News: HHS report details risks, impact of private equity in healthcare

Last week, the U.S. Department of Health and Human Services (HHS) released a report on consolidation and private equity in healthcare markets, highlighting the impacts and harmful effects. The report was made following a public request in March 2024 to the public for information about “how healthcare market transactions by health systems, insurers, private equity, and other investors may drive consolidation, harm patient care and affordability, endanger workers and burden taxpayers,” Becker’s Hospital Review reported.

HHS received more than 2,000 comments in response to its request last year, submitted by patients, physicians, health systems, insurers, industry associations, labor unions, and academic researchers. The report indicates one of the key findings from its request for information was the volume of comments and criticism targeting private equity deals.

“In theory, private investment in healthcare services could lead to increases in output, reduced prices, and improved quality, but the comments we received—which are consistent with the growing body of research—suggest that the opposite is true," the report said. 

HHS gleaned five key themes from the comments:

• Provider consolidation leads to higher prices and less access for patients
• Mergers and acquisitions in healthcare services, especially in private equity-backed transactions, results in process changes and quality reductions
• Physicians that worked with private equity firms offer mixed reviews
• There is a widespread desire for transparency on private equity-led transactions
• People are dissatisfied with private health insurers, especially vertically integrated insurers

HHS said case studies highlighted how private equity firms "loaded hospitals up with debt, sold the hospitals' underlying assets, and paid investors through dividends and financially engineered sales, resulting in negative consequences such as bankruptcy, closure of facilities and service lines, staffing shortages, and patient safety and quality concerns."

The report pointed out that at least 21% of the healthcare that filed for bankruptcy were private equity-owned in 2023, and stated private equity in the healthcare delivery system “deserves ongoing scrutiny and greater research.”

“[Private equity] ownership in healthcare appears to present new and unique risks related to and apart from consolidation,” the report said. “HHS, DOJ [Department of Justice], and FTC [Federal Trade Commission] must continue to monitor and address these issues, welcome partnerships with states and Congress to prevent harm from further consolidation, and collaborate with public and private partners in identifying effective remedies.”

Editor’s note: To read Becker’s Hospital Review’s coverage of this story, click here. To read the full HHS report, click here.