Private Ownership in Hospitals Enhances Performance and Efficiency
New research reveals that private equity ownership can enhance hospital efficiency and operational performance without compromising patient care, challenging common concerns.
Recent research conducted by ESMT Berlin and the Halle Institute for Economic Research (IWH) provides compelling evidence that private equity (PE) acquisitions can significantly improve hospital operations. Analyzing data from over 1,200 hospital acquisitions in the United States between 2001 and 2018, the study challenges the common perception that private ownership may harm healthcare institutions. Instead, the findings suggest that PE ownership leads to notable cost savings and increased operational efficiency without increasing hospital closure rates or negatively impacting patient care.
The research highlights that hospitals acquired by PE firms primarily undergo administrative restructuring, resulting in a 33% reduction in administrative staff in many cases, especially in hospitals transitioning from non-profit status. Importantly, this streamlining does not affect the core medical staff or essential services, which are preserved to ensure patient outcomes remain stable.
The study also notes that private equity firms do not cause hospitals to focus on wealthier or healthier patients. There is no evidence of rising inpatient prices or demographic shifts in the patient population. Additionally, key health outcomes, such as mortality and readmission rates, remain unaffected. The only observed negative effect is a slight decline in patient satisfaction, likely linked to operational changes in non-clinical services.
Overall, the findings suggest that private equity involvement can serve as a catalyst for enhancing hospital efficiency. It promotes cost-cutting where appropriate while maintaining the quality of care, thus offering a nuanced perspective on hospital ownership dynamics. This research underscores the potential for private equity to contribute positively to the healthcare sector by fostering healthier financial and operational conditions without compromising patient care.
Source: https://medicalxpress.com/news/2025-05-private-ownership-boosts-hospital.html
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