Investment or Extraction? Reframing Private Equity in Healthcare (Health Economics Policy and Law)

Summary

• In a typical private equity setup, 60 to 90 per cent of an acquisition is financed with debt saddled directly onto the portfolio company.p.2
• Private equity firms typically contribute about 2 per cent of the fund equity while receiving 20 per cent of investment returns.p.2
• Private equity-backed entities represented 7 of the 8 largest U.S. healthcare bankruptcies in 2024.p.3
• Private equity-related financial distress and bankruptcies contributed to the closures of at least 25 hospitals across the U.S. since 2018.p.4
• Research indicates a 25.4 per cent increase in hospital adverse events at facilities acquired by private equity firms.p.4
• The private equity industry claims to have invested $1.6 trillion in healthcare since 2008.p.6

Key insights

1. Private equity leveraged buyouts shift 60 to 90 per cent of transaction costs into debt obligations borne solely by the acquired company.p.2
2. Private equity firms hold portfolio companies for roughly 5 to 7 years, aligning exits with fund return schedules rather than long-term health system needs.p.2
3. Dividend recapitalisations extract capital for investor payouts while adding debt directly to portfolio company balance sheets without creating operational value.p.3
4. Steward Health Care's private equity investors extracted approximately $800 million through dividend recapitalisations and sale-leasebacks prior to 11 hospital closures.p.4
5. Arbitration processes under the No Surprises Act, heavily utilized by private equity-backed providers, generated over $5 billion in additional costs since 2022.p.5
6. Private equity serial acquisitions use platform roll-ups to execute stealth consolidation below required antitrust reporting thresholds.p.6
7. One third of private primary care clinics in Sweden are currently owned by international private equity firms.p.8