PRIVATE EQUITYS GROWING FOOTHOLD IN THE HEALTH CARE INDUSTRY

The report documents a record-breaking increase in private equity acquisitions within the health care sector, reaching $31 billion in 2018. Through case studies of senior care, hospital systems, physician staffing, and behavioral health, it argues that private equity strategies—such as leveraged buyouts, sale-leaseback transactions, and aggressive cost-cutting—often prioritize short-term investor returns over patient care and long-term institutional stability. Key concerns highlighted include increased health-code violations, facility closures, 'surprise' medical billing, and reduced regulatory oversight due to complex corporate restructuring.

• Private equity investment in health care saw a significant surge, with 2018 deal values reaching a record $31 billion across 388 transactions, representing a 71% increase in total value compared to six years prior.
• In the senior care sector, private equity firms have used sale-leaseback transactions to extract capital, which can lead to financial distress and diminished care. For example, Carlyle Group's ownership of HCR ManorCare involved a $6.1 billion real estate sale to pay debt and dividends, followed by cost-cutting and a 26% annual rise in health-code violations between 2013 and 2017.
• Private equity ownership of hospital systems may incentivize short-term asset stripping over long-term viability. Paladin Healthcare's acquisition and subsequent closure of Hahnemann Hospital in Philadelphia is cited as a case where the underlying real estate, valued at $58 million, may have been more valuable to the owner than the hospital's operation.
• The report identifies a trend of aggressive expansion followed by service discontinuation in PE-owned systems, such as Cerberus Capital Management's Steward Health Care, which grew to 38 hospitals but closed various units and facilities, including Quincy Hospital in Massachusetts.
• In physician staffing and emergency services, private equity-backed firms like Team Health (Blackstone) and Envision Healthcare (KKR) are linked to 'surprise' out-of-network billing. A Yale study found that Envision's entry into a market increased out-of-network billing rates by 81 to 90 percentage points.
• Private equity has become dominant in behavioral health, particularly in opioid treatment. In 2018, PE buyers accounted for 69% of behavioral health acquisitions, up from 48% in the previous period.
• The report argues that PE firms reduce their liability and hinder government oversight by restructuring companies into multiple separate LLCs, as seen with Fillmore Capital's management of Golden Living Centers.

APA

Baker, J. (2019). PRIVATE EQUITYS GROWING FOOTHOLD IN THE HEALTH CARE INDUSTRY. Private Equity Stakeholder Project. https://pestakeholder.org/wp-content/uploads/2019/11/Adverse-Reaction-PE-Investment-in-Health-Care-PESP-110619.pdf

Chicago

Baker, Jim. PRIVATE EQUITYS GROWING FOOTHOLD IN THE HEALTH CARE INDUSTRY. Private Equity Stakeholder Project, 2019. https://pestakeholder.org/wp-content/uploads/2019/11/Adverse-Reaction-PE-Investment-in-Health-Care-PESP-110619.pdf.

Wikipedia

{{cite report |last1=Baker |first1=Jim |title=PRIVATE EQUITYS GROWING FOOTHOLD IN THE HEALTH CARE INDUSTRY |publisher=Private Equity Stakeholder Project |date=November 2019 |url=https://pestakeholder.org/wp-content/uploads/2019/11/Adverse-Reaction-PE-Investment-in-Health-Care-PESP-110619.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{baker2019private, author = {Baker, Jim}, title = {{PRIVATE EQUITYS GROWING FOOTHOLD IN THE HEALTH CARE INDUSTRY}}, institution = {Private Equity Stakeholder Project}, year = {2019}, month = nov, url = {https://pestakeholder.org/wp-content/uploads/2019/11/Adverse-Reaction-PE-Investment-in-Health-Care-PESP-110619.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }