Private Equity Acquisitions Did Not Impact Hospital Quality, Spending

Private equity acquisitions of short-term acute care hospitals were generally not associated with any changes in patient outcomes or healthcare spending among Medicare beneficiaries, a study published in JAMA Network Open found.

Private equity acquisition of healthcare facilities has become increasingly common over the past 20 years, particularly among physician groups, hospitals, and nursing homes. Private equity firms are likely interested in hospitals due to for-profit incentives, such as aging populations that require significant acute care services and fragmented hospital markets where they can increase negotiating power over payers.

Industry leaders have questioned whether private equity acquisitions adversely affect healthcare spending and quality of care due to these finance-driven intentions.

To understand the impact that private equity acquisitions have on short-term acute care hospitals, researchers gathered data from the CMS standard analytic files and enrollment database between January 1, 2001, and December 31, 2018.

The study determined care quality based on six measures: comorbidity burden, inpatient mortality, 30-day mortality, 30-day readmission, inpatient length of stay (LOS), and 30-day episode spending.

Researchers measured outcomes for five medical conditions, including acute myocardial infarction (AMI), acute stroke, chronic obstructive pulmonary disease (COPD), congestive heart failure (CHF), and pneumonia.

Throughout the study period, 20 million care episodes occurred at non-private equity-acquired hospitals and nearly 660,000 occurred at private equity-acquired hospitals.

Private equity acquisition was associated with a slight decrease in comorbidity burden only among patients admitted with acute stroke. However, the study found no change in this measure across the other four conditions.

Similarly, patients with AMI saw decreases in inpatient mortality and 30-day mortality at hospitals that private equity firms acquired. These decreases were more significant after restricting the patient cohort to those who received treatment at hospitals in hospital referral regions with at least one private equity acquisition.

There were no differences in 30-day or inpatient mortality for the other conditions following a private equity acquisition.

Patients with COPD exacerbation had slightly shorter adjusted LOS after a private equity acquisition, a measure that remained unchanged for the other medical conditions.

Finally, there were no differences in 30-day readmission rates or 30-day episode spending for any of the five conditions at private equity-acquired hospitals.

Researchers found similar results in quality after stratifying hospitals based on whether they were part of the 2006 HCA Healthcare acquisition. Patients with AMI experienced a greater decline in 30-day mortality and inpatient mortality at HCA hospitals. Among non-HCA hospitals, private equity acquisition was associated with shorter LOS for patients with COPD exacerbation and CHF.

“This study’s findings were inconsistent with the prevailing concerns surrounding [private equity] acquisitions of healthcare systems, perhaps highlighting the need for nuanced investigations into the role of for-profit investments in healthcare,” researchers wrote.

Private equity acquisitions have been a topic of debate in the healthcare industry. Advocates believe that revenue generation through taxation can benefit society, while patients benefit from economies of scale, management expertise, and the incentive to implement cost-effective care.

Meanwhile, critics have claimed that private equity firms have an incentive to favor short-term returns rather than long-term investments that could help improve population health.

While AMI patients saw improvements in mortality rates after a private equity acquisition, the other conditions analyzed did not produce changes in quality or healthcare spending.

“These findings challenge the narrative that [private equity] investments in all subsectors of healthcare delivery organizations increase health spending and systematically worsen quality,” the study stated.

An April 2022 Health Affairs study found that private equity acquisitions reduced hospital costs per adjusted discharge and increased operating margins.

However, other data has shown that these acquisitions may negatively impact patient care and costs in different settings. For example, a 2021 study revealed that nursing homes acquired by private equity firms saw lower quality long-term care and higher Medicare costs.