1. Introduction
In recent years, private equity has become a focal point for U.S. medical professionals, regulators, policymakers, and even the general public as evidence grows of its risks and harmful impacts in healthcare.Footnote 1 This evidence comes in the form of empirical research on its effects across various subsectors of the healthcare industry, as well as investigations and case study-based evidence from nonprofits, unions, journalists, and lawmakers. Collectively, this evidence has demonstrated how private equity investment strategies in healthcare have resulted in bankruptcies, facility closures, layoffs, higher costs, patient care issues, and the erosion of clinical autonomy, as just some examples. In response, federalFootnote 2 and state lawmakersFootnote 3 have introduced legislation to guard against these risks and impacts, and 2025 saw an unprecedented number of state legislative proposals in response. However, federal legislative efforts have stalled, and with some notable exceptions,Footnote 4 much of what has passed at the state level has consisted of first steps and limited solutions, often watered down from ambitious first drafts (Fenne, Reference Fenne2025a; Bugbee, Reference Bugbee2025c). Industry talking points implying that any new regulations would be overly burdensome and could chill investments in the relevant state’s healthcare system, as well as aggressive lobbying tactics, seem to have been effective at spooking many legislators out of voting in favour of robust legislation.Footnote 5 Amidst industry pushback, a polarised political landscape, and growing scrutiny of private equity in healthcare, debate continues over the extent of its risks in healthcare, what shape regulations should (or should not) take, and whether we should permit private equity to invest in healthcare at all. To craft effective regulations around private equity’s participation in healthcare, as well as cut through the industry‘s talking points, we must reframe and acknowledge private equity ‘investment’ as ‘extraction’.
‘Extraction’ is a more specific term to describe the ways in which financialisation (see Bruch et al., Reference Bruch, Roy and Grogan2024; Brown and Rooke Ley, 2026) and assetisation (see Nijboer et al., Reference Nijboer, Kuijper, White, Rowland, Linthorst, Waring and Wallenburg2026) of healthcare are operating within the private equity business model. In particular, private equity business strategies serve to channel value out of portfolio companies to their investors, sometimes at the expense of patients, workers, and the long-term financial viability of the company. Conceptualising private equity’s business model as extractive is certainly not a groundbreaking observation. However, I argue that using the term ‘extraction’ over less specific terms like financialisation or misleading terms like ‘investment’ more succinctly describes what private equity business strategies do and therefore carries greater rhetorical weight to cut through the industry’s talking points. It can also help direct policymakers and regulators toward targeting the most harmful aspects of the private equity business model.
2. Private equity extraction
Under the typical private equity playbook, investment functions more like extraction. This is due to the very structure of the investment, which incentivises the use of high debt levels and limits liability for investors. In a typical investment setup, private equity firms raise money from institutional investors like pension funds, endowments and foundations; the firm puts up about 20 per cent of equity in the fund while the remainder is raised from the institutional investors (also referred to as limited partners). The fund is then used to acquire multiple companies in high-debt transactions called leveraged buyouts (LBOs). In an LBO, 60 to 90 per cent of the transaction is financed with debt that is saddled on to the acquired company, i.e. the portfolio company, and neither the private equity firm nor its limited partners will be on the hook for this debt (Kaplan and Strömberg 2008). Private equity funds might make healthcare-focused acquisitions, but many funds acquire companies across diverse sectors. Private equity firms will hold on to portfolio companies for approximately five to seven years before selling them, and sales are timed according to the private equity firm’s need to provide returns to limited partners, not to the needs of the portfolio company. Despite contributing only about two per cent of the equity in an investment fund, the private equity firm typically takes home 20 per cent of its returns, and this investment structure is consistent across industries (Appelbaum and Batt, Reference Appelbaum and Batt2014, Reference Appelbaum and Batt2017).
During the ownership period, private equity firms may direct companies to take on even more debt to finance add-on acquisitions or to pay dividends to investors – a practice referred to as a dividend recapitalisation. This type of transaction is fundamentally extractive because it adds no value to the company in question but leaves debt on its balance sheet. In the hospital and nursing home sectors, private equity-owned companies have also executed sale-leasebacks of real estate, in which the facility sells its real estate to a real estate investment trust (REIT) or other investment group, incurring long term lease liabilities on property it used to own. Meanwhile, the investors can siphon out the one-time revenue from the sale in the form of dividends (see Batt et al., Reference Batt, Appelbaum and Katz2022). In another extractive practice, private equity firms often charge the companies they own management fees, sometimes to the tune of millions of dollars over the life of the investment (Appelbaum, Reference Appelbaum2016).
Because private equity firms are not responsible for the debt or lease obligations incurred by their portfolio companies, and because they invest so little of their own money while taking home a disproportionate share of returns, firms can generate outsize returns on an investment, sometimes even if their company becomes financially distressed or declares bankruptcy. In other words, both the limited liability structure of private equity investments and the asymmetry of fund financing and returns produce a moral hazard problem that incentivises firms to direct the companies they own to take on risky amounts of debt, all while being relatively shielded from the consequences of said risks (Appelbaum and Batt, Reference Appelbaum and Batt2017; Statchen and Grogan, Reference Statchen and Grogan2025; Applebaum and Batt Reference Appelbaum and Batt2014). Appelbaum and Batt (Reference Appelbaum and Batt2014, p. 51) characterise private equity investments as ‘low risk, high rewards’ for private equity firms. The risks that exist are externalised to limited partners and acquired companies and their employees. In the case of healthcare, patients and sometimes entire communities also bear the risks.
3. Risks and impacts arising from private equity extraction in healthcare
The extractive structure of private equity investments, amplified by the temporal mismatch between the five-to-seven-year investment horizon and the long-term investment needs of healthcare providers, generates unique risks for private equity-owned healthcare companies.
3.1. Financial distress and bankruptcy
Private equity’s debt-based business strategies result in a disproportionately higher risk of financial distress and bankruptcy than seen in other types of corporate and investor-owned entities, especially in a high interest rate environment (Ayash and Rastad, Reference Ayash and Rastad2021). Companies saddled with unwieldy amounts of debt are less nimble and competitive amidst changing market conditions and regulations, and failure to generate sufficient revenues to pay monthly interest payments on top of necessary operating costs can result in defaults and bankruptcy. In 2024, private equity-backed companies accounted for seven of the eight largestFootnote 6 healthcare-related bankruptcies in the U.S. (Dabos, Reference Dabos2025). Financial distress and bankruptcy can lead to hospital or facility closures and layoffs, which can have devastating impacts on patients, the healthcare workforce, and entire communities.
3.2. Facility closures
Currently, there is limited empirical research on private equity’s impacts on healthcare access. Of the existing studies, access is measured by service utilisation, types of services offered, appointment availability, number of physicians and advanced practice providers employed, and the number of patients seen (Singh et al., Reference Singh, Dixit, Trivedi and Whaley2026a; Unruh et al., Reference Unruh, Rice and Lynn2025).Footnote 7 In the United States, a growing number of private equity-related hospital closures in recent years invite further research into this issue, because when private equity-owned facilities close as a result of financial pressure or bankruptcy, reduced access to healthcare services may result. Since 2018, private equity-related financial distress and bankruptcies have contributed to the closures of at least 25 hospitals across the U.S.Footnote 8 Steward Health Care, for example, whose private equity investors siphoned out approximately ＄800 million from the system via dividend recapitalisations and sale-leasebacks (Weil, Reference Weil2024), saw eleven hospital closures between 2018 and May 2025, resulting in the layoffs of at least 5,050 healthcare workers (Bugbee, Reference Bugbee2025a). Hospital closures have ripple effects within their larger regions. Effects of closures can include increased emergency transport times, longer wait times for emergency care, and reduced access to surgical care (see Alexander and Richards, Reference Alexander and Richards2023; Arrey et al., Reference Arrey, Mehranian and Alford2025; Cooper, Reference Cooper2025; LeMoult, Reference LeMoult2025).
3.3. Cost-cutting and its potential impacts on patient care
The debt service obligations on the hefty multimillion dollar loans secured by private equity-owned companies can divert substantial resources from operating costs, such as paying and retaining healthcare workers, investing in patient care, or making capital improvements to facilities and medical equipment. Slashing costs to afford debt payments and increase revenues may look like reduced staffing, failure to properly maintain medical equipment and facilities, and overreliance on unlicensed staff. A limited but growing body of research has looked at the relationship between private equity ownership of health facilities and patient outcomes.
A 2025 scoping review that included an examination of impacts of private equity on healthcare quality and patient outcomes in the U.S.Footnote 9 found primarily harmful or mixed results, with just two out of 21 studies showing beneficial impacts (Unruh and Rice, Reference Unruh, Rice and Lynn2025). The majority of such studies have looked at hospitals and nursing homes. For hospitals, research has shown a 25.4 per cent increase in hospital adverse events (i.e. central line bloodstream infections and patient falls) at hospitals acquired by private equity firms versus matched controls (Kannan et al., Reference Kannan, Bruch and Song2023) and higher death rates in emergency rooms at private equity-acquired hospitals, potentially related to reduced staffing (Kannan et al., Reference Kannan, Bruch, Zubizarreta, Stevens and Song2025). Other research has found increased mortality among nursing home residents at private equity-owned facilities (Gupta et al., Reference Gupta, Howell, Yannelis and Gupta2021) and a higher incidence of ambulatory care-sensitive emergency department visits and hospitalisations for long-stay nursing home residents at private equity-owned facilities (Braun et al., Reference Braun, Jung, Casalino, Myslinski and Unruh2021a). There is currently no research on the relationship between private equity ownership and patient outcomes in outpatient care.
3.4. Higher prices and increased health spending
The drive to generate outsize returns alongside debt-related pressures may also incentivise private equity-affiliated providers to increase prices. Recent research strongly supports this hypothesis (Unruh and Rice, Reference Unruh, Rice and Lynn2025; Borsa et al., Reference Borsa, Bejarano, Ellen and Bruch2023), with various studies finding higher prices at private equity-owned anaesthesia providers (La Forgia et al., Reference La Forgia, Bond and Braun2022), in outpatient specialties, such as gastroenterology ophthalmology, and dermatology (Braun et al, Reference Braun, Bond, Qian, Zhang and Casalino2021b; Singh et al., Reference Singh, Polsky, Song, Bruch and Zhu2022, Reference Singh, Song, Polsky and Zhu2025e), in primary care practices (Singh et al., Reference Singh, Radhakrishnan, Adler and Whaley2025d), and at private equity-owned nursing homes (Braun et al., Reference Braun, Jung, Casalino, Myslinski and Unruh2021a).Footnote 10
3.5. Inefficient use of taxpayer dollars
Private equity firms have benefitted from investing in segments of the healthcare industry that receive substantial financing from Medicaid and Medicare dollars, two types of public insurance programmes in the U.S. (McMahan et al., Reference McMahan, Sabik and Schenker.2025; O’Grady, Reference O’Grady2021a).Footnote 11 These include behavioural health care, home health and hospice, value-based primary care, and long-term care in skilled nursing facilities. Even if government payment rates are often lower than private insurance rates, government insurance has historically provided a predictable and reliable stream of income, making sectors that rely on these dollars an attractive investment target.Footnote 12 For example, most hospice care in the U.S. is financed by Medicare, a public insurance for those 65 and older (Appelbaum et al., Reference Appelbaum, Batt and Curchin2023). Recent research has shown that private equity-owned hospices, versus other for-profit ownership types, recorded the highest profits and lowest spending on direct patient care (Soltoff et al., Reference Soltoff, Williams and Braun2025). Medicare’s payment system for hospice care contains various legal loopholes that make it easy for profit-seeking investors to pocket as much of the Medicare reimbursement as possible while spending the bare minimums on patient care; this in turn has made hospice an attractive target for private equity (Appelbaum et al., Reference Appelbaum, Batt and Curchin2023).Footnote 13
3.6. Erosion of clinical autonomy
Private equity investments in physician staffing companies and practice management firms are often structured to skirt around state prohibitions of the corporate practice of medicine (CPOM). Many of these companies claim to handle the administrative side of medical practices, but business decisions such as staffing ratios and productivity targets can end up impacting physicians’ clinical autonomy (Brown and Hall, Reference Brown and Hall2024). There is no peer-reviewed research measuring private equity’s impacts on clinician autonomy, although various professional associations and researchers claim or predict a reduction in clinical autonomy following private equity buyouts (see Dilip et al., Reference Dilip, Derse, Paxton and Martin2026; Bradley et al., Reference Bradley, Burnett, Hall, Kerr and Rana2026). Recent research has found increased physician turnover following private equity acquisition of physician practices, which in turn invites further research into the mechanisms by which private equity acquisition results in higher turnover, and whether reduction in clinical autonomy is playing a part (Singh et al., Reference Singh, Bejarano, Torabzadeh, Borkar and Whaley2025a; Berquist et al., Reference Berquist, Klarnet and Dafny2025). In 2024 and 2025, some U.S. state legislatures explored ways to shore up their CPOM regulations in response to growing concerns about private equity and corporate influences in the practice of medicine; most notably, Oregon passed the strongest set of regulations to date to close CPOM loopholes and help restore clinician autonomy in medical decision-making (Zhu and Rooke-Ley, Reference Zhu and Rooke-Ley2025; Fenne, Reference Fenne2025a).
3.7. Consolidation
Private equity firms frequently use platform companies to ‘roll-up’ smaller companies, a consolidation strategy intended to increase the value of the enterprise for its sale later on. Many of these acquisitions are financed by debt and are often below reporting thresholds to antitrust regulators (Brown and Hall, Reference Brown and Hall2024). Consequently, this serial acquisition strategy has been referred to as ‘stealth consolidation’, and was a major focus of the Biden-Harris administration’s Federal Trade Commission (Federal Trade Commission, 2024). Through roll-ups, private equity is contributing to consolidation across multiple health sectors, including in Ambulatory Surgical Centres (Fenne, Reference Fenne2025b), value-based care primary care providers (Bugbee, Reference Bugbee2025b; Rooke-Ley, Reference Rooke-Ley, Song and Zhu2024a), opioid treatment (Singh et al., Reference Singh, Cantor, Whaley, Shuey, Bilden and Donahoe2025c), various outpatient specialties (Scheffler et al., Reference Scheffler, Alexander, Fulton, Arnold and Abdelhadi2023; Singh et al., Reference Singh, Reddy and Whaley2024), hospice (Aldridge et al., Reference Aldridge, Hunt, Halloran and Harrison2024; Appelbaum et al., Reference Appelbaum, Batt and Curchin2023) and home health care (Zhu et al., Reference Zhu, Reddy, Bejarano and Braun2025; Valdes-Viara et al., Reference Valdes-Viera, Seifert and Sen2025). Consolidation in the U.S. healthcare system, in turn, is contributing to overall rising costs (Hulver, Reference Hulver2024).
4. Critically examining industry talking points
The industry frames its contributions in healthcare as ‘investments’ in innovation and services and touts the ＄1.6 trillion it has ‘invested’ since 2008 (American Investment Council, 2024a). If we consider the typical fund structure of private equity investments and the practice of using LBOs to acquire companies, we can assume that much of this trillion-dollar figure is debt. The industry also claims that private equity is improving health care, arguing it ‘plays a critical role supporting quality, affordable health care in the United States’, and claiming it has funded life-saving innovations and helped lower healthcare costs (American Investment Council, 2024a). An eight-page report from the group published in February 2024 cites just two studies, one from 2021 and one from 2017, in the section captioned ‘[n]ew studies come out every year that demonstrate PE’s ability to expand health care access, reduce costs, and improve the health care services system overall’ (American Investment Council, 2024b, p. 3). Researchers Lietz and Song (Reference Lietz and Song2024, p. 14) have pointed out that the industry has failed to document its purported benefits in healthcare in a convincing way, and therefore, ‘the lack of supporting evidence for PE’s benefits does leave the evidence of patient and societal harms more concerning and unchallenged’.
When up against potential regulations,Footnote 14 the industry has argued that these will deter investment and therefore reduce access to health services.Footnote 15 But there is scant evidence showing private equity has improved access to healthcare to begin with. By uncritically accepting industry talking points or allowing them to serve as justification for choosing not to regulate private equity in healthcare, we are ignoring the reality that the very structure of private equity investments incentivises extraction. If regulating the extractive practices deters ‘investment’, then what can that tell us about the raison d’être for private equity’s participation in healthcare? Responsible private equity investors and their limited partners should welcome common-sense regulations that prohibit egregious business practices that threaten the reputation of the larger industry.
While it is important for researchers to continue compiling evidence on private equity’s impacts in healthcare – both good and bad – the evidence as it stands is sufficiently robust for policymakers to see through industry talking points and recognise that private equity extraction in healthcare carries substantial risks for patients and can lead to higher healthcare costs for patients and payers alike. Even for those who choose to take seriously that private equity can play a role in providing much-needed capital in struggling health systems must also recognise that such a position does not foreclose the need to regulate private equity’s associated risks and harms.
5. Policy recommendations
Private equity has become embedded in the privatised, for-profit U.S. healthcare system and to excise it through banning its participation altogether would not be politically feasible in the short nor medium term. That being said, there is definitive evidence that private equity’s debt-based extraction in healthcare can produce unique risks, as well as amplify the general risks that arise with for-profit healthcare. These include a high risk of bankruptcy and financial distress and associated facility closures, cost-cutting that impacts patient safety and care, rising healthcare costs, inefficient use of taxpayer dollars, erosion of clinician autonomy, and increased consolidation. Continuing to allow private equity to play a role in healthcare means that policymakers have a responsibility to address its associated risks through updated laws and regulations, and with sufficient budgetary allocations for the agencies and offices tasked with enforcement.
Moral hazard is built into the structure of private equity investments, which incentivises debt-based extraction rather than value-adding investment. But with sufficient regulations, private equity’s participation in healthcare can begin to look more like investment.Footnote 16 Some of the most egregious cases of private equity harms have involved large-scale sale-leaseback transactions with REITs and dividend recapitalisations, such as in the bankruptcies of Steward Health Care and Prospect Medical Holdings. Policies and regulations that address extractive behaviours like these head-on are the most targeted and efficient ways to safeguard patient care and may also discourage the worst actors in private equity from acquiring healthcare providers. Policymakers should consider statutory limits on debt levels that can be used to acquire healthcare providers, including in smaller add-on acquisitions; limits or bans on the sale-leasebacks of healthcare facility real estate, as both the states of Connecticut and Massachusetts have done; and limits or bans on dividend recapitalisations involving healthcare companies. Policymakers should also create joint liability for private equity firms and their portfolio companies to disincentivise firms’ use of excessive debt and other risky behaviours for which firms currently do not have to pay the price (Stewart and Baker, Reference Stewart and Baker2023). For policymakers concerned with regulating private equity with too broad a brush, they can consider regulating private equity’s participation in specific subsectors of healthcare where there is evidence of heightened risks and harms to patients – such as inpatient care at long-term care facilities and hospitals.Footnote 17 In sectors where there is evidence of rising prices post-acquisition, such as outpatient specialty care, state policymakers should consider strengthening and enforcing antitrust regulations.Footnote 18
Transparency measures and reporting requirements for private equity healthcare acquisitions have become a common angle taken up by state legislators looking to regulate private equity in healthcare. While these measures are an important first step, they fall short of actually preventing the harmful behaviours that private equity firms may engage in post-acquisition. For example, while Cerberus Capital’s acquisition of Caritas Christi Health Care to create Steward Health Care was a highly scrutinised transaction that included a five-year monitoring period by the Massachusetts Attorney General, this transparency was insufficient to prevent Cerberus Capital’s extractive practices that preceded Steward’s historic bankruptcy and associated hospital closures.Footnote 19
6. Looking beyond the United States
Researchers, policymakers, regulators and elected officials outside of the U.S. should take note of the evidence of private equity’s risks and harms in the U.S. context, even if their countries have national health systems and/or strong public financing. The reality is that most countries’ health systems are not insulated from the reach of private equity. A small but growing body of research has found steady increases in private equity healthcare investments among OECD countries in sectors such as primary care, outpatient specialty care, elder care, and hospitals (Singh et al., Reference Singh, Brown and Papanicolas2025b, Reference Singh, Reddy, Papanicolas and Scheffler2026b), including in European countries with relatively higher public investments in healthcare or universal health systems (Singh et al., Reference Singh, Brown and Papanicolas2025b, Reference Singh, Reddy, Papanicolas and Scheffler2026b). A recent exploratory analysis of private equity dealmaking in healthcare outside of the U.S. found that higher private equity deal volume was associated with higher healthcare expenditures, and the countries with the highest volume of deals were the United Kingdom, Germany, and France (Singh et al., Reference Singh, Reddy, Papanicolas and Scheffler2026b). Other countries have also seen substantial participation of private equity, such as in Sweden where one third of private primary care clinics are owned by international private equity firms (Singh et al., Reference Singh, Reddy, Papanicolas and Scheffler2026b; Winblad, Reference Winblad2023). Outpatient specialty care has been the most popular investment target while elder care and hospitals are also attractive targets in select markets, according to research by Singh et al., (Reference Singh, Reddy, Papanicolas and Scheffler2026b). And in low-and middle-income countries, a damning report from Oxfam (Marriott, Reference Marriott2023) as well as recent investigative work from Bloomberg (Finch et al., Reference Finch, Taggart and Kocieniewski2025; Taggart et al., Reference Taggart, Marks, Kocieniewski and Finch2025) have demonstrated how development finance institutions are facilitating private equity’s investments in private hospitals, sometimes with great financial and safety risks to patients and at the expense of providing affordable healthcare to those in most need.
Some countries have taken the first steps in bringing regulatory scrutiny to private equity in healthcare; however, these policies and proposals remain limited in scope and have primarily focused on transparency and disclosure (Tracey et al., Reference Tracey, Schulmann, Tille, Rice, Mercille, Timans, Allin, Dottin, Syrjälä, Sotamaa, Keskimäki and Rechel2025). More research is needed to investigate the extent of and the impacts of private equity’s investments outside of the United States to help guide policymaking in these contexts, and greater transparency can help support these efforts. However, while the specificities and regulatory regimes of each country’s health system vary, the fundamentals of private equity’s extractive business model do not change as it travels across these differing contexts. Regulations will certainly need to be calibrated to country specifics, but all regulations will necessarily need to address the debt-based extractive business strategies that are built into the private equity investment structure. As we continue debating regulations – or even prohibitions – of private equity in healthcare, it is worth asking why we even ‘need’ private equity’s extractive business model in the first place.
Acknowledgements
The author wishes to thank the anonymous reviewer and the editor for their valuable feedback and suggestions that strengthened this manuscript.
Funding statement
This work was supported with grants from Arnold Ventures and Robert Wood Johnson Foundation. The funders had no role in the conception, drafting, or review of this manuscript. The views presented here are those of the author and should not be attributed to Arnold Ventures or its directors, officers, or staff nor to Robert Wood Johnson Foundation or its directors, officers, or staff.
Competing interests
Mary Bugbee was previously employed at Private Equity Stakeholder Project, a nonprofit research and advocacy organisation.
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