Private equity hospitals in the news

We’re just getting into 2025, but there are already new developments in state policy, news, and research around private equity and hospitals.

Massachusetts regulates real estate sales

After the bankruptcy of Steward Healthcare threatened access to care and patient safety, Massachusetts is making moves to better regulate private equity in healthcare. A recently passed law subjects private equity investors to new reporting requirements, which should help policymakers better identify when hospitals are struggling.

While the bill does not allow the state to block private equity acquisitions outright, it does prohibit hospitals from selling their property to real estate investment trusts (REITs), which was a key factor in Steward’s financial troubles. 

Prospect declares bankruptcy

Prospect Medical Holdings, a large health system formerly owned by private equity firm Leonard Green & Partners, declared bankruptcy. While Prospect claimed that inflation and labor expenses were the cause of their financial challenges, experts pointed to sale-leaseback agreements to real estate investment trusts as the key driver, calling attention to the “extractive” business practices of private equity firms.

A recent Senate report on private equity in healthcare came to a similar conclusion, warning that “private equity investors have pocketed millions while driving hospitals into the ground.”  

Patient experience and PE acquisitions

A recent study in JAMA compared patient experience scores over time at hospitals acquired by private equity compared to those not acquired. They found that hospitals acquired by private equity had worse patient experience outcomes after acquisition.

• The proportion of patients who said they would “definitely recommend” the hospital declined at hospitals acquired by private equity and increased at control hospitals.
• The general ratings of the hospital increased for both groups over time, but at control hospitals, the ratings increased by significantly more.
• Ratings of staff responsiveness increased for both groups over time, but at control hospitals the scores increased by significantly more.

This study adds to a growing body of evidence showing declines in hospital care quality after private equity acquisitions.