Impact of Private Equity on U.S. Healthcare Consolidation and Patient Care

Private equity (PE) firms have significantly increased acquisitions in the U.S. health care sector over the past two decades, impacting hospitals, physician practices, and patient care. A notable example is Steward Health Care, formerly Caritas Christi Health Care System, which filed for bankruptcy in 2024 after a PE acquisition by Cerberus Capital Management. This event led to service disruptions and layoffs affecting over 4,430 staff and providers, particularly in socioeconomically disadvantaged communities.

Cerberus converted the nonprofit hospital system into a for-profit entity and employed sale-leaseback strategies, selling hospital properties to real estate investment trusts (REITs) and leasing them back at high costs. These financial arrangements strained hospital resources, resulting in staffing cuts and reduced equipment, which adversely impacted patient safety and increased mortality rates.

Research from Brown University's School of Public Health highlights that from 2000 to 2018, PE investment in health care surged over 2000%, reaching $100 billion, with an estimated $1 trillion invested over the past decade. PE firms typically use heavy debt financing, placing the operational burden on acquired facilities, aiming for short-term profits within three to seven years.

PE ownership now spans more than half of medical practices regionally and includes over 450 hospitals nationwide. Significant activity is noted in behavioral health, with over 5,000 facilities acquired between 2010 and 2022, indicating accelerated consolidation in recent years.

Vertical consolidation trends have concentrated market power among few dominant entities, notably UnitedHealth Group and CVS/Aetna, controlling approximately 27% of the U.S. health care market. This consolidation restricts independent providers' competitiveness and increases providers' leverage to negotiate higher insurance reimbursement rates.

Regulatory shifts since the 1990s, including Medicare's move to capitation-based payments and the Affordable Care Act’s profit limits on insurers, have catalyzed mergers and acquisitions as insurers and PE firms seek revenue growth in less regulated segments.

Market concentration has led to higher costs, estimated increases of 20-40%, and variable care quality, often declining in highly consolidated markets. Competition is associated with better innovation and quality, whereas dominant players have less incentive to maintain high standards.

Studies suggest PE firms' cost-cutting measures, such as staffing reductions and sale-leaseback transactions, negatively affect care availability and quality. Integrated ownership models grant firms significant control over patient access and treatment authorization, with financial incentives to maximize billing.

Antitrust and regulatory responses include federal efforts to curb upcoding and increase enforcement capacity, with administrative collaboration among the FTC, DOJ, and HHS. State-level initiatives are also emerging to regulate smaller mergers and scrutinize PE activities, including strengthened bans on the corporate practice of medicine.

Despite these measures, many experts emphasize that antitrust enforcement often reacts to existing consolidation rather than prevention. Health care markets remain highly concentrated, posing ongoing challenges to affordability and care quality.

Policy recommendations advocate for enhanced transparency, increased regulatory oversight, targeted antitrust action, and support for independent providers to foster competition and protect patients. These approaches seek to balance investor interests with operational sustainability and patient outcomes in a complex, financially driven health care landscape.