Private Equity in Medicine: At Odds With Doing What’s Best for Patients?

High-profile bankruptcies of private equity-backed health systems, including the collapse of Steward Health Care, have fueled growing concern among physicians and lawmakers. While proponents of private equity argue that it can make healthcare facilities more efficient, critics say that efficiency may come at the cost of patient care.

MedPage Today explains how private equity works in healthcare and what research says about its effects on patients, physicians, and the industry as a whole.

The following is a transcript.

Audra Sprague, RN: Steward Health Care systematically extracted every possible dollar that they could get out of our hospital.

Sen. Bernie Sanders (I-Vt.): Steward Health Care and the more than 30 hospitals it owns in eight states declared bankruptcy with some $9 billion in debt. Working in partnership with the private equity firm Cerberus, Dr. de la Torre became obscenely wealthy.

While Steward was busy shutting down hospitals, the companies he owned received $250 million in compensation and some of that money he used to purchase this $40 million yacht.

While Steward’s hospitals were severely understaffed…

Ellen MacInnis, RN: There were 95 patients in that emergency department on that shift and only 11 nurses.

Sprague: No way in the world could two nurses, no matter how fast they were, how hard they work, no matter what could care for 18 patients.

Sanders: Dr. de la Torre was able to afford this $15 million custom-made luxury fishing boat.

Sen. Bill Cassidy, MD (R-La.): A physician at Glenwood told a Louisiana state inspector the hospital was performing “third-world medicine.” That’s a quote.

Sanders: While Steward-owned hospitals cannot afford to pay for life-saving medical supplies…

Sprague: We ended up getting this subpar … it was like a Fisher-Price toy it felt like.

MacInnis: There were nights that we didn’t have any Similac or Pedialyte or even diapers.

Sanders: It had enough money to purchase a $62 million private jet.

Sprague: And then all of a sudden we couldn’t even rent the beds because we were on “credit hold.”

MacInnis: I personally have given my, my dinner, my meals, to patients.

Sanders: And incredibly a $33 million backup jet. Cerberus, the private equity firm he partnered with, made an estimated $800 million profit from its investments in Steward Health Care.

Cassidy: We need to keep this from happening again. That means we need answers.

Hannah Glaser, MedPage Today: Two years after Steward Health Care filed for bankruptcy, Valley Health’s recent firing of emergency physicians in Virginia has once again thrust private equity ownership into the healthcare spotlight.

According to a 2024 survey by the American College of Physicians, only 10% of physicians said they viewed private equity involvement in healthcare either positively or somewhat positively.

So let’s jump into what that involvement entails and why healthcare workers and Congress are sounding the alarm.

A MedPAC [Medicare Payment Advisory Commission] report prepared for Congress defines “private equity,” or PE, as referring “broadly to any activity where investors buy an ownership or equity stake in companies or other financial assets” that are not publicly traded. And, as the report says, it has become increasingly common in the healthcare sector to see acquisitions involving these firms.

Now, proponents of PE argue that these acquisitions can make hospitals “more efficient” and “provide a way for healthcare companies to obtain capital.”

But critics say they can weaken hospitals in the long term.

According to the Private Equity Stakeholders Project, or PESP, at the core of their concern is what the nonprofit watchdog organization calls the “typical private equity investment playbook.” Groups will pursue “outsized returns over short time horizons,” purchasing companies and then trying to flip them, or as the MedPAC report puts it, “improve their operational and financial performance so they can later be sold for substantial profit.” One way this is done? As this expert puts it, “a little bit of money” and “a lot of debt.”

Let’s say a private equity firm buys a hospital for a million dollars. To buy the hospital, the PE firm’s investment may kick in 30%, or $300,000, which is their equity. The remaining $700,000 gets borrowed and then assumed as debt, usually by the hospital.

So if all goes to plan, the firm will quickly make the hospital profitable and sell it, say for maybe $1.3 million. They’ll pay off the debt, in this case leaving investors with double their original equity. But if it doesn’t go to plan?

WTNH News 8: A company that owns three hospitals here in Connecticut has now filed for bankruptcy….

NEWS CENTER Maine: Genesis Healthcare is filing for Chapter 11 bankruptcy…

8 News Now Las Vegas: Omnicare filed for Chapter 11 bankruptcy…

Glaser: A private equity firm has “no sense of loyalty to the business that it owns,” economist Eileen Appelbaum stressed.

And it’s these firms’ incentive structure, prioritizing quick financial returns for investors, that one Harvard expert calls fundamentally “at odds with doing what’s best for patient care.”

The debt incurred by hospitals, says Appelbaum, “drives a lot of the poor quality care in private equity-owned facilities,” due to staffing reductions, less time with patients, and less attention to safety. And it appears the patients themselves are feeling the effects.

Kristina Fiore, MedPage Today: Harvard researchers found that measures of patient satisfaction declined after private equity took over hospitals. They conducted what’s called a difference-in-differences analysis that compared the same before and after period — that’s 3 years before and 3 years after — at hospitals that were taken over by private equity versus those that weren’t.

They found that the percentage of patients rating hospitals highly, as like a nine or a 10 out of 10, was unchanged at private equity-acquired hospitals, but it rose at matched control hospitals.

So they also found that the percentage of patients who would definitely recommend the hospital fell at those that were acquired by private equity, while it increased at control hospitals. And those differences grew each year after the acquisition, reaching five percentage points by the third year.

Glaser: As for doctors, those staffing cuts could mean that they’re out of a job.

To fight back, EMBR [Emergency Medicine of Blue Ridge] enlisted the help of the American Academy of Emergency Medicine [AAEM], which had recently helped a group of physicians with a similar case in Oregon.

But the involvement of these PE groups in healthcare doesn’t only cover hospitals. One study found that private equity-owned nursing homes were associated with 20,000 additional deaths over a 12-year period. Billions of dollars of private equity investment have also been poured into ambulatory surgery centers, and a recent PESP report documents over 500 healthcare facilities operated through “nonprofit joint ventures” involving private equity firms.

What’s more, according to a study in JAMA Pediatrics, between 2015 and 2024, private equity firms acquired 574 sites that delivered autism services, and researchers say money matters here. Private equity investors “appeared more likely to enter states with a higher autism prevalence and more generous state autism insurance mandates.”

Now, Congress is taking notice and states are taking action.

Many, including the chief medical officer of the AAEM, believe that a federal law would be the “holy grail” for enacting regulations on private equity groups. Back in March, Sen. Chris Murphy (D) of Connecticut introduced the Take Back Our Hospitals Act of 2026, but as of now, the legislation tracker GovTrack.us gives it a 0% chance of being enacted.

On a state level, Vermont just recently signed into law a bill that aims to place limitations on private equity group ownership, particularly when it comes to clinical decision making.

And as of March, PESP has documented 79 bills across 25 states that have been introduced addressing private equity and investor-backed ownership in healthcare. So it seems that while state legislators are going full steam ahead with regulation, that “holy grail” federal law may continue to prove elusive.

Written and reported by: MedPage Today staff

Produced by: Hannah Glaser