who alleged that Hahnemann owed nearly $2 million in unpaid pension contributions, health benefits, and training time.32
In June 2019, Hahnemann filed for Chapter 11 bankruptcy and announced it would be closing in approximately three months.33 All residency programs would shut down by August 6, leaving more than 500 residents struggling to relocate to other programs.34 Ultimately, more than 2,000 workers lost their jobs and tens of thousands of patients—predominantly Black, Latino, and patients covered by Medicaid—were forced to find new care providers.35
By separating the hospital’s real estate from its operating businesses, AAHS was able to exclude the real estate from Hahnemann’s bankruptcy. In 2021, Harrison Street Real Estate Capital and Paladin affiliates sold the hospital building and other parts of the former Hahnemann medical campus to another private equity firm.36
2. Private equity ownership stealthily decreases health care competition
A central strategy for private equity firms is to consolidate fragmented markets, often by buying up multiple health care practices in a geographic region over time to reduce competition.37 This “serial” acquisition or “roll up” of small entities allows consolidation to avoid the attention of regulators.
Private equity-driven consolidation of physician practices spans many medical specialties, including gastroenterology, dermatology, ophthalmology, and urology.38 According to a 2023 report by the American Antitrust Institute, a single private equity firm controlled more than 30 percent of market share of full-time-equivalent physicians in 28 percent of all metropolitan statistical areas (MSAs) and 50 percent of market share in 13 percent of MSAs.39 In more than one-third of MSAs in 2021, private equity firms collectively controlled more than 30 percent of market share in at least one specialty.40 In 2019, private equity-owned companies controlled between 19 percent and 36 percent of the anesthesiology market in six states.41
Private equity acquisitions of health care providers often avoid scrutiny from antitrust authorities by keeping transactions below the FTC premerger reporting threshold set in the Hart-Scott-Rodino Act—currently $126.4 million—for regulatory review of acquisitions.42 Likely because many hospital acquisitions exceed this limit and most physician practice acquisitions do not, most private equity deals in health care services are for physician practices, not for hospitals.43 The lack of regulatory oversight for these deals results in “stealth consolidation,” where private equity firms achieve market concentration before regulators notice the anticompetitive effects.44 Between 2012 and 2021, as private equity purchases of physician practices increased by 600 percent, fewer than 10 percent of private equity deals met the minimum value required for regulatory review.45
Case Study: U.S. Anesthesia Partners, Inc
U.S. Anesthesia Partners (USAP) provides anesthesia services in 700 inpatient and outpatient facilities in multiple states.46 On September 21, 2023, the FTC initiated legal action against USAP and its private equity owner, Welsh Carson Anderson and Stowe, alleging that they had executed a multiyear, multipronged anticompetitive strategy to stifle competition and unfairly increase prices for anesthesiology services in Texas.47
The FTC complaint contended that, starting in 2012, USAP and Welsh Carson engaged in a roll-up acquisition scheme, purchasing multiple anesthesia providers in the state and consolidating them into a single, dominant entity. First, according to the FTC, USAP purchased the largest anesthesiology practice in Houston, Greater Houston Anesthesiology, providing USAP with control of more than 50 percent of the “commercially insured hospital-only market” in Houston.48 Then, the FTC alleged that between 2014 and 2020, USAP acquired an additional three practices, increasing its market share in the Houston market to 70 percent by 2021.49 The FTC alleged that by establishing a dominant presence in the region, competitive forces that kept prices controlled were reduced, giving USAP an opportunity to raise prices of anesthesiology services to what the FTC alleges were “supracompetitive” levels. According to the FTC complaint, the insurer United Healthcare reported that as of February 2020 it reimbursed USAP at rates 95 percent higher than the in-network median for Texas.
The FTC further alleged that USAP and Welsh Carson used their market power to engage in price-setting arrangements with at least three of USAP’s competitors, enter an agreement with one of its competitors to allocate markets, and prevent an unnamed competitor from entering the region’s market entirely.50 One insurance executive alleged that USAP’s price-setting agreements drove up competitor prices to match the highest rates in the state—its own. As a result, the FTC alleges, USAP extracted tens of millions of dollars in increased profits from patients, payers, and businesses across Texas.51
Under a January 2025 settlement resolving the FTC’s legal action against Welsh Carson, the firm is prevented from increasing its ownership share of USAP and is required to provide notification to the FTC of future acquisitions and investments in anesthesia and other hospital-based physician practices.52 The FTC litigation against USAP remains ongoing.53
3. Private equity ownership often increases costs for patients and payers
Private equity-driven consolidation of physician practices reduces competition, increasing the market power of private equity-owned facilities.54 These consolidated health care practices can then leverage their market dominance to charge higher prices to patients and negotiate higher reimbursement rates from insurers.
A 2023 systematic literature review of studies between 2000 and 2023 found that private equity ownership of U.S providers increased health care costs to patients and payers in 9 of 12 cases—and decreased costs in none.55 Another 2023 study demonstrated substantial price increases in specialties such as gastroenterology, obstetrics and gynecology, and dermatology in markets where private equity firms owned at least 30 percent of the practices.56
Private equity-owned hospitals represent 8.5 percent of all private hospitals (including for-profit and nonprofit) and more than 22 percent of all private for-profit hospitals in the United States.57 This is significant, as a November 2022 study from the MIT Sloan School of Management found that negotiated prices between hospitals and insurers increased 32 percent after private equity investment. The study also found a “spillover effect,” where private equity investment in hospitals affects negotiated prices of local nonprivate equity hospitals in the same “bargaining network.” When nonprivate-equity-owned hospitals shared at least one insurer with a private equity-backed hospital in the same region, negotiated insurance rates at the nonprivate-equity-owned hospitals experienced an average 8.1 percent increase in negotiated insurance prices. Local, nonprivate-equity-owned hospitals that did not share an insurer with a private equity-backed hospital showed no meaningful increase in prices.58
Private equity ownership, with its aggressive focus on profit generation, may also pressure physicians to deliver revenue by providing unnecessary care, increasing insurance upcoding, and exploiting billing loopholes such as increasing the number of charges per insurance claim. These practices can lead to increased costs for patients, insurers, and government payers.59
4. Private equity ownership can compromise patient care
Within health care settings, where payroll is generally the largest single expense, the most direct way to cut costs—and therefore maximize revenue—is to decrease staffing.60 Consequently, private equity funds can be aggressive in reducing staffing levels in pursuit of profits. According to a 2018 study, private equity-owned hospitals and nursing homes had fewer employees per bed compared with those not owned by private equity firms, and a 2014 study found that staffing patterns in private equity-owned nursing homes in Florida demonstrated a lower skill mix—substituting less expensive licensed practical nurses and certified nursing assistants for more expensive registered nurses (RNs)—than other for-profit nursing homes.61
Reduced health care facility staffing can result in significant patient harm. A 2021 JAMA study found that residents of nursing homes owned by private equity firms were 11 percent more likely to have an emergency department visit and almost 9 percent more likely to experience hospitalization resulting from a health condition that could have been prevented or controlled with adequate outpatient treatment than residents of other for-profit nursing homes.62 Similarly, a 2023 evaluation of hospital quality and outcomes found private equity ownership to be associated with a 25 percent increase in hospital-acquired conditions, such as falls and central line-associated infections––events that are sensitive to the ratio of staff to patients and the composition of the staff, particularly when RNs are replaced with non-RN staff.63
In addition to staffing constraints, a lack of adequate capital investment by private equity-owned health care providers can translate into insufficient equipment available for staff to adequately care for patients.64 The 2025 Senate Budget Committee report concluded that the parent company of Ottumwa Regional Health Center (ORHC) failed to make routine capital expenditures required to maintain its facilities and equipment starting the year it was acquired by a private equity fund. According to the report, the lack of capital investment was reflected in 35 employee comments related to broken or old equipment in ORHC’s June 2022 satisfaction survey, including being forced to use outdated equipment that “does not work half the time.”65
Patient harms can translate into lives lost: A 2021 study from the National Bureau of Economic Research found the 90-day mortality rate for Medicare patients was 10 percent higher for private equity-owned nursing homes than for skilled nursing facilities overall. A 2020 report calculated approximately 21,000 lives lost over 12 years due to private equity ownership of nursing homes.66
Beyond reducing staffing levels and infrastructure investment to increase profits, private equity firms sometimes shut down essential service lines altogether. For example, in 2016, private equity-owned Riverton Memorial Hospital in Wyoming closed its maternity ward, and in 2022, private equity-owned Conemaugh Nason Medical Center in central Pennsylvania shuttered its OB-GYN and pediatric clinics, choosing instead to invest in cardiology, orthopedics, and general surgery, which traditionally generate more revenue for hospitals.67 This is especially alarming considering the lack of OB-GYNs nationally: A study in JAMA found that 537 hospitals lost obstetrics units—and only 138 hospitals added obstetrics units—between 2010 and 2022.68 In 2024, the March of Dimes reported that more than one-third of U.S. counties did not have a single obstetric clinician.69
See also
5. Private equity ownership and consolidation can harm health care workers and providers
A 2024 Physicians Foundation survey found that acquisitions, mergers, and consolidation––the stock and trade of private equity funds––can lead to the loss of autonomy and lower job satisfaction for physicians and compromised access to “high-quality, cost-efficient” patient care, all of which contribute to burnout among physicians.70 The survey found that only 14 percent of physicians agreed that “private equity funding is good for the future of healthcare.”71
Similarly, journalistic reporting and anecdotal evidence demonstrate that prioritizing profits over patients, shorter appointment times, upcoding, billing more intensively, providing unnecessary care, and pressure to admit more emergency patients to the hospital and refer patients to in-network providers may cause burnout and moral injury––emotional distress brought about by witnessing, participating in, or failing to prevent events that violate one’s personal moral code––while putting physicians in the position of having to violate their oath to “do no harm.”72 All of these practices can result from private equity’s focus on short-term profit.
Furthermore, while not limited to private equity-owned practices, physicians within the health care industry are often required to sign noncompete agreements that prevent them from changing jobs, even when they are dissatisfied with their employers.73 Data on noncompete agreements is scarce, however, because they are often paired with nondisclosure agreements, preventing physicians from disclosing their existence.74
In health care facilities, reductions in staffing––which have been associated with private equity ownership––can place strain on the clinicians and technicians who remain in their roles.75 Staff reductions force nurses and support staff to manage larger patient loads, which can lead to stressful work environments, overworked health care professionals, higher rates of burnout, more occupational hazards, and an increased likelihood of medical errors.76
In addition to negative workplace effects, private equity-driven consolidation can confer substantial labor market power to private equity-owned health systems, hospitals, and physician practices, leaving health care workers fewer options for health care jobs, resigning them to lower wages, and limiting job mobility.77 The effects of consolidation can be more pronounced for workers with industry-specific skills, such as nurses and pharmacy workers, as their employment options are limited to the health care sector.78
Health care workers are also harmed when private equity firms abruptly close facilities. Nearly 800 people were reported to have lost their jobs when private equity firm Prospect Medical Holdings closed Nix Medical Center and Nix Behavioral Health Center in San Antonio in 2019.79 As described above, the closure of private equity-owned Hahnemann University Hospital in Philadelphia cost around 2,000 jobs.80 On April 21, 2025, Prospect Medical Holdings announced it would be closing Crozer Health in Pennsylvania and laying off more than 2,600 employees.81
Policy recommendations
Policymakers must take steps to safeguard the health care system against harmful private equity practices by enhancing regulatory oversight over health care acquisitions, rolling back reporting exemptions on financial transactions in private markets, and changing the incentive structures to limit private equity firms’ interest in engaging in financially risky behaviors that run counter to the public interest. These recommendations should address private equity practices, but also protect against anticompetitive behaviors broadly, regardless of corporate structure.
Use existing oversight and enforcement tools to catch anticompetitive behavior early
The FTC should aggressively monitor potentially anticompetitive behavior and prevent mergers and acquisitions that will lessen competition under Section 7 of the Clayton Act. Existing tools at its disposal include new FTC premerger notification requirements, which went into effect in February 2025 and require parties to file information on previous acquisitions and overlapping business, and the 2023 update to the Merger Guidelines, a set of rules the FTC and the U.S. Department of Justice (DOJ) use to investigate potential violations of antitrust laws.82
In April 2024, the FTC released a final rule banning new noncompete clauses and preventing the enforcement of existing noncompetes except for senior executives.83 An order from a district court stopped the FTC from enforcing the rule in August 2024, and the FTC voted to dismiss any appeals to that ruling on September 5, 2025, vacating the final rule.84 FTC Chairman Andrew Ferguson stated, however, that FTC will continue to investigate unlawful noncompete agreements.85 The FTC should continue to use its authority to stop enforcement of noncompetes where it can.
Vigorous federal oversight will require an increased number of FTC investigations and enforcement staff. Yet, enforcement of antitrust laws is currently lacking. According to a study from the Yale Tobin Center for Economic Policy, the FTC took enforcement actions against only 13 of more than 1,000 horizontal hospital mergers between 2002 and 2020.86 Recent cuts to federal agencies make it all the more critical that the FTC, HHS, DOJ, and other agencies be granted the resources and personnel needed to adequately carry out the oversight that current and future laws and rules require.87
At the state level, laws requiring advance notice and prior approval of health care transactions by the state attorney general or other state agency have been passed in at least 11 states, giving attorneys general additional tools to fight anticompetitive transactions.88 Where state laws require advance notice but do not require approval of specific transactions, state attorneys general can still sue to stop mergers and acquisitions that reduce competition.89 They should use this authority aggressively.
See also
Even without state laws addressing private equity deals, state attorneys general can assert their power to stop anticompetitive transactions under Section 4 and Section 16 of the Clayton Act by, for example, suing to block health care mergers that violate antitrust laws by substantially lessening competition.90 When federal agencies fail to take aggressive action, states can still take the lead on litigation and coordinate antitrust enforcement efforts with the FTC and DOJ.91 States can even coordinate multistate antitrust litigation efforts with the assistance of the National Association of Attorneys General Multistate Task Force.92
Establish and enhance guardrails for health care transactions by private equity funds and other corporate entities
Many private equity transactions are not subject to government antitrust oversight because the value of the deals falls under the threshold for premerger review.93 Federal legislation could lower the Hart‑Scott‑Rodino threshold for regulatory review of mergers and acquisitions, giving the FTC the opportunity to review more private equity firms’ efforts to stealthily roll up multiple small physician practices into dominant regional practices.94 In 2024, the FTC issued a final rule requiring merging parties to “provide information on certain prior acquisitions that closed within the previous five years.”95 While that was a positive step, legislation could go further by requiring the FTC to count the cumulative value of past acquisitions in related markets, not only individual deal value, toward the regulatory threshold, subjecting a greater number of roll-up acquisitions to review.
With the FTC currently reviewing only a tiny percentage of mergers and acquisitions, however, it is arguable that increasing the number of transactions eligible for regulatory review would only increase the number of eligible transactions not being scrutinized. A greater number of deals being subject to scrutiny could, however, draw attention to the roll-ups of smaller physician practices, identify the roll-up acquisitions that pose the greatest risk to competition, inform state attorneys general of deals they might challenge even when the FTC does not, and possibly have a deterrent effect on potential roll-ups.96
Congress should protect patients and providers by passing legislation that would require more transparency from more entities and cover more transactions. Some of those components are included in existing bills. For example, the Health Over Wealth Act of 2024, sponsored by Sen. Ed Markey (D-MA), and the Corporate Crimes Against Health Care Act of 2024, sponsored by Sen. Elizabeth Warren (D-MA), include provisions that would require private equity health care entities to report to HHS on mergers, acquisitions, and changes in ownership and control, as well as to share with HHS financial data, including debt and debt-to-earnings ratios, executive pay, and costs for patients. The Health Over Wealth Act would also require HHS to establish a task force to monitor changes in the health care marketplace and address and limit the role of private equity in health care specifically and consolidation in health care generally.97
In the past two years, at least 13 state legislatures have introduced bills requiring advance notice and prior approval of health care transactions by the state attorney general or other state agency.98 Codifying those bills into law, and passing similar laws in other states, would empower state attorneys general and other state agencies to prevent more anticompetitive mergers and acquisitions. States should be more assertive in preventing anticompetitive deals by lowering the thresholds for regulatory oversight, requiring public comment periods for all health care transactions, and requiring review, by the attorney general or other state office, of all acquisitions of physician practices.99
State policymakers should ensure that legislation applies to the full scope of private equity practices. Model legislation from the National Academy for State Health Policy (NASHP) offers a good example of how comprehensive these laws should be. Central provisions of the model legislation include updating definitions of key words and phrases (e.g., “health care entity,” “licensee,” and “material change transaction”) to reflect current market conditions; extending oversight to include corporate changes of control of health care provider groups, real estate sale-leasebacks, and planned facility or service line closures; strengthening laws regulating the corporate practice of medicine (CPOM); and requiring transparency of ownership and control structures.100
What are corporate practice of medicine laws?
State CPOM laws are intended to protect against medical decisions being made based on corporate interests by prohibiting corporations from owning physician practices. At least 33 states currently regulate CPOM. These laws are important, but their strength varies from state to state and they are inconsistently enforced.101 While many CPOM laws require medical practices to be 100 percent owned by physicians licensed to practice medicine in a state, private equity firms and other corporations have successfully evaded those requirements, often by establishing local “staffing groups” that are technically owned by physicians, but in practice are controlled by corporate Management Services Organizations (MSOs).102 Private equity firms are also known to establish physician practices that are “owned” by a “friendly” or “captive” physician while exerting management control over the practices.103
In January 2025, Massachusetts enacted a law incorporating much of NASHP’s model language by expanding existing requirements that parties provide notice of transactions involving private equity firms, real estate investment trusts, and MSOs; banning sale-leaseback agreements; and increasing transparency by requiring the detailed reporting of entities’ financial stability and the public reporting of compensation and dividends.104 As Hostert and others explained in a column in Health Affairs Forefront, the Massachusetts law could have gone further by requiring prior approval by the attorney general or the state Health Policy Commission—not merely advance notice—for material change transactions and by updating the state’s ban on CPOM to prevent MSOs from controlling medical practices, a provision that was in the original bill but dropped from the final legislation. 105
On June 9, 2025, Oregon legislators passed the country’s strongest state law addressing abuses of existing CPOM regulations by private equity firms and large corporations.106 The law restricts MSO control of physician practices by preventing a shareholder, director, or officer of a professional medical corporation from owning shares in, serving as an officer of, or participating in managing an MSO with which the professional corporation has a contract. The law also limits noncompete agreements.107 Other state policymakers should follow Oregon’s lead by passing similarly strong legislation into law.
Eliminate financial incentives that encourage risky private equity behavior
State and federal policymakers should be more aggressive in using legislation and regulatory power to realign the financial incentives that drive private equity firms to load acquired health care entities with debt, strip them of their assets, engage in anticompetitive behaviors, increase costs to consumers and payers, and prioritize capital distributions to investors over patient care. For example, legislation could deter asset stripping by limiting tax breaks for health care real estate investors. Closures and service reductions could be minimized by requiring private equity firms to create escrow accounts to cover five years of operation and capital expenses at the health care entities they own. Both such measures are included in the Health Over Wealth Act.108 Private equity firms also could be prevented from making capital distributions for certain periods of time, as called for in the Stop Wall Street Looting Act of 2024.109
Legislators should be more assertive in shaping an appropriate incentive structure by requiring private equity firms and any other corporate owners of health care facilities to share responsibility with the health care entities they acquire for the debt placed on the latter.
Legislation could provide the power to claw back executive compensation when an acquired facility experiences financial difficulty as a result of corporate looting; prohibit entities that sell assets to a real estate investment trust from receiving payments from federal health programs such as Medicare and Medicaid; and go so far as to impose a prison sentence for executives whose actions contribute to an event that results in the injury or death of a patient. All of these measures are included in the Corporate Crimes Against Health Care Act.110
Legislators should be more assertive in shaping an appropriate incentive structure by requiring private equity firms and any other corporate owners of health care facilities to share responsibility with the health care entities they acquire for the debt placed on the latter.111 This could be achieved by, for example, placing limits on fund distributions to investors where the fund has loaded an acquired health care facility with debt the company cannot support. Furthermore, legislation could require HHS to collect and publicly report on the relationship between private equity ownership of health care facilities and patient outcomes and enhance protections and financial rewards for whistleblowers who report safety violations, upcoding, and other private equity malfeasance.112
These reforms, whether passed into law through existing bills or through new legislation or rulemaking, would protect patients, health care workers, providers, and communities by disincentivizing many of the private equity practices that cause the most harm.
Conclusion
While business principles and capital can, in some instances, benefit health care providers, workers, and patients and promote efficiency without harming quality of care, the private equity business model is fundamentally ill-suited to health care. Private equity firms prioritize short-term profit over patient care and can exploit the assets of acquired health care facilities to distribute large payouts to investors. This can result in financial strain on health care facilities, decreased competition, higher costs, and harms to patients and health care workers.
To protect the public from the threats that can result from private equity ownership of health care entities, policymakers must require more transparency in a greater number of private equity deals and eliminate the financial incentives that encourage risky private equity behavior. Regulatory bodies at the state and federal levels must be aggressive in using all available tools to stop anticompetitive private equity deals, require high quality of care in private equity-owned facilities, and penalize private equity firms and their executives when they strip health care facilities of their assets for personal financial gain.
Acknowledgments
Special thanks to Andrea Ducas, Natasha Murphy, and Kierra Jones for their contributions, editing, and fact checking, and to Erin Fuse Brown, Zurui Song, and Yashaswini Singh for their feedback and guidance.