Patient Care Deteriorates After Private Equity Acquisition of Hospitals

Patient care experiences worsened after private equity firms took over hospitals, according to a difference-in-differences analysis.

From 2008 to 2019, the percentage of patients rating hospitals a 9 or 10 (on a scale of 0-10) was unchanged at 73 hospitals acquired by private equity firms (65% before the acquisition and 65.2% after), while it rose at matched control hospitals that weren’t acquired (66.2% to 69.2%), according to Rishi Wadhera, MD, MPP, MPhil, of Harvard Medical School and Beth Israel Deaconess Medical Center in Boston, and colleagues.

That amounted to a difference-in-differences estimate of -2.4 percentage points (95% CI -3.9 to -0.9), they reported in JAMA.

Furthermore, the percentage of patients who would definitely recommend the hospital declined at those acquired by private equity (66.9% to 65.5%), while it increased at control hospitals (68.2% to 69.3%), for a differential change of -2.1 percentage points (95% CI -3.6 to -0.7).

Wadhera noted that the difference in overall measures of patient care experience between hospitals acquired by private equity and control hospitals grew each subsequent year after acquisition, a change that reached 5 percentage points by year 3.

“It’s quite striking that after private equity takes over a hospital, overall patient care experience scores worsen more than they did nationally during the COVID-19 pandemic,” Wadhera told MedPage Today, referring to a cohort study that showed a 3.6-percentage point decline in patient care experience scores during that time.

“That tells us there are organizational and structural changes that happen when some private equity firms take over hospitals that really may be detrimental to the patient care experience,” he added.

Wadhera said the findings build on another recent difference-in-differences analysis, which found that adverse events rise at hospitals after a private equity acquisition.

“Now we’re seeing, across multiple domains of quality in these two studies … that when private equity takes over a hospital, things generally get worse for patients,” he noted.

Increasing involvement of private equity in healthcare has captured national attention. This week, a bipartisan Senate Budget Committee report said the trend may pose a threat to the nation’s healthcare infrastructure. And a few months ago, Sen. Ed Markey (D-Mass.), chair of a Health, Education, Labor, and Pensions (HELP) subcommittee, released a report on how private equity helped run Steward Health Care into the ground.

While studies have shown impacts of private equity acquisition on patient outcomes, Wadhera said there’s been less research on the patient care experience.

“Patients see and experience elements of healthcare that can’t be captured with traditional outcome measures alone — how they feel about their overall care experience, their interactions with doctors and nurses, the responsiveness of staff, and the hospital environment,” he said. “It provides important insights into the quality of care being delivered by those hospitals.”

For this difference-in-differences analysis, the researchers identified U.S. hospitals acquired by a private equity firm using data from Irving Levin Associates and Pitchbook, and manually verified the data using official news releases, hospital websites, and other online searches. They focused on acquisitions that occurred between 2010 and 2017 to allow hospitals to contribute 3 years of data before and after the acquisition year. They stopped before 2018 so as not to overlap with the COVID pandemic.

The primary outcomes were two global measures of patient care experience from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, and they looked at a host of secondary outcomes as well.

Among those secondary outcomes, they saw a decrease in patient-reported staff responsiveness after a private equity acquisition compared with control hospitals, for a differential of -1.3 percentage points (95% CI -2.4 to -0.2).

“We know private equity has a strong incentive to cut costs and maximize profits and returns for its investors, and one easy way to do that is by reducing staffing,” Wadhera said. “Who feels reductions in staffing first? Patients.”

However, the percentage of patients reporting that they had received discharge instructions increased for both groups of hospitals, and there were no significant changes in measures of communication or in hospital environmental factors, such as cleanliness.

Wadhera said he thinks the lack of effect on physician and nurse communication with patients is “a testament to the fact that doctors and nurses continue to try to do what’s best for their patients, irrespective of who acquires their hospital and the organizational changes that occur around them as a result of the acquisition.”

The study was limited by several factors, including the fact that data on private equity acquisitions are opaque; that the HCAHPS survey has a risk of nonresponse bias; and because private equity acquisition is “not a random occurrence,” so there may be other factors not captured by the matching process. Finally, since the study didn’t go past 2019, outcomes may be different if more recent years were included, they acknowledged.

Nonetheless, Wadhera and colleagues said the study supports the growing weight of the literature showing worse outcomes after private equity acquisition of hospitals.

“I think the reason clinicians, patients, [and] policymakers are concerned about private equity’s growing presence in healthcare is because of the incentive structure that is in place for private equity firms to generate financial returns for their investors over short time horizons,” Wadhera said. “That is at odds with doing what’s best for patient care.”

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