Medicine in the Age of Private Equity: The Ethics of Profit in Patient Care

October 21, 2025 by krh53

Interested in healthcare? Check out our latest piece from Denny Center Student Fellow Rai Hasen Masoud (F'27) on private equity in the U.S. healthcare system.

Private equity (PE) has become a dominant force in healthcare, but its debt-driven, short-term profit model stands in direct conflict with the ethical imperatives of medicine. PE firms promise efficiency, modernization, and fresh capital, yet evidence shows that PE ownership often undermines patient safety, raises costs, and destabilizes communities. Unless policymakers enforce transparency and accountability, healthcare risks being transformed from a public good into little more than a financial product.

Private Equity’s Growing Foothold in Healthcare (2010–2025)

In the past 15 years, private equity (PE) firms have rapidly expanded their presence in the healthcare sector. By 2025, PE groups owned nearly 488 U.S. hospitals and tens of thousands of other providers, representing 8.5% of all private hospitals and 22.6% of for-profit hospitals nationwide.^[1] This marked a dramatic increase from prior decades; PE investment in healthcare rose over twenty-fold between 2000 and 2018.^[2]

Globally, similar trends are unfolding. In India, for example, private equity investments in hospitals have surged to an estimated $5–6 billion annually, aiding rapid growth of private hospital chains. Even the UK’s National Health Service has felt PE’s reach: in 2023, a U.S.-owned company quietly sold dozens of London GP clinics to a British PE firm, prompting public outcry over profit-driven firms operating inside a public health system.^[3] And in countries like Pakistan and Kenya, PE-backed hospital networks (often supported by development funds) have sparked complaints that profits were put ahead of patient safety.

What makes healthcare so attractive to private equity? The industry’s massive scale (nearly $4-5 trillion in the U.S.) and steady cash flows are a “natural next step” for investors seeking high returns.^[4] An aging population, fragmented markets, and guaranteed insurance payments create opportunities to consolidate and monetize care delivery. Since 2010, thousands of physician practices (from primary care to oncology) have been purchased by PE firms, rising from just 816 practices in 2012 to 5,779 in 2021.^[5] This financial influx has sometimes rescued struggling providers. But it also raises a fundamental tension: should hospitals and clinics operate as public-serving institutions or as profit-maximizing assets?

As Meredith Rosenthal, Professor of Health Economics and Policy at Harvard, puts it: “Because health care is so important, the public expects these corporations to prioritize public interest over profits. And that’s not what they’re built to do.”

The PE Model: Debt, Deals, and Quick Exits

Private equity’s business model centers on buying, overhauling, and reselling companies within a short time horizon, typically 3–7 years.^[6] In healthcare, this often means leveraged buyouts (LBOs) – acquisitions financed heavily with borrowed money that the target company (hospital or clinic chain) must repay. The acquired entity often assumes significant debt at purchase and is expected to generate high returns quickly.^[7] This debt-fueled pressure can incentivize aggressive cost-cutting and revenue-maximizing strategies to boost cash flow. PE firms generally seek at least 20% profit on resale of a healthcare business, a goal that can conflict with the slower, service-oriented mission of patient care.

A hallmark tactic is the “roll-up” strategy, where a PE fund acquires and consolidates many small practices or facilities into a larger entity. By achieving scale, the firm can leverage bargaining power with insurers or suppliers and cut duplicative overhead. For instance, in emergency medicine and anesthesia, PE firms have rolled up local physician groups into national staffing companies, commanding sizable market share. Two such PE-owned staffing firms, Envision and TeamHealth, have grown to cover over half of U.S. hospital emergency departments, though not without controversy over surprise billing practices.^[8]

Another financial maneuver is the sale-leaseback of hospital real estate. In this arrangement, a PE-owned hospital sells its buildings and land to an outside landlord (often a real estate investment trust) for a quick infusion of cash, then leases them back. This boosts short-term capital but saddles the hospital with hefty rent payments. Steward Health Care – a hospital system bought in 2010 by Cerberus Capital Management – demonstrates the risks of this approach. In 2016, Steward sold nearly all its hospital properties for $1.25 billion to an investment trust, using the cash to acquire more hospitals.^[9] This sale-leaseback spree made Steward, for a time, the largest for-profit hospital chain in the U.S. However, the leases proved “unsustainable,” draining resources as rent bills grew. Steward’s debt ballooned, and by 2023 the company was stripped of assets, unable to pay vendors or staff adequately. It filed for bankruptcy in early 2024, forcing hospital closures and layoffs that disrupted care for entire communities. Notably, Cerberus exited its investment in Steward Health in 2020, just four years before the company’s bankruptcy. They walked away with more than $800 million in profits demonstrating how the private equity model can extract immense value from a health system even as the system itself heads toward collapse.

In sum, the PE playbook in healthcare relies on financial engineering: high leverage, rapid restructuring (closing “low-margin” service lines, reducing staffing, outsourcing, etc.) and asset sales – all aimed at boosting valuation for an eventual exit. These techniques are commonplace in other industries. But in hospitals and clinics, they can translate to reduced resources at the bedside and a shift in priorities from long-term clinical outcomes to short-term financial metrics. As the U.S. Right to Know organization bluntly summarized: “Private equity firms typically acquire companies and sell them for high returns within three to seven years – a quick turnaround that often involves restructuring, such as cutting costs and targeting specific services to raise prices.”^[10] This fundamental “buy, strip, and flip” approach sits uneasily with the mission of healthcare providers to prioritize patient care over profits.^[11]

Promised Benefits: Capital, Innovation, and Efficiency

Proponents of private equity argue that this model can revitalize healthcare businesses, especially those struggling financially, by injecting needed capital and modern business practices. Many hospitals and physician groups enter PE negotiations out of necessity rather than opportunity. Across the U.S., healthcare providers face growing financial strain from chronic underpayment and delayed reimbursements: patients often cannot afford their medical bills, while insurers continue to tighten restrictions on what they are willing to cover. Margins are especially thin for safety-net and community hospitals, where uncompensated care and stagnant reimbursement rates collide with rising labor and supply costs. At the same time, maintaining infrastructure i.e. updating aging facilities, investing in new equipment, or adopting electronic health record systems, demands significant upfront capital that many nonprofits and small systems simply do not have.

In this context, private equity’s appeal becomes clearer. Investors promise liquidity, operational efficiency, and relief from mounting debts. They point to PE’s track record in other industries of improving operations and fostering innovation. In healthcare, supporters say PE investment can fund IT systems, new facilities, and cutting-edge medical technology that hospitals might otherwise be unable to afford. By adopting managerial best practices and streamlining workflows, PE-owned providers might become more efficient and patient-centric. For example, private investors often tout their ability to upgrade outdated electronic health records or expand telemedicine offerings. Economies of scale from consolidated networks could enable bulk purchasing of supplies or centralized administrative services, reducing costs.

Access to PE capital has, in some cases, saved rural or inner-city hospitals from closure, by covering short-term losses or assuming liabilities that non-profit owners could not. An oft-cited case is the 2010 conversion of the Caritas Christi Catholic hospital system into Steward Health Care under Cerberus’s ownership. At the time, Caritas’s hospitals were near bankruptcy and PE financing promised to keep them open and maintain services for local patients. Indeed, PE firms emphasize that they bring business acumen to healthcare: they can recruit professional management, restructure inefficient departments, and create an “innovative culture” that rewards new ideas in care delivery.

Crucially, some analysts note that not all private equity ventures in healthcare are equal. There are examples of PE-backed startups driving telehealth expansion, urgent care clinics, or specialty treatment centers that improve consumer convenience and introduce modern customer-service approaches to medicine. These successes form the core of the PE defense: infusions of private investment can catalyze innovation and help modernize a fragmented healthcare system.

Sacrificing Care for Cash?

Despite the promised benefits, a growing body of empirical research suggests that private equity ownership often prioritizes short-term financial gains at the expense of patient care quality, access, and workforce stability. Jake Young, a senior policy analyst at the American Medical Association in Chicago claims that “The private equity business model’s focus on a 20% profit in 3–7 years is inherently at odds with health care’s primary ethical commitment to patients’ well-being.” Recent studies have documented several troubling patterns when hospitals, nursing homes, or clinics are bought by PE firms:

Worsening Patient Outcomes: A landmark 2021 study by economist Atul Gupta examined over 1,600 nursing homes acquired by PE firms and found a 10% increase in patient mortality, equating to roughly 20,000 premature deaths over 12 years.^[12] Similarly, a 2023 systematic review in The British Medical Journal (BMJ) covering 55 studies across 8 countries concluded that PE ownership was most often associated with “mixed to harmful” impacts on quality of care and higher costs to patients or payers. No rigorous study to date has shown clear improvements in quality, efficiency, or access under PE ownership. In fact, the authors of the Stanford Law Review’s 2024 analysis flatly note: “PE’s push for rapid revenue growth and quick exits generally means that PE is not adding value to patient care.”^[13]
Higher Rates of Complications and Safety Lapses: When private equity takes over hospitals, hospital-acquired infections and other adverse events tend to rise. A 2023 Journal of the American Medical Association (JAMA) study of 51 PE-owned hospitals found a 25% increase in hospital-acquired conditions (e.g. falls, infections) for Medicare patients compared to control hospitals.^[14] This jump was driven by a 37.7% rise in bloodstream infections and a 27% rise in patient falls. Another study found that surgical site infections doubled at PE-owned hospitals post-acquisition, even as surgical volumes slightly decreased. These are not mere statistics – they reflect real harms like injured patients, longer recoveries, and higher medical costs. The likely cause, researchers note, is aggressive cost-cutting, especially reductions in clinical staff. “Private equity-owned hospitals face unique financial pressures (new acquisition debt and profit expectations) that may lead to cutting the costs of delivering care – such as through reducing staffing,” explains Dr. Zirui Song of Harvard Medical School. But healthcare is “human-labor intensive… Cutting staff can have salient consequences for quality of care and patient outcomes.”^[15] In other words, fewer nurses, support staff, or cleaning personnel can mean more falls, more infections, and worse vigilance for vulnerable inpatients.
Higher Costs and Price Increases: Private equity’s focus on financial returns often leads to higher charges and out-of-pocket costs for patients and payers.^[16] A study in JAMA Internal Medicine found that after PE acquisition, hospitals’ net income rose by 27%, largely due to increasing the prices charged for procedures (by 7–16%) and shifting the payer mix away from lower-paying Medicare patients. In practice, this can lead to patients being targets of “surprise bills” and more aggressive billing practices and a higher frequency of high-margin procedures i.e. tests, imaging, or interventions that reimburse well under private insurance but may not always be medically necessary. Another analysis noted that PE-owned hospitals were more likely to drop unprofitable services (like mental health units or maternity wards) and concentrate on high-reimbursement service lines. Such moves can leave communities with less access to essential care even as overall healthcare spending rises.^[17]
Staffing Turmoil and Erosion of Clinical Autonomy: Frontline healthcare workers often bear the brunt of PE-driven changes. Cost-cutting frequently targets labor, leading to layoffs of experienced nurses, shorter doctor-patient visit times, and higher staff turnover.^[18] Physicians at PE-acquired practices report loss of independence and pressure to meet financial targets – sometimes pushing unnecessary tests or procedures, or rushing patient visits to hit quota.^[19] Trainees and young doctors may face job instability if residency programs or training sites are closed or sold off. Over time, this climate contributes to burnout and moral distress among clinicians who feel unable to practice according to patients’ best interests.^[20]

Taken together, these findings paint a consistent picture: private equity ownership correlates with measures of worse patient care and, in many cases, higher costs for patients. As a U.S. Senate investigation in 2025 concluded after reviewing millions of internal documents from PE-owned hospitals, the pattern of “reduced services, compromised patient care, and even complete hospital closures” under some PE firms “calls into question the compatibility of private equity’s profit-driven model with the essential role hospitals play in public health.” In the harshest terms, critics argue that financializing healthcare turns patients into profit centers, with life-and-death implications. Dr. Stephanie Woolhandler, a primary care physician and public health advocate, doesn’t mince words: given private equity’s record, regulators “should ban new private equity purchases in the health sector and impose stringent oversight on the health resources PE already owns.”

Antitrust and Regulatory Blind Spots

Despite private equity’s growing role, current oversight mechanisms have struggled to keep pace. Both antitrust law and health regulations contain gaps that PE firms have exploited. One major issue is that most PE healthcare acquisitions fly under the radar of antitrust review. The Federal Trade Commission (FTC) only reviews mergers or acquisitions above certain dollar thresholds. According to one Health Affairs report, fewer than 10% of PE-related healthcare deals trigger FTC review because most transactions are smaller than the minimum reporting threshold. For example, a PE firm can serially acquire dozens of physician practices across a state, each deal small enough to avoid reporting, yet cumulatively gain a dominant market share (“stealth consolidation”).^[21] Beyond national concentration, private equity consolidation poses serious regional and local risks. Healthcare markets are inherently geographic such that most patients rely on nearby hospitals, clinics, or physician groups. This means that even a single firm’s control of providers in a given area can create a de facto monopoly. For instance, a PE firm could buy several outpatient surgery centers, imaging clinics, and primary care groups within one metropolitan area, effectively dominating referral networks and limiting patient choice without ever triggering federal antitrust review. In rural regions or smaller cities, this dynamic is even starker: a PE-backed hospital chain or nursing home network can become the only viable provider, giving it immense leverage over payers, staff, and patients. As economist Martin Gaynor observes, “Health care competition doesn’t happen in Washington or Wall Street; it happens zip code by zip code.” Antitrust enforcers currently lack a mechanism to scrutinize these piecemeal roll-ups that together may reduce competition or drive up prices.

Another blind spot involves complex ownership structures that obscure who actually controls a healthcare provider. PE firms often use management service organizations (MSOs) or joint ventures with nominal physician partners to technically comply with laws (like Corporate Practice of Medicine (CPOM) bans in some states that forbid non-doctors from owning medical practices). These arrangements can make it hard for regulators or the public to trace accountability when something goes wrong. As a result, a PE firm might effectively dictate a clinic’s operations behind the scenes, while state authorities see only a licensed doctor’s name on the ownership papers. Legal loopholes and lack of transparency thus allow many acquisitions to proceed with minimal scrutiny.

Financial disclosure is another challenge. Unlike publicly traded hospital systems, privately owned providers don’t have to file detailed financial statements or report their debt burdens. Important changes – such as a decision to sell hospital property to a landlord or to cut a service line – may not require regulatory approval in many jurisdictions. By the time communities or regulators realize the impact (e.g., a hospital nearing insolvency after asset-stripping), it can be too late. In the words of scholars Erin Fuse Brown and Mark Hall, “like a cloud of locusts, private equity moves so quickly that by the time lawmakers become aware of the problem and researchers study the effects, PE has moved on to other targets.” In short, the speed and opacity of PE deals have outstripped the capacity of traditional oversight geared toward slower, more transparent hospital mergers.

Emerging Oversight and Reforms

Alarmed by high-profile failures and mounting evidence of harm, policymakers at both state and federal levels have begun exploring ways to reassert accountability over private equity in healthcare. While nationwide reforms have lagged (two 2023 U.S. Senate bills aimed at PE in healthcare – the “Corporate Crimes in Healthcare Act” and the “Health Over Wealth Act” – stalled in Congress), some states have forged ahead with new laws:

Oregon’s SB 951 (2023): In a pioneering move, Oregon enacted the nation’s toughest limits on PE control of medical practices. This law strengthens the state’s CPOM rules by prohibiting arrangements where a PE-owned MSO can exert control over a physician group.^[22] In essence, it stops non-medical corporations from simultaneously owning a practice’s management company and the practice itself – a common structure used by PE to sidestep ownership restrictions.^[23] By closing this loophole, Oregon aims to ensure that clinical decisions remain in the hands of medical professionals, not financiers. The law also reportedly requires more disclosure of ownership interests and restricts certain profit-sharing agreements that could influence care. PE firms have criticized it as overly restrictive, but patient advocates hail it for protecting the doctor-patient relationship from corporate interference.
Massachusetts’ Hospital Oversight Law (2025): Spurred by the Steward collapse, Massachusetts passed a comprehensive law (HB 5159) to increase transparency and oversight over private equity, real estate investors, and MSOs in healthcare transactions.^[24] The law expands reporting requirements: hospitals and provider organizations must annually disclose any private equity or REIT (real estate investment trust) involvement, including debts and lease obligations. Penalties for non-compliance were raised sharply (fines up to $25,000 per week and potential loss of license). Crucially, the law now subjects PE and similar entities to the state’s “material change” review process, meaning any significant transaction – for instance, a PE fund acquiring a large physician group, or a sale-leaseback of hospital real estate – requires 60 days advance notice and a state review of its impact on cost, quality, and access. Massachusetts even banned new sale-leaseback deals for core hospital campuses (grandfathering existing ones). These steps essentially bring formerly hidden deals into daylight and allow regulators to flag or mitigate harmful consequences before they occur. Other provisions also direct the state to monitor health system consolidation and study improvements to primary care access. Early observers suggest this could become a model for other states.
Other States: A handful of states are following suit. California and New York have considered bills requiring the state attorney general’s approval for any healthcare acquisition by private investors above certain sizes. New Jersey enacted a law to scrutinize for-profit hospital owners more closely after a string of failures. Pennsylvania strengthened reporting on nursing home ownership (many of which are PE-owned) after discovering poor conditions under opaque ownership webs. While not all proposals pass, the trend is clear: states are waking up to the need for guardrails on private equity in health services.

Outside of government, professional groups and researchers have offered reform ideas. In Health Affairs, experts have called for lowering federal reporting thresholds so that even relatively small healthcare deals would be reviewed if they might cumulatively affect a market. They also suggest closing the MSO loophole nationally, requiring any entity influencing clinical operations to meet certain standards or be subject to oversight. Another idea is instituting “ownership caps” – limiting how much of a vital service (ERs, dialysis centers, etc.) any one private equity-backed chain can control in a region. Transparency is a recurring theme: mandates for public disclosure of outcomes at PE-owned facilities, or even report cards identifying owners of healthcare providers and their track records.

Some advocates go further, pushing for an outright ban on corporate ownership of physician practices. Grassroots movements like Take Medicine Back, led by emergency physicians, argue that only clinicians or non-profit entities should control clinical practices. While this is unlikely to become law in the near term, it underscores the depth of concern among doctors themselves. The American Medical Association’s ethics journal has explored options like tying private equity acquisitions to quality metrics – for example, if a PE-owned hospital’s quality falls and patients are harmed, the firm could face stiff penalties or even criminal liability (as Senator Warren’s proposed bill envisioned).

In the international context, similar policy debates are emerging. The UK, grappling with private firms running some NHS services, is considering tighter rules on outsourcing and more rigorous vetting of private operators after incidents of subpar care. In low- and middle-income countries, organizations like Oxfam have warned that unregulated private investment in hospitals can worsen inequities, and they call on global development institutions to attach stricter conditions if private equity is involved in health projects.^[25]

Profit and Care: Finding the Balance in Healthcare

Private equity has undeniably become a major force in healthcare, transforming how capital flows into hospitals and clinics. Its rise has coincided with a broader financialization of medicine – where market efficiencies are promised, and patients are sometimes viewed through the lens of revenue streams. On one hand, private equity brings new funds and managerial talent that could help modernize healthcare delivery. On the other, its debt-driven, short-term profit model often clashes with the long-term needs of patient care and community health. The evidence to date, from higher mortality in nursing homes to hospital bankruptcies and service cuts, urges us toward caution. Without stronger oversight and accountability, there is a genuine risk of turning healthcare into a financial product first and a public good second.

^[1] Private equity in health care puts patients’ lives in danger, studies show

^[2] Private Equity Undermines Rural Health Care

^[3] Operose GP contracts terminated in North Central London

^[4] Private equity’s appetite for hospitals may put patients at risk

^[5] https://hsph.harvard.edu/news/private-equitys-appetite-for-hospitals-may-put-patients-at-risk/

^[6] Private Equity Undermines Rural Health Care

^[7] Changes in Hospital Adverse Events and Patient Outcomes Associated With Private Equity Acquisition | Health Care Economics, Insurance, Payment | JAMA

^[8] Research: What Happens When Private Equity Firms Buy Hospitals?

^[9] How Private Equity and an Ambitious Landlord Put Steward Health Care on Life Support | OCCRP

^[10] Private equity in health care puts patients’ lives in danger, studies show

^[11] Private Equity Undermines Rural Health Care

^[12] Private equity in health care puts patients’ lives in danger, studies show