Private Equity and Health Care | OAS Episode 250

Private equity investment in health care facilities has grown substantially in the past decade. There have been hundreds of such acquisitions of health care facilities in the past decade, including physician practices, nursing home facilities, and hospitals involving hundreds of billions of dollars.

At its most basic, private equity investors take over a health care company with the intention of increasing its value and reselling it for a profit. Advantages of such a strategy can be more capital investment and management expertise. Downsides include the use of leveraged buyouts that could saddle the acquired company with high levels of debt.

On this episode, we're joined by Dr. Zuri Song, an associate professor of health care policy and medicine at Harvard Medical School, and an expert on the financial incentives, public policies, and private sector investment in the health care system. Dr. Song explained what research has found in studying private equity acquisitions in health care. On average, he said, these investments raise real concerns about both patient outcomes and access to care.

State legislatures are at the forefront of regulation in this area with much of the regulation focusing on increased transparency into these transactions. I talked with two state legislators to get their perspective: Senator Tyler Johnson, a Republican from Indiana who is also a physician, and Senator Cindy Friedman, a Democrat from Massachusetts. They each discussed the legislative action in their states and how they view private equity investment.

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