Private Equity in the Hospital Industry
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ECGI New Working Paper Alert
ECGI Finance Series 787/2021
Thursday 30 September 2021
Private Equity in the Hospital Industry

Janet Gao, Indiana University
Merih Sevilir, Indiana University and ECGI
Yong Seok Kim, Indiana University


Private Equity • Hospital Acquisitions • Employment • Operational Efficiency •
Real Patient Outcomes And Satisfaction

This paper studies the growing presence of private equity (PE) acquirers in the hospital industry. We examine employment, operational efficiency and patient outcomes at hospitals acquired by PE firms. While the total employment at target hospitals significantly declines, the proportion of physicians and nurses in the total workforce (skilled worker ratio) increases for hospitals acquired by a publicly traded PE-backed hospital. Employment cuts also occur in hospitals acquired by non-PE acquirers, but the skilled worker ratio does not increase in those hospitals. PE-backed acquirers, especially publicly traded ones, are also uniquely associated with reductions in overhead costs. Consistent with PE acquirers increasing skilled worker ratio, patient satisfaction scores do not decline at PE-acquired hospitals and even improve along some dimensions.

In contrast, patient satisfaction significantly worsens at hospitals acquired by non-PE acquirers. Examining real patient outcomes, we find that PE acquirers are not associated with higher mortality and readmission rates at target hospitals than non-PE acquirers. Overall, our paper provides a comprehensive look at the role of PE acquirers in the hospital industry, and documents nuanced differences between PE and non-PE acquirers, as well as between PE backed acquirers with and without access to public capital markets.
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Submitted by

Professor Merih Sevilir ECGI Profile
Associate Professor of Finance
Indiana University

The ECGI is an international scientific non-profit association providing a forum for debate and dialogue between academics, legislators and practitioners, focusing on major corporate governance issues. 
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