Private equity has become a dominant force in U.S. healthcare, creating a stark divide between investors, who prioritize efficiency and growth, and clinicians, who warn of serious risks. Since 2012, private equity firms have executed more than 8,000 healthcare transactions, fueling what researchers call the “financialization of health,” a term researchers use to describe the structural transformation of the healthcare sector driven by these investment activities.1 As the sector evolves, two conflicting narratives have emerged, with differing perspectives on the future of private equity in medicine: investors tout modernization, while medical experts point to rising costs and mixed outcomes for patients.
Financially, investments appear strong. Even with high borrowing costs and economic uncertainty, global healthcare private equity deal value reached roughly $115 billion in 2024.2 Investors are increasingly retreating from from direct-care acquisitions such as physician groups and nursing homes and redirecting capital toward sectors that support rather than deliver care, including biopharma, medtech, and healthcare IT.2
Future investment strategies hinge on “value creation,” meaning firms must demonstrate operational improvement rather than rely on simple price arbitrage.2 Mid-market funds are outperforming larger firms by using “buy-and-build” plans that consolidate small companies to generate synergies.2 Looking globally, private equity is shifting away from China toward India, Japan, and South Korea, where aging populations and pro-investment regulatory reforms create appealing opportunities.2 Corporate carve-outs acquiring unwanted divisions of large public companies are also becoming a central tactic.2
Clinicians and health policy researchers, however, emphasize the downsides and argue that private equity is negatively impacting the current and future landscape of medicine. A major body of evidence shows private equity ownership of healthcare facilities and systems is associated with worse performance on health outcomes and lower process quality across numerous settings.1 Costs to both patients and payers consistently rise after acquisition.1,3 Firms frequently increase prices, upcode to higher-paying billing categories, or shift their payer mix toward commercially insured patients to maximize revenue.1,2
Assessments of quality of care are particularly contentious. While some studies report no dramatic decline, the broader literature indicates that private equity firms often reduce staffing especially skilled clinical labor, to cut overhead costs.1 In nursing homes, private equity ownership correlates with fewer nurses and a shift toward lower-skilled workers.3 These changes have measurable consequences. More than 20% of healthcare entities that filed for bankruptcy in 2023 were private equity owned, raising concerns that financially engineered models may leave communities without essential services.1
Still, the data are not uniformly negative. Some private equity-backed organizations achieve operational and clinical improvements. While private equity ownership often increases costs for payers, it can successfully reduce internal operating costs through efficiency gains.1 In select cases, financial incentives align with clinical quality. For example, hospitals owned by Hospital Corporation of America (HCA), a major PE-backed organization, have demonstrated significantly lower mortality for conditions such as myocardial infarction compared with national benchmarks.1
This variability underscores that “private equity” is not a single model. Some firms rely heavily on debt and aggressive cost-cutting. Other deploy managerial strategies comparable to high-performing public companies.1 The sector’s future in medicine hinges on differentiating private equity firms that create value through genuine operational improvements from those relying on price inflation and resource extraction.
Looking ahead, investors plan to double down on digital infrastructure, AI-enabled analytics, and global markets to drive returns.2 Meanwhile, clinicians and policymakers face the challenge of ensuring that efficiency does not undermine patient safety or affordability. Research consistently shows that while private equity private equity may achieve cost savings for operators, these gains rarely translate into lower costs or better outcomes for patients. 1,3 The sustainability of the model ultimately depends on whether “value creation” can shift from boosting exit multiples to improving health.
References
1. Karamardian M, Jagtiani E, Chawla A, Nembhard IM. An update on impacts of private equity ownership in health care: extending a systematic review. Health Management, Policy and Innovation. 2024;9(2).
2. Jain N, Murphy K, Podpolny D, Meyer D, Boulton A, Kapur V. Global Healthcare Private Equity Report 2025. Bain & Company; 2025.
3. Borsa A, Bejarano G, Ellen M, Bruch JD. Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review. BMJ. 2023;382:e075244. doi:10.1136/bmj-2023-075244