Private equity’s intrusion into US healthcare

In his 2022 state of the union address, US president Joe Biden claimed that more and more private financing had been flowing into nursing homes, degrading the quality of care and increasing costs. “That ends on my watch,” he promised.

Biden was referring to private equity. That is, money gathered from high level investors for the purpose of buying up companies and maximising profits with the aim of selling the company in 3-10 years at a large profit. In 2021 private equity firms owned 11% of nursing homes, according to an independent agency that provides information to the US Congress on Medicare.1

And it’s not limited to nursing homes. Private equity firms have been buying up physicians’ practices, hospitals, health systems, clinics, obstetrics units, even veterinary clinics. According to an insurance company trade group, private equity firms spent $750bn in healthcare from 2010 to 2019, jumping from $41.5bn in 2010 to $119.9bn in 2019.2

In a recent webinar hosted by the National Institute for Health Care Management, a non-partisan healthcare research foundation, director of research Cait Ellis complained about the lack of regulation as well as the mystery surrounding private equity investments. “While private equity investment in healthcare may improve operational or technological efficiencies,” she said, “there are growing concerns about the impact on cost, quality, and use of care.”

Yet this situation has been made possible by the capitalism that is at the core of the US health system.

The argument in favour of private equity in healthcare is that the firms improve the company they buy, since they hope to sell it at a profit, and invest capital to do so, buying high price items like medical equipment and bookkeeping systems that other healthcare …