How Private Equity Has Looted Our Hospitals And What We Can Do to Stop It

The article examines the impact of private equity ownership on US hospitals, specifically detailing how leveraged buyouts, dividend recapitalizations, and sale-leaseback transactions with real estate investment trusts (REITs) drain resources from healthcare operations. Using Steward Health Care and Prospect Medical Holdings as primary examples, the author illustrates how these financial tactics lead to understaffing, reduced quality of care, and bankruptcy. The document calls for increased state and federal regulation, including joint liability for private equity firms and restrictions on debt-funded dividends, alongside healthcare worker organizing.

• Private equity firms typically employ a business model that involves using institutional investor funds and debt to acquire companies, cutting costs to increase cash flow, and selling the assets for profit within three to seven years. These firms often take approximately 20 percent of profits while investing only 2 percent or less of their own money.
• The use of leveraged buyouts shifts the financial risk from the private equity firm to the acquired hospital, as 60 to 90 percent of the transaction is typically funded by debt secured by the company being bought. This high debt burden pressures hospitals to cut costs through understaffing, skimping on supplies, and delaying capital improvements.
• Private equity ownership is linked to poorer patient outcomes and higher costs. One peer-reviewed study found a 25.4 percent increase in hospital-acquired conditions, such as bloodstream infections and falls, following private equity acquisition, while another 2023 review associated such ownership with reduced nurse staffing levels and higher costs for patients and payers.
• Three specific 'parasitic' strategies are used to extract wealth from hospitals: dividend recapitalizations, where hospitals take on new debt to pay investors; management fees, which can include 'accelerated monitoring fees' for services not rendered; and sale-leasebacks, where hospital real estate is sold to real estate investment trusts (REITs), replacing ownership with permanent lease obligations.
• Steward Health Care and Prospect Medical Holdings serve as case studies for these practices. Steward, owned by Cerberus Capital Management, filed for Chapter 11 bankruptcy in May 2024 with over $9 billion in liabilities. Prospect Medical Holdings, majority-owned by Leonard Green & Partners, saw $649 million in dividends and $9 million in management fees extracted while its safety-net hospitals suffered financial and quality declines.
• Medical Properties Trust (MPT) is identified as a key accomplice in the looting of hospitals by facilitating sale-leaseback transactions. For example, a 2016 deal between MPT and Steward Health Care generated nearly $500 million in dividends for Cerberus and funded expansion, but eventually burdened the system with rent payments it could not afford.
• To combat these practices, the author recommends several policy changes: creating joint liability for private equity firms and their portfolio companies, closing the 'carried interest loophole', banning debt-funded dividends, and regulating or banning hospital real estate sale-leasebacks.

APA

Bugbee, M. (2024). How Private Equity Has Looted Our Hospitals And What We Can Do to Stop It. Private Equity Stakeholder Project. https://pestakeholder.org/media_coverage/aft-health-care-how-private-equity-has-looted-our-hospitals/

Chicago

Bugbee, Mary. How Private Equity Has Looted Our Hospitals And What We Can Do to Stop It. Private Equity Stakeholder Project, 2024. https://pestakeholder.org/media_coverage/aft-health-care-how-private-equity-has-looted-our-hospitals/.

Wikipedia

{{cite report |last1=Bugbee |first1=Mary |title=How Private Equity Has Looted Our Hospitals And What We Can Do to Stop It |publisher=Private Equity Stakeholder Project |date=27 November 2024 |url=https://pestakeholder.org/media_coverage/aft-health-care-how-private-equity-has-looted-our-hospitals/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bugbee2024how, author = {Bugbee, Mary}, title = {{How Private Equity Has Looted Our Hospitals And What We Can Do to Stop It}}, institution = {Private Equity Stakeholder Project}, year = {2024}, month = nov, url = {https://pestakeholder.org/media_coverage/aft-health-care-how-private-equity-has-looted-our-hospitals/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }