A recent study conducted by researchers from the University of California at San Francisco, Harvard Medical School, and the City University of New York’s Hunter College found that private equity firms acquiring hospitals lead to a significant decline in the facilities’ assets and resources. This diminishing of assets results in hospitals being less equipped to care for patients, with a notable decrease in total capital assets compared to hospitals not acquired by private equity.
The study analyzed 156 hospitals acquired by private equity firms from 2010 to 2019, revealing that total capital assets at these hospitals declined by 15% on average in the two years following acquisition. This contrasts with an average increase of 9% in assets at other hospitals. The depletion of assets has long-term implications, as the pattern of diminished assets persisted and widened five years after acquisition.
The impact of asset-stripping by private equity firms on hospitals includes a reduced level of care due to the lack of necessary equipment, buildings, and technology. Recent research has shown that patient outcomes suffer following private-equity takeovers of hospitals, with increased patient falls and infections, and higher mortality rates in nursing homes owned by private-equity firms.
The collapse of Steward Health Care, a hospital chain recently owned by private equity, underscores the negative consequences of private equity acquisitions in the healthcare industry. As a response, several states have begun enacting new laws to scrutinize private equity’s acquisitions in healthcare to prevent patient harm and ensure transparency in these transactions.
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