How does private equity work in the healthcare industry?
Partnering or selling private equity can be an attractive option, especially for healthcare providers looking to retire, or because of small practices that require administrative assistance or better negotiation skills for insurance reimbursement. He said it could be.
But economists and health analysts say there is still much to learn about the short-term and long-term benefits and risks of private equity investments.
A 2023 study published in the Journal of the American Medical Association found an increase in “hospital-acquired adverse events” such as Falls and Infections after private corporations acquired the facility. In a 2023 physician survey, more than half of respondents thought that private equity ownership was worse than independent ownership.
Meanwhile, other reports show that these investments can lead to job creation and stabilise care in certain areas. For example, a 2024 report from the advocacy and resource organization American Investment Council showed that private equity investments were used to open emergency care in rural Appalachia, where hospital closures occurred. .
In written testimony to the US Senate Committee on Health, Education, Labor and Pensions, AIC President and CEO Drew Maloney argued that more private equity investments are needed.
“While some may choose to use private equity as a convenient bogeyman, the committee should focus on encouraging American investment and promoting innovation,” he said. I am writing.
This type of business and ownership model isn't inherently bad, said Atulgupta, an assistant professor in the Department of Healthcare Management at the University of Pennsylvania Wharton School and a fellow at the Penn Leonard Davis Health Economics Institute.
In fact, Gupta said it could be a strength for good.
“I think we were conditioned to think they would do something wrong, but we need to remember that it's just a creative, highly financial incentive model,” he said. said. “And if we can find ways to align their incentives with society's incentives, private equity is actually much more efficient and creative than other forms of organization.”
The problem is that these incentives aren't always there and the investments aren't always successful, so there are problems. In the worst case scenario, clinics were closed, hospitals closed services, and some systems filed for bankruptcy.
