When Wall Street Owns the Hospital

Private equity refers to investment firms that acquire companies using borrowed funds, restructure operations to maximize returns, and sell within three to seven years. In health care, private equity firms employ sophisticated financial engineering strategies including sale-leasebacks that burden hospitals with unsustainable rent payments, dividend recapitalizations that strip capital from facilities, and complex corporate structures designed to shield investors from liability while extracting maximum value.

The death of Sungida Rashid at Steward Health Care’s St. Elizabeth’s Medical Center illustrates the human cost of these practices. Rashid, a 39-year-old mother, died from internal bleeding after the hospital’s critical medical equipment was repossessed due to unpaid bills—a direct result of Steward’s financial engineering that prioritized debt payments and executive compensation over patient care. Before its bankruptcy in 2024, Steward had extracted over $800 million through real estate transactions while accumulating billions in debt.

Private equity’s health care footprint has expanded dramatically. As of 2023, private equity firms owned or operated approximately 11 percent of U.S. hospitals and 30 percent of for-profit hospitals. These firms also control significant portions of emergency physician staffing companies, anesthesiology practices, and specialty care facilities.

Existing regulatory framework on health care—designed for traditional nonprofit and community hospitals—lacks the tools to address private equity’s extraction strategies. The Affordable Care Act, Medicare conditions of participation (federal requirements that hospitals must meet to receive Medicare and Medicaid reimbursements), and state licensure requirements focus primarily on quality metrics and operational standards rather than ownership structures or financial engineering practices that can undermine patient care.

Recent state efforts signal growing recognition of this regulatory gap. Massachusetts enacted groundbreaking legislation in 2025 requiring enhanced scrutiny of private equity health care transactions, including 60-day advance notice, disclosure of debt levels and management fees, and ongoing reporting of quality metrics. Similarly, Massachusetts Senator Edward Markey has proposed federal legislation that would increase transparency requirements and limit certain extraction practices.

Reform advocates argue that private equity ownership correlates with reduced care quality, higher patient mortality, and decreased access to essential services. Opponents of reform, however, contend that private equity can provide necessary capital for struggling hospitals, improve operational efficiency, and facilitate technological upgrades.

In this week’s Saturday Seminar, scholars examine the regulatory challenges posed by private equity hospital ownership and evaluate emerging reform efforts.

• In an article in the Stanford Law Review, Erin Fuse Brown of Brown University School of Public Health and Mark A. Hall of Wake Forest University propose comprehensive regulatory reforms to address private equity’s corporatization of health care. Brown and Hall trace how private equity firms exploit regulatory blind spots through limited liability structures and financial engineering. Brown and Hall document how sale-leaseback arrangements can drain operating capital while generating immediate returns. They propose three key reforms: mandatory disclosure of beneficial ownership, minimum capital requirements, and explicit fiduciary duties prioritizing patient welfare. Their analysis reveals how current regulations fail to address the unique challenges posed by private equity’s business model in healthcare settings.
• In a study published in JAMA Internal Medicine, Joseph D. Bruch of the University of Chicago and then-colleagues from Harvard T.H. Chan School of Public Health analyze Medicare claims data from 2009 to 2019. Bruch and his coauthors find that private equity acquisition was associated with a 25.4 percent increase in hospital-acquired conditions. They observe that quality declines emerged despite similar Medicare reimbursements, suggesting operational changes drove deteriorating outcomes. They note that staffing reductions mediated the relationship between ownership and adverse events. The study provides compelling evidence that private equity ownership systematically undermines patient safety through operational changes designed to maximize short-term profits at the expense of care quality.
• In an article in JAMA, Sneha Kannan and her coauthors examine patient outcomes using difference-in-differences analysis. Kannan and her coauthors document a 25.4 percent increase in hospital-acquired conditions and 27.3 percent increase in falls after private equity acquisition. They reveal that adverse events increased most at hospitals serving vulnerable populations, with safety-net hospitals experiencing 37.7 percent rise in complications. Kannan and her coauthors conclude that ownership patterns suggest systematic underinvestment in safety infrastructure while maintaining profitability through financial engineering. Their findings demonstrate that private equity’s profit-maximizing strategies disproportionately harm already vulnerable patient populations who rely on safety-net facilities for essential medical care.
• In a study in Health Affairs, Marcelo Cerullo of Duke University and colleagues analyze how private equity-owned hospitals adjust service lines. Cerullo and his coauthors find that private equity acquisition correlates with the elimination of less profitable services including obstetrics, pediatrics, and substance abuse treatment. Cerullo and his coauthors document simultaneous expansion of profitable services like cardiac surgery and orthopedics, creating access gaps to essential medical services. Cerullo and his coauthors argue that this profit-maximizing behavior particularly harms rural communities where alternative providers may not exist. Their research highlights how private equity ownership fundamentally reshapes hospital service offerings based solely on profitability rather than community health needs.
• In an article published in BMJ, Alexander Borsa of Harvard T.H. Chan School of Public Health and colleagues synthesize evidence on private equity’s healthcare impact. The Borsa team finds consistent evidence of increased short-term mortality following private equity acquisition compared to non-private equity hospitals, with pooled estimates suggesting 10.3 percent increase in 90-day rates. The Borsa team identifies cost increases averaging 32 percent higher for privately insured patients at private equity facilities compared to traditionally owned hospitals. The Borsa team highlights particularly severe impacts on marginalized populations, with Medicaid patients experiencing longer wait times at private equity facilities. This comprehensive meta-analysis provides the strongest evidence to date that private equity ownership systematically worsens both clinical outcomes and healthcare affordability.
• In a joint inquiry launched in May 2024, the Federal Trade Commission (FTC) and U.S. Department of Justice identified serial acquisitions and roll-up strategies as key enforcement priorities. The agencies seek information on how private equity firms use multiple small acquisitions to build dominant positions while evading merger thresholds. FTC Chair Lina Khan characterized these tactics as “stealth consolidation schemes” that “roll up markets” and “undermine fair competition.” The inquiry builds on enforcement actions including the FTC’s suit against U.S. Anesthesia Partners. This aggressive antitrust approach signals federal recognition that private equity’s acquisition strategies may violate competition laws even when individual transactions fall below traditional merger review thresholds.