The takeover of healthcare services by private equity funds is associated with a worse quality of care and higher costs, according to the largest study ever undertaken on the effect of private equity ownership published in the BMJ, and regulation could be needed.

The authors of the review, which was led by the University of Chicago, said:

 “The current body of evidence is robust enough to confirm that PE [private equity] ownership is a consequential and increasingly prominent element in healthcare, warranting surveillance, reporting and possibly increased regulation.”

Private equity firms use money supplied by a combination of wealthy individuals and loans to buy companies, often ones that are struggling, with the aim to sell them at a large profit as quickly as possible (generally within 3-5 years). In order to make the profit quickly, the companies use a variety of approaches – breaking-up companies, merging small companies, selling off assets separately, making large numbers of redundancies, and generally cutting costs wherever possible. 

In the past decade, these firms have increasingly invested in, acquired and consolidated healthcare facilities, with global healthcare buyouts exceeding £157bn since 2021 alone.

The systematic review in the BMJ – Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality – considered 1,778 studies and evaluated 55 studies with the correct inclusion criteria across eight countries, although with a heavy bias on the US market (47 studies). The researchers looked at studies in a range of healthcare settings, with nursing homes the most commonly studied, followed by hospitals, dermatology, and ophthalmology. The impact of private equity takeovers on costs, quality of care and health outcomes was assessed.

The researchers found that private equity ownership was “most consistently associated with increases in costs to patients or payers” and was “associated with mixed to harmful impacts on quality.”  Furthermore, the review identified “no consistently beneficial impacts of PE ownership.”

Nine of 12 studies revealed higher costs to patients or the funders of healthcare at services owned by such firms, three found no differences, and none showed lower costs.

When quality of care was assessed, of 27 studies, 12 found harmful effects, three found beneficial, nine found mixed, where some measures declined and some improved, and three were neutral.

The researchers note that in some cases private equity ownership was associated with reduced nurse staffing levels or a shift towards lower nursing skill mix. 

The review was heavily biased to the US, but private equity is a global phenomenon, and the researchers note that there is a need for rigorous research on such ownership in healthcare, in other non-US settings, such as Europe.

Earlier in the year, in April, an article in the European Journal of Public Health also called for such research into private equity. 

The article – Private equity investment in Europe’s primary care sector—a call for research and policy action, noted that such investment in Europe’s primary care sector seems to be increasing in many countries, but that there is no information on its impact, such as on access to care, competition, data protection and health care costs.

In the UK,  private equity is invested in some notable healthcare companies that receive millions from NHS contracts. Yet, the researchers of the systematic review in the BMJ found only one paper they could include that looked at the effect of these companies in the UK – Effects of chain ownership and private equity financing on quality in the English care home sector: retrospective observational study – published in Age and Ageing in December 2022.

This study concluded that private equity financing and independent for-profit ownership is associated with lower quality in care homes and called for quality to be monitored as the care homes market structure was changing due to the influx of private equity. 

An article from late 2022, on the website of RSM a leading audit, tax and administration company for the private equity industry, noted that the UK healthcare industry offers “rich pickings for PE investors large and small” and that “political pressure to relieve NHS backlogs will benefit businesses that can bring down waiting lists,” and these are attracting private equity investment.

Notable recent deals include: the sale of  Virgin Care, primarily a community healthcare business, to Twenty20capital in 2021 and its subsequent rebranding as HCRG Care Group; the 2021 acquisition of the mental health provider Huntercombe Group and merger with Active Care Group by Montreux Healthcare Fund based on the Isle of Man; and the December 2020 acquisition of The Priory Group by Waterland, a Dutch PE group, which in 2021 alone received £626.8 million from the NHS and social services.


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