Agenda-driven research fails to tell the whole story: private equity’s limited but strategic health sector investments help improve health outcomes and alleviate system wide-challenges.

• A New York Times newsletter highlights research funded by an agenda driven organization, Arnold Ventures, that fails to reflect private equity’s role in bolstering health care delivery in hospitals across the country, leaving readers to draw inaccurate conclusions about private equity’s limited investments in the sector.
  
  
• Broader research continues to demonstrate private equity’s positive impact on patient outcomes and support for high-quality care delivery across the country.
  
  
• The fact is, many practices across the country that “don’t have alternative financing mechanisms” depend on private equity’s critical capital to remain competitive, improve patient care, and innovate.
  
  

The U.S. health care system is increasingly complex and constantly evolving. As a result, providers, especially those in rural areas, have to contend with a number of challenges that come with maintaining their businesses and remaining financially viable, all while continuing to deliver exceptional care. Private equity investment is filling a need that public markets are otherwise unable to provide to help physician practices or other innovative businesses who “don’t have the capital to take it to the next level and the next scale and need the money” grow, according to former Department of Health and Human Services (HHS) Secretary Alex Azar.

Let’s consider the facts – all too often ignored by critics – about how private investment fills critical funding gaps in U.S. health care and expands access to quality care.

Private partnerships prioritize high-quality care and positive health outcomes

Perhaps most starkly, critics fail to appreciate, and document, evidence of private equity investments supporting high-quality care at hospitals and other facilities.

For example, evidence published in JAMA Internal Medicine shows that private equity-backed hospitals are associated with improvements in several process quality measures that providers meet to improve health, including for conditions like an acute myocardial infarction or pneumonia. Research also demonstrates that private equity ownership can improve patient outcomes: one study from researchers at Duke University observed that private equity-acquired hospitals saw greater declines in both in-hospital mortality and 30-day mortality among heart attack patients compared to non-private equity-acquired hospitals. Other research found private equity-backed nursing homes were more likely to have reserves of critical personal protective equipment (PPE) on hand during the COVID-19 pandemic – all while maintaining the same staffing levels and mortality levels as non-private equity-backed counterparts.

Private equity investments not only improve care, but also expands access to it: when compared to other for-profit counterparts, private equity-backed hospitals are more likely to serve low-income, rural communities, ensuring that rural residents and their families have access to high-quality, life-saving care.

Taken together, these points provide a clear indication that anyone seeking to make blanket criticisms about private equity in health care are willfully ignoring the truth.

Alleviating workforce shortages across the health sector

Critics also ignore private equity’s work to combat systemic challenges in U.S. health care, like workforce shortages. Researchers at Indiana University and Georgetown University found, for example, that the “core worker ratio” – or the proportion of physicians, nurses, and pharmacists compared to overall employees – increased at hospitals acquired by private equity firms. As these shortages are expected to worsen over the next decade, private equity is providing solutions across the rest of the health care sector as well, from offering better patient-to-nurse ratios in hospice care to bolstering the pipeline of providers who help meet the needs of individuals with autism. Additionally, research has demonstrated that private equity-backed nursing homes, which have “no statistically significant differences” in staffing levels compared to non-PE-backed facilities, help ensure residents receive attentive and skilled care.

Helping health care practices grow, improve efficiencies, and remain competitive

Despite what some purport, private equity’s support helps patients come first. Private investment brings the capital necessary that wouldn’t otherwise be available to help providers maintain and grow their practices and, per the Medicare Payment Advisory Commission (MedPAC), spend more time with their patients instead of on burdensome paperwork and other administrative tasks.

The reality is that many providers are eager to grow their businesses, or are simply struggling to maintain their practices as they face increased pressures resulting from declining reimbursements or competition with larger health care entities. This is where private equity can step in to help providers expand or run their practices. As former HHS Secretary Azar put it,

“One of the reasons that I think health care attracts a lot of funding…it’s a lot of private equity funding now…is you’ve got a lot of smaller, founder-led…physician practices or innovative businesses that…don’t have alternative financing mechanisms right now to expand and get bigger. And you’re facing extremely large entities – whether integrated systems or big insurers…If we’re just talking about, say, practice groups or other smaller-model delivery programs, [private equity is] really the only way you can raise money to get bigger to compete.”

Additionally, private equity is a catalyst for a successful sector, particularly among smaller entities. Private equity’s “buy-and-build” model, for example, helps highly fragmented and cost-intensive industries – like health care – become more competitive and allows small practices to thrive while expanding access to care. As the following quote from former HHS Secretary Azar demonstrates, this would not be possible without private equity:

“If you don’t have PE money coming into a lot of these smaller entities throughout the health care ecosystem, I can give you the names – ‘cause they’d fit on these hands – of the entities that are going to buy them. If you don’t like consolidation, that what it would be. At least you get some counterpoint [with private equity].”

The Bottom Line

Unfortunately, critics are once again ignoring holes in their own arguments in an effort to discredit how private equity is strengthening U.S. health care. “The private equity industry plays an essential role in providing local hospitals with the capital they need to improve patient care, expand access and drive innovation,” Drew Maloney, President and CEO of the American Investment Council (AIC) told the New York Times. “This research doesn’t reflect private equity’s full record of strengthening health care across the country.” As such, private investment will continue to leverage its small but critical role in U.S. health care to drive positive change and improve outcomes for hospital patients.