Earlier this month, the U.S. Senate Committee on the Budget released a bipartisan report, titled, Profits over Patients: The harmful effects of private equity on the U.S. health care system. The report details the results of an investigation led by Committee Chairman Sheldon Whitehouse (D-RI) and Ranking Member Charles E. Grassley (R-IA) that expanded on a previous inquiry by Sen. Grassley in 2023.
The report concludes that “In sum, the findings of the investigation call into question the compatibility of private equity’s profit-driven model with the essential role hospitals play in public health. This report serves as a call to action for greater oversight, transparency, and reforms to ensure that PE-driven financial strategies in healthcare do not come at the expense of patient well-being or the sustainability of critical hospital services. The American public deserves more when it comes to healthcare.”
But as TXEAHC advisory board member Paul Keckley notes, private equity ownership is not itself the problem. While recent peer-reviewed studies have found that patient experiences in hospitals decreased after private-equity acquisition, private-equity ownership represents only 8% of all private hospitals, a significant majority of which were smaller and in financial distress at the time of acquisition.
A better way of observing the situation is of private-equity ownership as a symptom of a broken health care system, not the root cause.
Private equity firms are by definition profit-driven. They tend to look for opportunities to quickly reduce operating costs and increase shareholder value—not value for patients or payers. And private-equity activity in the health care sector has seen a boom in recent years because the industry lacks safeguards against practices that artificially inflate prices including:
- Inappropriate use of facility fees.
- Suboptimal price transparency.
- Lack of competition due to market consolidation.
Texas has the most private equity-owned hospitals in the nation. This should be taken as a wake-up call for state lawmakers—not to take action against private equity, but to address the root causes of artificially inflated hospital prices that make health care so attractive to private equity firms in the first place.