Private equity ownership of healthcare facilities has led to significant problems — including hospital closures, reduced staffing and compromised healthcare services — showing the need for regulation, a new report shows.
The report was published in March by the NYU Stern Center for Business and Human Rights. It analyzed peer-reviewed health outcomes research, bankruptcy records and transaction data. It also examined case studies from health systems like Steward Health Care and Prospect Medical.
NYU Stern details that private equity firms have invested more than $1 trillion in debt-financed healthcare deals in the last decade. Some studies show that private equity ownership increases in-hospital complications by 25% and reduces nursing staff by 4.4%. In addition, private equity ownership of nursing homes correlates with 11% higher patient mortality rates.
Research also shows that private equity ownership increases the risk of bankruptcy by 10 times. In just 2023 alone, there were 34 bankruptcies of PE-backed healthcare businesses.
Steward Health and Prospect Medical are examples of health systems that went bankrupt following private equity ownership. Steward Health was owned by PE firm Cerberus Capital Management from 2010 to 2021 and went bankrupt in 2024, while Prospect Medical Holdings was owned by Leonard Green & Company from 2010 to 2021 and went bankrupt in 2025. These bankruptcies disproportionately harmed low-income and rural communities.
“The private equity model needs to be adapted for the healthcare sector, because otherwise, they’re an unhealthy fit. Here, on the one side, you have a business model that is based on public anonymity, legal immunity, remote and financialized ownership and a lack of self-restraining norms. On the other side, you have a sector where all the stakes are life and death,” said Michael Goldhaber, author of the report, in an interview.
That said, Goldhaber noted that the report is not advocating for a ban of private equity in healthcare. PE firms do offer benefits, like providing capital and improving operational efficiency. But there is a need for reform, he said.
The report provides several recommendations to private equity investors for self-reform. Self-regulation can be a way to avoid “harsher” government regulation, Goldhaber said. These reforms include:
- Provide ongoing public reporting on company finances, as well as ownership, workforce details, patient outcomes and customer satisfaction.
- Avoid sale-leaseback deals or debt-funded dividends, and don’t burden healthcare companies with new financial obligations that could make them vulnerable during revenue downturns.
- Keep a maximum ratio of debt to cash flow, which would help prevent cost-cutting measures that could harm care quality or lead to facility closures.
- Don’t cut essential services, shut down facilities or reduce staff or wages except in urgent situations and only with regulatory approval.
The report also provides recommendations to state and federal governments on how to regulate private equity in healthcare, including:
- State legislatures should give health regulators the authority to block or place conditions on healthcare acquisitions.
- States should use the review process for deals to enforce specific requirements.
- Federal and state lawmakers should deter sale-leaseback deals and debt-funded dividends by making companies that use these practices ineligible for government healthcare payments.
- Lawmakers should hold parent or controlling entities accountable when their portfolio companies commit fraud against government healthcare programs, if the investors knew about the misconduct and failed to report it.
- Congress should require private equity firms to disclose detailed financial information to the SEC and restrict access to 401(k) investments for firms that do not comply.
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