The Impact of Private Equity on Healthcare: Insights from ACHI

Private equity investment in healthcare is a big topic these days. But what does it really mean? Simply put, private equity firms buy healthcare facilities to make a profit, usually within a few years. They aim to enhance operations and boost value, often through cost-cutting measures and management changes. This strategy differs from venture capital, which focuses more on early-stage companies for the long haul.

One reason healthcare attracts private equity is its stability. Even during economic downturns, people will still need medical care. Outpatient services, like urgent care clinics and specialty practices, create steady revenue. The healthcare market also has many smaller, independent providers, presenting a chance for consolidation into larger systems. This not only increases efficiency but also raises revenue potential.

For instance, private equity firms often target specialty practices such as cardiology and dermatology for their predictable cash flow. They are also moving into primary care to capitalize on coordinated care and better reimbursement opportunities. Reports show a substantial increase in physician practice acquisitions, growing from 2012 to 2021. Similarly, nursing homes have become attractive due to an aging population. About 5% of U.S. nursing homes had private equity owners as of 2022, indicating a notable trend.

However, these acquisitions can introduce significant financial risks. Many private equity deals involve leveraged buyouts, relying heavily on borrowed money. This leaves healthcare facilities with massive debts, making them more likely to face bankruptcy—nearly ten times more often than others. The risks extend to patient care as well. Recent studies highlight mixed outcomes; for instance, adverse events increased in privately owned hospitals compared to others, raising concerns about quality and safety. Yet, some data indicate that private equity ownership might also correlate with lower mortality rates for certain conditions.

Another pressing issue is access to care. Private equity firms may prioritize profitable services, potentially leaving out lower-income patients, particularly those on Medicaid. Studies reveal that acceptance of Medicaid is often lower in private equity-owned practices than in others. Additionally, costs can rise. Research indicates that patient expenses generally increase after a facility is bought by private equity firms.

Regulatory oversight of private equity in healthcare is also complex. Many transactions escape federal scrutiny, as these firms often operate through intricate corporate structures that make ownership hard to trace. As of May 2025, at least 35 states have stepped in, requiring facilities to notify local authorities about certain transactions. Some states are tightening rules to improve transparency and address issues surrounding corporate practice laws.

The future of private equity in healthcare remains uncertain. While it can provide valuable capital and operational improvements, there’s a growing worry about its impact on patient care, transparency, and community health. Policymakers are debating how best to regulate this trend to balance the need for innovation with the need for quality care.

In Arkansas, for example, private equity has made significant inroads. As of May 2025, several hospitals were under private equity control. The effects are being closely monitored, considering how these changes could affect local healthcare accessibility and quality.

As this trend continues, the healthcare community and policymakers must prioritize patient interests, striving for regulations that ensure equitable access to care for all.

For more insights on the impacts of private equity in healthcare, check out this [National Academy for State Health Policy report](https://nashp.org/a-model-act-for-state-oversight-of-proposed-health-care-mergers/) and the [Commonwealth Fund’s analysis](https://www.commonwealthfund.org/publications/explainer/2023/nov/private-equity-role-health-care).

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