the business of health: implications of private equity in healthcare

JASON LU – In the past decade, private equity firms have made substantial investments in our healthcare system. The primary objective of private equity firms is to maximize their returns on investments, and this has led them to acquire equity in hospitals, private practices, and surgical centers, with the hope of increasing their financial gains. These aims bring about significant changes in the way healthcare is managed, sparking debates about the ethics of treating patients’ health as a business venture.

Supporters of private equity argue that to turn a profit in healthcare, it is imperative to efficiently treat as many patients as possible. Private equity firms often boast that better business management could potentially enhance the reach and efficiency of our healthcare system. Additionally, consolidation through large corporations, like the CVS Health acquisition of Oak Street Health for $11 billion, could offer leverage against payors and suppliers. In theory, this could result in reduced costs for patients and greater access to healthcare services for a larger population. In practice, however, these claims leave much to be desired.

A systemic study done by Columbia University reveals that private equity involvement is actually associated with higher costs for both patients and payers. Furthermore, many privately-owned healthcare systems have cut their costs by reducing the amount of staff, which can compromise the quality of care provided.

These issues lie in the distinction between patient-centered care and profit-oriented business practices. Businesses are naturally driven to make profits, so it would be unreasonable to label a private healthcare enterprise as unethical for seeking financial gains. Yet, when public perception is a significant concern, as it is for private equity firms invested in healthcare, the need for impression management strategies arise. These strategies often include claims of affordability and extended outreach, promises that are frequently unfulfilled. The core values of business and healthcare fundamentally differ, making it challenging for these two fields to align.

As private equity firms continue to play an ever-increasing role in our daily health, it becomes imperative to scrutinize the intentions of our healthcare providers. Drastic changes are bound to come, and it is crucial to preserve the true essence of medicine for the future generations of healthcare professionals—to heal the sick. Ultimately, our healthcare system will be shaped by our ability to maintain the integrity of medicine while adapting to the demands of a complex and evolving business environment.

Copy Editor – Anaghah Sanikapally

Photography Source – https://www.uchicagomedicine.org/forefront/research-and-discoveries-articles/private-equity-investments-in-healthcare-may-not-lower-costs