A private equity hospital is a hospital that has been purchased by a private equity firm, an investment company that buys businesses with the goal of increasing their value and selling them for a profit within roughly 5 to 10 years. By the beginning of 2024, private equity firms owned at least 386 hospitals in the United States, making up about 30% of all for-profit hospitals in the country. The model has drawn intense scrutiny because of its potential effects on patient care, staffing, and hospital finances.
How the Business Model Works
Private equity firms don’t typically buy hospitals with their own cash. They use a strategy called a leveraged buyout, borrowing large sums of money and using the hospital’s own assets as collateral for the debt. This means the hospital, not the investment firm, carries most of the financial risk. The firm then works to cut costs and increase revenue so it can sell the hospital at a higher price or recoup its investment through other financial strategies.
One common tactic is a sale-leaseback arrangement. The firm sells the hospital’s land and buildings to a real estate investment trust, then leases those same properties back. This generates a large one-time cash infusion but locks the hospital into long-term rent payments. The Steward Health Care system illustrates how this plays out: after being acquired by private equity firm Cerberus Capital Management, Steward sold its hospital properties for $1.25 billion. That money paid off the private equity firm and funded an expansion spree of 26 additional hospitals. But the resulting rent obligations became a financial burden that led the company to cut costs and neglect bills to keep up with payments, raising serious concerns about patient safety across its facilities.
Hospitals acquired through these real estate deals face particularly steep risks. Research from Harvard found that hospitals sold to real estate investment trusts had a 5.7-fold higher risk of closure or bankruptcy compared with similar hospitals that weren’t involved in such deals.
What Changes for Patients
The most consequential changes tend to happen behind the scenes in ways patients don’t immediately notice. Research has consistently linked private equity acquisition to increased charges for hospital services and higher prices overall. Staffing is where the effects become most visible. A federally funded study found that after private equity acquisition, hospitals reduced their total full-time workforce by an average of 11.6% and cut overall salary spending by 16.6%. Emergency departments saw salary expenditures drop by 18%, and intensive care units saw cuts of 16%.
These staffing reductions appear to have real consequences for patient outcomes. A study published in Health Affairs found that private equity acquisition was associated with a 2.7-percentage-point increase in 30-day death rates after common inpatient surgeries. The increase was driven not by more surgical complications occurring, but by a decline in the hospital’s ability to rescue patients when complications did happen, a 3.9-percentage-point increase in what researchers call “failure to rescue.” The problem was especially pronounced for emergency surgeries, while planned elective procedures showed no significant change.
Separately, a study published in JAMA found a 25% increase in preventable problems like hospital-acquired infections after private equity takeovers. Researchers linked these outcomes directly to the staffing cuts. As Zirui Song, a Harvard Medical School researcher who has studied private equity in health care extensively, put it: “These are places where cutting staffing often means cutting the capacity to take care of people.”
Which Parts of a Hospital Are Targeted
Private equity involvement in hospitals goes beyond owning entire facilities. Firms also acquire the companies that staff specific hospital departments, particularly emergency rooms and anesthesia services. Hospitals can either employ their own emergency and anesthesia physicians or contract with outside staffing companies for those roles, and private equity firms have aggressively consolidated these staffing companies.
In 2009, private equity and publicly traded staffing companies controlled just 3.2% of the national anesthesia market and 8.6% of the emergency medicine market. By 2019, those numbers had grown to 18.8% and 22.0%, respectively, with a sharp acceleration between 2014 and 2016. These staffing companies gained notoriety for driving surprise billing, where patients treated by an out-of-network provider in an in-network hospital received unexpectedly large bills for the difference between the provider’s charge and what insurance would pay.
How Private Equity Hospitals Differ From Other Hospitals
Most hospitals in the United States are either nonprofit (run by community organizations, universities, or religious groups) or government-owned (county or public hospitals). For-profit hospitals owned by large publicly traded corporations like HCA Healthcare have existed for decades. Private equity hospitals are a distinct category within the for-profit world because of two key differences.
First, the timeline is compressed. Nonprofit and publicly traded for-profit hospitals generally operate with long-term sustainability in mind. Private equity firms plan to hold a hospital for roughly 5 to 10 years, which creates pressure to generate returns quickly. Second, the debt structure is different. The leveraged buyout model loads debt onto the hospital itself rather than the parent company, which means the hospital bears the financial risk if the strategy doesn’t work out. This combination of short timelines and high debt loads creates incentives to cut operating costs aggressively, and in a hospital, the largest operating cost is staff.
Government Scrutiny
The growth of private equity in health care has drawn attention from federal regulators. In March 2024, the Federal Trade Commission, the Department of Justice, and the Department of Health and Human Services launched a joint inquiry into corporate control of health care, specifically targeting private equity’s role. The agencies issued a public request for information about deals involving health care providers and facilities, including transactions too small to trigger standard antitrust review.
FTC Chair Lina Khan framed the inquiry around what she called “strip-and-flip tactics,” where firms slash staffing and cut quality to extract short-term profits. The agencies stated that public comments would shape future enforcement and potential regulations aimed at protecting competition and access to affordable care. Several states have also introduced or passed laws requiring advance notice and review of private equity acquisitions of health care facilities, though the regulatory landscape remains uneven across the country.