Many people worry that profits may be put ahead of patients, even though there is no conclusive evidence that it improves or damages care
Fremont, CA:What is private equity in healthcare?
Investing in private equity involves pooling money from several investors. As a result, they are able to accumulate large sums of money they can invest.
Their goal is to increase business value by purchasing businesses or shares of businesses. Investors receive profits after they sell their businesses.
Health systems and hospitals are often bought by private equity firms in healthcare. Profits are then increased.
These firms employ a variety of strategies, including:
- Bringing together multiple healthcare practices
- Staffing reductions
- Hospitals and healthcare practices may have to close parts of their operations
- Focusing on the growth of a particular area of a practice's services
- Assuring insurers are reimbursed at a higher rate
Why it happens
Health systems are invested in by private equity firms for the purpose of making money.
Providers and practices must be willing to sell in order for this to happen. There are several reasons why this may occur:
- There is a financial problem at a hospital or other health practice
- Regulation compliance can be challenging
- There is a retirement in the practice
- Financial support is needed for an innovative hospital service or product
How it can affect patients
There are a variety of effects associated with private equity deals. Many people worry that profits may be put ahead of patients, even though there is no conclusive evidence that it improves or damages care.
Quality of care can be affected in some cases by a constant drive to generate profits.
Patients on Medicare who live in nursing homes owned by private equity firms die at a higher rate by 10%, according to a 2021 working paper. Moreover, there was a decline in staff time with residents, a reduction in quality training, and a reduction in the number of employees.
Medicare spending increased in these nursing homes despite their lower quality of care.
Providers and practices must be willing to sell in order for this to happen. There are several reasons why this may occur:
- There is a financial problem at a hospital or other health practice
