Private Equity in the Hospital Industry

We examine the survival, profitability, and employment profiles of private equity (PE) acquired hospitals. Target hospitals sustain their survival rates and improve in profitability. Although employment and wage expenditures substantially decline, the effect differs across employee types: The decline in core medical workers is temporary and quickly reversed, while the decline in administrative workers and their wages persists. These changes are more pronounced for nonprofit targets, acquisitions into larger systems, and PEs with healthcare industry expertise. We do not find patient outcomes to worsen at acquired hospitals. Our results suggest that PE acquirers improve hospitals’ operational efficiency without compromising healthcare quality.