Private Equity Is Eating Healthcare Alive

If you know me in real life and you've ever made the mistake of bringing up private equity in front of me, you already know I have a problem with these people. Let me be clear up front: this is not because I'm anti-business. I'm an employed private-practice surgeon in aesthetics. I am about the most business-y kind of doctor you can be. But private equity is something different. It is accelerating the loss of trust and autonomy that has been hollowing out American medicine, and it's driving an even bigger wedge between patients and doctors. I want to help you understand why.

What private equity actually is

People throw the phrase around ("they sold to private equity," "that's a PE group") without necessarily knowing what it means, so let's start there.

The entity we're talking about is a private equity firm. Picture a Scrooge McDuck vault of gold coins. That money comes from institutions and wealthy individuals, pooled together and handed to the firm with one instruction: go turn this money into more money. 

The playbook is consistent. The firm buys a controlling stake in a business, which in healthcare means a physician practice, a hospital, a surgery center. Controlling stake means they now make all the rules. They go in, restructure everything to optimize for profit, and aim to extract those profits on a three-to-seven-year timeline. Then they sell the business off, return the gains to the pool, and move on to the next project.

And this has become a major force in healthcare fast. Global private equity investment in healthcare between 2018 and 2022 reached $446 billion, more than $350 billion of it in U.S. practices, hospitals, and long-term care facilities. That is a lot of gold coins.

How it plays out: the retiring dermatologist

Take dermatology, one of the earliest specialties affected. Say you're a dermatologist who has been in solo practice for thirty years. You've built something thriving, but you have no junior partner, and you want to retire. What do you do with the practice?

Private equity firms know exactly who you are: someone with an asset to sell, on a timeline. So they show up and say, don't sell this to another physician. Sell it to us. We'll make it enormously profitable, and we'll pay you more than any individual doctor possibly could. We're your golden ticket into retirement.

Honestly, if you're that dermatologist, it's hard for me to knock the deal. They have the biggest check. I get it.

The problem is for the next generation to deal with. If you're the physician who comes into that practice after the sale, the firm doesn't owe you anything. The old model was a physician hiring another physician who would grow into the practice and eventually take it over, an investment in building talent. The new model views you as an employee, a highly replaceable one, and the firm's motivation is to get you for the lowest amount of money possible, because its entire game is making the business profitable within a few years.

The bigger problem: private equity makes care worse

The job market for doctors matters to me, and we'll come back to it. But the bigger problem is that private equity makes healthcare worse, and there's evidence to support that.

The largest systematic review to date, published in the BMJ, found that private equity ownership was most consistently associated with increased costs to patients and payers, and with quality of care that was at best unchanged and in many cases worse. There were no consistently beneficial impacts for anyone except the people profiting from the private equity firm. It isn't good for the hospital, the patient, the doctor, or even the insurance company. These firms come in, take the money, and leave.

You might assume that a company coming in to modernize your practice would preserve the quality of care and your clinical decision-making, because that's the tradition you were trained in. That's exactly the problem: the private equity group isn't beholden to any of it. They didn't take the Hippocratic Oath. They have no qualms about looking at a patient and telling them they need something they don't. It is very hard for a doctor to function in that environment.

After a private equity acquisition, prices go up and spending goes up; we've seen this in dermatology, gastroenterology, and ophthalmology. Office visits get shorter and volume gets higher, because time is finite. And once the firm sells the business after its five-year hold, these problems don't resolve. They accelerate.

The safety data is the clearest argument

To me, the strongest case against PE in healthcare is safety. If I had the choice, I would not send a loved one to a private equity-owned institution.

An analysis of Medicare claims published in JAMA compared private equity-acquired hospitals with their non-PE counterparts and found that acquisition was associated with a 25 percent increase in hospital-acquired conditions. Drilling into what changed: more falls, which anyone who works in a hospital knows usually means less staffing and less close watch over patients. And a 37 percent increase in central line-associated bloodstream infections.

All of this despite the fact that private equity hospitals tend to admit younger, lower-risk patients, because those patients are more profitable. A healthier patient population with worse outcomes. That is terrifying.

Then there are patient experience scores. I'll admit I've never loved patient satisfaction as a metric. The scores all cluster between 90 and 100, everyone's above average, and who has a pleasant experience while they're sick? But even these numbers, which I don't consider especially powerful, moved significantly. In another JAMA study, patient experience scores dropped roughly five percentage points at private equity hospitals compared with non-PE hospitals. On a scale that effectively runs from 90 to 100, five points is enormous, a bigger swing than we saw during COVID, when nobody was happy in the hospital.

When you dig into why, much of it comes back to staffing: reduced nurse staffing, so worse patient ratios, and a lower nursing skill mix. The NP who's been there twenty years is expensive, so she's gone, replaced with someone brand new, or with an MA who has been deemed good enough. That matters because nursing is the front line of healthcare. It also matters for doctors, because when the nursing skill level drops, more questions flow to the physician, who ends up spending more of the day working below the top of their license.

In fairness

Not everything is negative. At least one study suggests that for very standardized, routinized conditions treated in a systematic way, private equity-owned practices may handle them more efficiently, or at least without harm. And an injection of capital can modernize systems. Much of what these firms do is roll-ups, folding a small practice into a larger group, and there are real efficiencies to be gained there.

I just don't care about those efficiencies nearly as much as I care about whether we're providing good care. If the trade-off is that you take worse care of patients, the efficiencies don't matter.

Don't take my word for it: ask the physicians

Surveys of physicians who have worked in private equity groups tell the story. More than 60 percent view PE involvement in a practice negatively, and the effect on physician well-being is especially unfavorable.

One survey comparing private equity-employed physicians with those not employed by PE found that the PE physicians reported lower professional satisfaction, 44.8 percent versus 74.4 percent. That is a big gap. They reported lower autonomy, 48.3 percent versus 66.3 percent, and isn't autonomy why we all became doctors, to make our own decisions? They were also much less likely to say they intended to stay with their employer. What I see in those numbers is a miserable, burned-out physician with no control over their day who is looking to get out as soon as they can make it work.

Why do they feel that way? It's hard to pin down quantitatively, but the qualitative work is consistent. You go from being a physician whose job is to take care of patients and do the right thing for them to being a physician whose job is to optimize how much each patient spends in your practice. There's a real push to expand elective procedures, to offer them more often and encourage patients to sign up, and to steer people toward every ancillary service the system offers. They want you to be the guy at McDonald's asking if you'd like to supersize that. None of us went into medicine for that.

These practices also favor commercially insured patients, who pay better than publicly insured ones, and they push low-complexity, high-margin care. They aren't interested in the very sick or very complicated patient. They want the patient with one problem and an expensive solution.

Physicians also report constant pressure to substitute higher-cost clinicians with lower-cost ones: the experienced NP replaced by a brand-new nurse or an MA, a mature team with deep institutional knowledge replaced by the cheapest team that technically meets the criteria for being enough. I lived a version of this as a resident during COVID, when a huge wave of nurses and staff left our hospital. The change was palpable in the quality of the questions I'd get. That wasn't anyone's fault; it was a team of brand-new people who had trained when teaching standards were down. But when your team is less experienced, the responsibility for everything missing in the system falls on you.

The big picture

Set the money aside for a moment. The bigger issue is that this is an acceleration of the loss of trust that people have in doctors and in the healthcare system. These enormous entities come in and strip the industry for parts, and the only person in the room the patient actually sees is the doctor. So the patient gets a worse experience, pays more for it, and looks at you and assumes it's you doing it.

And the idea that clinical decisions will be influenced by money to an even greater degree is everything our forebears in this profession stood against. Medicine is built on the idea that we can be trusted to make unbiased decisions based on evidence and on a trusting relationship with a patient who knows we're on the same side. That doesn't work well in a private equity-owned situation.

So what do we do about it? The evidence is pretty clear that private equity is making healthcare worse and more expensive, which makes it bad for a lot of powerful parties, including insurers and big hospital systems. Boiled down, the real problem is that decision-making authority has been taken from physicians and handed to non-physicians who now make the rules in physician practices.

A good model to look at is dentistry. Dentists have done an extraordinary job of protecting their profession, with laws at multiple levels saying that non-dentists cannot own dental practices. Imagine if we had that in medicine, if a hospital couldn't operate without a physician in a leadership position. That would be huge. It's difficult in a system as dysfunctional as ours, but we need whatever rules we can get to ensure clinical practices are, in some meaningful form, informed and run by physicians, or at least by clinicians. Turning healthcare into a chain of McDonald's optimizes for something totally different from what any of us got into this for.

Think about the long term, for yourself and for what we're doing to our profession. And advocate, in every way you can, to rebuild the rules around physician ownership of our practices and our system. If we don't, the trust we have with patients will keep eroding, and that isn't good for any of us.