In new analysis, FAIR Investigative reporter John Canham-Clyne calls out the popular, yet inaccurate, media portrayal of private equity’s contributions to U.S. health care. While critics try to depict common market forces as “uniquely destructive” “abuses” carried out by private equity, Canham-Clyne outlines how this framing wrongly diverts public attention from system-wide disfunctions in U.S. health care that have nothing to do with private investment.

Don’t take unfounded claims at face value – dive deeper into Canham-Clyne’s analysis to get the real facts on private equity in health care:

MYTH: Private equity ownership dominates U.S. health care.

FACT: Private equity firms comprise a relatively small portion of the U.S. health care market.

The narrative of a private equity “takeover” in U.S. health care conveniently ignores the full picture of research and data. In fact, as Canham-Clyne writes, “private equity has almost nothing to do with hospital industry consolidation.”

For example, a frequently cited study from nonprofits like the American Antitrust Institute and U.C. Berkeley claims that “in 28% of U.S. metropolitan statistical areas (MSAs), a single private equity firm had gained 30% market share in at least one of 10 specialties, and in 13%, a single firm had gained 50% market share in at least one specialty.” However, this data – and its portrayal in the media – misses the bigger point:  

“Looking through the other end of the telescope, 72% of all US metropolitan areas have no meaningful private equity market power in any specialty at all. Many of the MSAs threatened by private equity are far smaller than nearby areas facing monopoly threats from university- and church-affiliated hospitals.”

What’s more, Canham-Clyne points out that private equity firms “employ far fewer doctors than hospitals and insurance companies do, own less than 5% of general acute care hospitals, and are showing signs of exiting these segments of healthcare.” In fact, 70% of employed U.S. physicians who do not own their own practice work for hospital systems, with the remaining 30% employed by other “corporate entities” like “health insurers, private equity firms, [and] umbrella corporate entities that own multiple physician practices.” As he notes:

“Private equity employers are only a slice of that remaining pie. Becker’s Payer Issues (2/16/23), a health insurance industry trade newsletter, reported last February that the largest employer of physicians in the US is health insurance giant UnitedHealth Group, with 70,000 “employed or aligned” physicians. Nine months later, the company disclosed that the number of “employed or affiliated” doctors had jumped to 90,000 (Becker’s Hospital Review, 11/29/23)…[I]nsurers and major drug store chains account for a large chunk of doctors employed by “other corporate entities” (New York Times, 5/12/23).”

MYTH: Private equity firms are responsible for the demise of rural hospitals across the country.

FACT: Private equity’s strategic investments in rural health are strengthening hospitals in underserved communities across the country.

Biased critics conveniently ignore that private equity has made meaningful investments in low-income, rural communities to ensure that local physicians have what they need to care for their patients. Rural communities have struggled with access to care for years – with patients having to travel far distances to receive care or lacking adequate insurance coverage. Expanding access to urgent care centers can help meet rural health needs while alleviating patient burdens on local hospitals, a reality that private equity investments are helping bring about in low-income, rural communities.

Further, agenda-driven organizations like Private Equity Stakeholder Project tout tools like their “PE Hospital Tracker” as a way to meaningfully demonstrate private equity’s outsized role in the industry, particularly in rural America. However, as Canham-Clyne writes, PESP’s “research isn’t immune from pumping numbers up with ‘takeover’ hot air.” Indeed, PESP’s tracker claims statistical significance that isn’t actually there:

“The web page for the tracker says ‘34% of private equity hospitals serve rural areas’ a claim repeated by Stakeholder Project researchers in a Health Affairs article (12/18/23) headlined ‘Private Equity: The Metastasizing Disease Threatening Healthcare.’ Thirty-four percent sounds like a big number, but 34% of less than 7% isn’t much. According to the tracker’s data, less than 5% of all rural hospitals are owned by private equity firms.”

MYTH: Attacking private equity will fix systemic U.S. health care challenges.

FACT: Scapegoating private equity for its U.S. health care investments distracts from needed conversations about real policy improvements.

As Canham-Clyne notes, critics’ attempt to paint private equity as a “uniquely destructive” force reveals a basic misunderstanding of the market.

“Presenting a particular corporate structure as uniquely destructive ignores the history of boom-and-bust cycles of Wall Street investment in hospitals and doctors, and confuses readers about the ultimate winners. The unfortunate outcome of this misunderstanding is that most media analysis promotes policy changes that apply only to private equity…These will do nothing to restrain extreme US healthcare costs, to expand access to healthcare or to stop actors with different corporate structures from engaging in… abusive behavior.”

While misguided reporting claims that common exercises of market forces, like “surprise bills,” are unique “abuses” carried out by private equity, the truth is that these are emblematic of a failing system, not the presence of private investment in U.S. health care.

By filling critical funding gaps, supporting innovation in new medical technologies, alleviating workforce shortages, and more, private equity’s strategic investments strengthen the U.S. health care system. Enacting policies targeting these contributions would be detrimental to patients and providers across the country.

The bottom line

Agenda-driven reporting has fueled a false narrative about private equity in health care that distorts the truth: private equity firms’ limited, but impactful, role in supporting a complex and dynamic health care system ensures that patients receive the care they deserve – no matter where they live.