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At A Glance
Increase in Patient Satisfaction Scores in 5 Years
Drop in Readmission Rates in 5 Years
The healthcare landscape is evolving, with private equity (PE) firms playing an increasingly prominent role.
This surge in PE acquisitions of hospitals and health systems has sparked a lively debate. While some see PE as a catalyst for innovation and operational efficiency, others express concerns about patient costs and service accessibility.
Private equity’s influence in healthcare has grown significantly in the lead-up to the Covid-19 pandemic. As Dr. Atul Gawande, a renowned surgeon and public health researcher, notes, “The intersection of finance and healthcare brings both opportunities and challenges. It’s a delicate balance between driving innovation and ensuring patient care isn’t compromised.”
Supporters of PE point to its potential to drive value by improving operations, fostering an innovative culture, and providing much-needed capital for infrastructure improvements.
For instance, a PE-owned hospital we worked with at P&C Global was able to reduce operational costs by 20% and upgrade their IT systems, leading to improved patient care and satisfaction.
However, critics express concerns about PE’s focus on maximizing returns. They argue that this could lead to unexpected bills for patients, reduced nursing staff, and avoidance of low-margin services primarily used by vulnerable populations. As healthcare economist Uwe Reinhardt once said, “In healthcare, the pursuit of profit and the needs of patients are often at odds.”
Consider the recent outcomes when a PE firm, one of our clients, acquired a struggling hospital. With the infusion of capital and strategic oversight, the hospital was able to invest in state-of-the-art equipment and attract top medical talent. Over a span of five years, patient satisfaction scores increased by 30%, readmission rates dropped by 15%, and the hospital expanded its services to underserved communities while improving quantified patient outcomes substantially. This demonstrates the positive impact of PE ownership when managed effectively.
Conclusion
While PE ownership in healthcare can bring challenges, it can also deliver unquestionable value when managed effectively and with a focus on all stakeholders. As Dr. Robert Pearl, former CEO of The Permanente Medical Group, reminds us, “In healthcare, the ultimate measure of success is the health and satisfaction of the patient.”
As we navigate the complex landscape of private equity in healthcare, we invite you to share your insights. How do you perceive the role of private equity in shaping the future of healthcare?
What measures can be implemented to ensure that PE investments in healthcare serve the best interests of patients and communities? How can we balance the need for capital and operational efficiency with the obligation to provide accessible, high-quality care? Share your insights in the comments below. Let’s work together to create a healthcare system that is equitable, efficient, and patient-centered.
References
Dr. Atul Gawande is a surgeon, writer, and public health researcher. He practices general and endocrine surgery at Brigham and Women’s Hospital in Boston, Massachusetts. He is also a professor in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health and the Samuel O. Thier Professor of Surgery at Harvard Medical School.
Uwe Reinhardt was a health economist from Germany who was a James Madison Professor of Political Economy at Princeton University and held several positions in healthcare. He was recognized as one of the leading authorities on healthcare economics and was a member of the Institute of Medicine of the National Academy of Sciences.
Dr. Robert Pearl is a former healthcare executive who served as CEO of The Permanente Medical Group, the nation’s largest medical group, and president of The Mid-Atlantic Permanente Medical Group. He is a clinical professor of plastic surgery at Stanford University School of Medicine and is on the faculty of the Stanford Graduate School of Business.