A new study by researchers from Harvard Medical School, the University of Pittsburgh, and the University of Chicago serves as a stark warning about the risks of private equity ownership in healthcare, a trend that is rapidly growing in countries like India. The study, which was federally funded, reveals that after being acquired by private equity firms, hospitals across the United States experienced a concerning increase in patient death rates in their emergency departments compared to similar hospitals that were not acquired.
The research team suggests that this rise in fatalities is likely a direct result of significant staffing reductions and salary cuts made by these firms. Specifically, the data shows that hospitals under private equity ownership had an average of seven additional deaths per 10,000 patient visits, a 13 per cent increase from a baseline of 52 deaths.
The Financial impact of private equity ownership
The study also provides a clear picture of the financial changes that occur after a private equity acquisition. The data indicates that these hospitals:
- Cut salary expenditures in the emergency department by 18 per cent and in the ICU by 16 per cent.
- Reduced the number of full-time employees across the hospital by an average of 11.6 per cent.
- Lowered overall salary expenditures by 16.6 per cent compared to non-private equity hospitals.
Understanding private equity in healthcare
Private equity is a form of investor-based private ownership in which firms use capital from investors and lenders to purchase healthcare facilities like hospitals and nursing homes.
While these acquisitions are often framed as a way to provide much-needed funding to struggling institutions, a separate 2024 study in JAMA Internal Medicine suggests a different reality.
According to that study, private equity firms tend to target financially healthier hospitals that are better positioned to handle the new debt while still generating revenue. This shows that the primary motivation for these acquisitions is often profit maximisation, not the financial rehabilitation of failing hospitals.
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