Watchdog Calls for Oversight of Private Equity in Non-Profit Healthcare
The Private Equity Stakeholder Project (PESP), a watchdog group critical of private equity, is urging greater government oversight of joint ventures between private equity firms and non-profit healthcare providers. The group warns that these arrangements could pose risks to patients, payers, and employees, including profit extraction and declining care quality.
Report Details Over 500 Joint Ventures
In a new report, PESP details more than 500 joint ventures between private equity and non-profit healthcare providers, spanning rural hospitals, religiously affiliated health systems, and hospice care. Jim Baker, founder and executive director of PESP, said, “This is the challenge with private equity – it’s private, so they don’t have to report what they own. We think this just scratches the surface.”
Private Equity’s Growing Footprint in Healthcare
Private equity funds invested over $1 trillion in debt-financed healthcare deals in the last decade, according to researchers at New York University. PESP reports that 488 hospitals, or 8.5% of all private hospitals, are owned by private equity. The industry employs over 13 million American workers and contributes $2 trillion to US GDP, according to industry data.
Tension Between Non-Profit Mission and For-Profit Goals
Erin Fuse Brown, a health policy professor at Brown University, noted the tension between non-profit hospitals and for-profit investors: “I don’t think it’s an irrelevant question to ask whether there’s some tension between a non-profit hospital and a for-profit investor group joining forces.” Non-profits are legally obligated to pursue their charitable purpose, she said.
Case Studies Highlight Risks
The report highlights four case studies, including the bankruptcy of Steward Health, a former non-profit that became a for-profit chain with backing from Cerberus Capital Management. Steward filed for bankruptcy in 2024 with $9 billion in debt, after extracting hundreds of millions in profit for investors. The chain was criticized for poor building conditions and lack of supplies, leading to two hospital closures.
Another case involves Wilson Medical Center in North Carolina, where a joint venture with Duke Lifepoint Health (backed by Apollo Global Management) led to CMS investigations after two patient deaths. The North Carolina Department of Justice also expressed concerns about patient care. Kimberley Sirk, director of marketing for Wilson Medical Center, said issues were addressed years ago and the hospital has been in full compliance with CMS requirements since 2024.
Sale-Leaseback Practices Under Scrutiny
The report criticizes sale-leaseback arrangements, where hospitals sell property to real estate investment trusts (REITs) and lease it back. This provides cash but saddles hospitals with added expenses. In one example, after Apollo Global Management acquired LifePoint Health in 2018, nine hospitals in joint ventures with LifePoint sold property to REITs.
Differing Views on Private Equity’s Impact
Not all researchers agree on the risks. Anthony T Lo Sasso, a professor at the University of Wisconsin–Madison, argued that criticism of private equity distracts from broader issues like consolidation and high prices. “The so-called non-profit sector doesn’t in any way behave differently than the for-profit sector,” he said. The industry also notes that joint ventures can provide much-needed capital for struggling hospitals.
Ardent Health’s CFO Alfred Lumsdaine stated that “about 40% of hospitals are losing money,” suggesting private equity partnerships could help. PESP’s report calls for increased oversight to ensure non-profits maintain their charitable purpose.
