Quality of Hospital Care After Private Equity Acquisition

Quality of Hospital Care After Private Equity Acquisition

Private equity firms are a growing presence in health care, as they increasingly acquire hospitals, nursing homes, physicians, and other providers. This has led to concerns that the private equity model’s emphasis on investor returns might lead to poorer quality of care for patients. On December 26, 2023, a study in JAMA offers new evidence in light of these concerns from the hospital setting. The study , by Pulmonary/Critical Care fellow, Sneha Kannan, and Associate Professor of Health Care Policy and Medicine, Zirui Song, found increased rates of hospital-acquired adverse events in patients, such as falls and bloodstream infections, after hospitals were taken over by private equity as compared with non-private equity hospitals.

Specifically, the study found that among hospitals acquired by private equity firms, admitted Medicare patients had, on average, a 25 percent increase in hospital-acquired adverse events (so-called “hospital-acquired conditions”) after acquisition than before, when compared to similar patients at non-private equity hospitals. This was driven by patients at private equity hospitals experiencing a 27 percent increase in falls and 38 percent increase in central line-associated bloodstream infections relative to peers at non-private equity hospitals. The latter increase occurred despite private equity hospitals placing 16 percent fewer central lines than before acquisition, relative to central lines performed at comparison hospitals. 

Private equity hospitals also admitted, on average, younger and less disadvantaged Medicare patients, as well as transferred more patients to other acute care hospitals, after acquisition. These changes in admission and transfer decisions likely contributed to a small decline in in-hospital mortality at private equity hospitals, which dissipated by 30 days after discharge.

Concerns for harm to patients, combined with rapid expansion of private equity in health care, have motivated inquiry among members of the U.S. Congress and the Biden Administration.

On December 7th, two leaders of the Senate Budget Committee, Chairman Sheldon Whitehouse (D-RI) and Ranking Member Charles Grassley (R-IA), launched a bipartisan investigation into private equity ownership of hospitals in the U.S., noting concerns that private equity owned hospitals may have negative consequences for providers and patients.

The investigation focuses on staffing cuts, quality of care, and liquidation of hospital assets such as real estate, which often leaves hospitals debt-ridden, within a few short years. The Senators are asking for detailed documentation to assess effects of private equity ownership on patients and providers, and they seek to hold private equity firms accountable for actions taken under their ownership. This follows earlier hearings in the U.S.Senate and House of Representatives on the growth of private equity in health care. 

The new JAMA study builds on previous research by Song and colleagues that showed private equity acquisitions were associated withincreased charges and income among hospitals, as well as increased prices and utilization along with staffing cuts among physician practices. A separate JAMA article this year presented a policy framework in response.

With growing interest among policymakers and the public, continued research on patient care and outcomes may inform efforts to improve transparency and accountability in these types of provider acquisitions.

The study was co-authored by Joseph Bruch, a former post-doctoral fellow at HCP and advisee of Song, who is now Assistant Professor at the University of Chicago. This research was funded by the National Heart, Lung, and Blood Institute, the National Institute on Aging, and Arnold Ventures.