To say the role of private equity investment in the health care system is growing would be an understatement. In 2018, the valuation of private equity deals in the US health care sector surpassed $100 billion, a 20-fold increase from 2000 when it was less than $5 billion.
Now, many are concerned that the incentive structures built into private equity financing have exacerbated trends such as surprise medical billing and contribute to increasing health care prices.
Despite the increased presence of private equity in health care, there’s been little systematic examination of its scope and its effect on health care access and spending.
Published in the May 2021 edition of Health Affairs, Dr. Anaeze Offodile from the University of Texas MD Anderson Cancer Center and colleagues reviewed private equity acquisitions of hospitals from 2003 to 2017. They found that private equity acquisitions occurred mostly in the Mid-Atlantic and Southern US regions and were more likely to be for-profit hospitals in urban areas.
In addition, they found that private equity-acquired hospitals also had higher charge-to-cost ratios and operating margins.
Listen to Health Affairs Editor-in-Chief Alan Weil interview Dr. Anaeze Offodile discuss this foundational piece of research on the role of private equity investments in health care.