Private Equity in Healthcare: A Cure or a Curse?

Over the past decade, PE firms have gobbled up physician groups, hospitals, and specialty practices.

While some see this as a necessary evolution, others argue it prioritizes profits over patients, driving up costs and eroding physician autonomy.

In this article, I’ll break down how private equity operates in healthcare, examine its impact on patients, physicians, and health systems, and explore what the future holds as regulators start paying closer attention.

Private equity (PE) in healthcare is reshaping how physician practices operate.

At its core, PE firms provide investment capital to physician groups, often allowing physicians within those practices to hold equity. The idea? Scale up, restructure, and eventually cash out—hopefully at a much higher valuation.

PE firms adhere to a well-followed path: acquire physician practices, consolidate them, cut costs, scale, and sell within a short three-to-seven-year window. It’s all about maximizing returns.

But why would private equity firms want to invest in physician groups in the first place?

If you’ve been following my content, you already know healthcare is a very lucrative industry—one that shows no signs of becoming less lucrative. Here’s why PE finds it especially attractive:

So, once a PE firm locks in on a physician group, how do these deals actually work? In most cases, PE firms rely on three main strategies: roll-ups, debt-leveraged buyouts, and add-on acquisitions.

A roll-up is when a PE firm acquires and merges multiple smaller physician practices under a single umbrella. The goal? More market power and higher valuation multiples when it’s time to sell.

One of the biggest advantages is staying under the radar. Many of these acquisitions happen below the Hart-Scott-Rodino (HSR) Act notification threshold (~$119.5M), meaning they avoid Federal Trade Commission (FTC) scrutiny. That’s how PE quietly consolidates an entire specialty before anyone even notices.

Beyond that, roll-ups allow firms to cut costs by eliminating redundancies and centralizing back-office functions (think billing, admin, and scheduling).

And the payoff? Significant growth before an exit.

A study in Health Affairs examined PE exits in dermatology, ophthalmology, and gastroenterology from 2016 to 2020. Among ~800 acquisitions, over half were resold within three years. PE firms increased the number of practices by an average of 600% in that short time.

This is where things get interesting—and a little risky. PE firms typically don’t use their own money to buy medical groups. Instead, they rely on a leveraged buyout (LBO) model, meaning they take on a ton of debt to finance the acquisition.

A typical deal might be structured like this:

Who’s responsible for paying back the debt?

Not the PE firm. The acquired medical group is on the hook. PE firms use the group’s own assets as collateral, meaning if the group can’t keep up with payments, lenders can seize it.

And this isn’t just theoretical—PE-owned healthcare firms have been filing for bankruptcy at an alarming rate. In 2023 alone, 20% of healthcare companies that went bankrupt were PE-owned.

Another common strategy is the “platform and add-on” model. Here’s how it works:

Why does this work? Because it consolidates market power, allows the group to control referrals, and increases negotiating leverage with insurers.

This results in a bigger, more powerful medical group that commands higher reimbursement rates and a stronger bargaining position.

The last two decades in healthcare have been a gold rush for private equity, marked by massive consolidation and aggressive PE investment. The trend is clear: bigger systems, fewer independent hospitals and practices, and more market control shifting into corporate hands.

Let’s start with the bigger picture—how consolidation has shaped hospital ownership:

This shift has also accelerated private equity’s role in healthcare, particularly in physician practices.

Between 2017 and 2021, PE deal flow in healthcare surged by 150%, fueled by cheap capital and an influx of investors eager to cash in on medicine.

Then came the slowdown. Since its peak in 2021, PE deal growth has fallen by 50%, reflecting higher interest rates, regulatory scrutiny, and market stabilization. But even with this decline, deal activity today is still up 40% compared to 2017.

What does this mean? PE firms may not be acquiring practices at the fast pace of 2021, but the footprint they established over the past decade remains—and continues to grow in select specialties. For example, PE firms now control substantial market share in physician practices, especially in high-density urban areas. According to a Health Affairs study:

While dermatology, ophthalmology, and gastroenterology have been PE’s favorite targets, let’s focus on GI—where the shift has been especially dramatic. In that same Health Affairs study, between 2019 and 2021, private equity market penetration in gastroenterology doubled from 7.5% to 13%, highlighting how firms leveraged post-pandemic restructuring (Health Affairs). By 2021, PE firms controlled 42% of gastroenterology market share in 120 of 384 U.S. metro areas.

Why GI? It’s a high-margin, procedure-heavy specialty with reliable payer reimbursement—perfect for PE’s business model of scaling and extracting value before flipping for a sale.

PE’s grip on healthcare is happening worldwide. A recent NEJM article showed private equity’s expansion across peer nations like the U.K., Germany, and Sweden:

Singh et al (2025)

Even as deal growth slows, market penetration remains high, especially in physician groups. The next big question: What does this mean for physicians and patients?

Private equity firms pitch themselves as the saviors of struggling hospitals and physician practices, bringing in capital and efficiencies. But when you look at what happens after they take over, a different picture emerges—one where financial engineering often takes priority over patient care, physician autonomy, and hospital sustainability.

Imagine being a patient at a hospital that’s just been acquired by private equity. At first, nothing seems different. But then, staffing gets thinner, appointment slots shrink, and routine procedures suddenly cost more. What you don’t see is that behind the scenes, the hospital is now carrying a massive amount of debt, taken on by its new owners to fund the acquisition.

That’s exactly what happened with Steward Health Care, a hospital system that expanded rapidly under private equity ownership. In just a few years, it had acquired 33 hospitals, dozens of urgent care centers, and over a hundred skilled nursing facilities. But the financial maneuvers used to fund that growth—leveraging hospital assets for short-term investor gains—left the system fragile. When Steward filed for bankruptcy in 2024, it put critical hospitals at risk of closure, leaving communities scrambling to find care.

And then there’s Hahnemann University Hospital in Philadelphia, which had served low-income patients for 171 years. I even did a summer program there back in high school! When private equity took over, the hospital’s real estate was quietly stripped from the hospital itself, sold separately, and when financial pressures mounted, the hospital was shut down. This was a gutting of an entire healthcare safety net, all while investors walked away with profits from the real estate deal.

Even in hospitals that stay open, care often suffers. A JAMA study found that hospital-acquired adverse events—like falls, infections, and surgical complications—rose by over 25% after private equity acquisitions. Cost-cutting measures, like reducing nurse staffing and increasing patient loads, may boost profits in the short term, but they leave patients vulnerable in the long run.

Physicians who join private equity-owned groups often find themselves in a different work environment than they signed up for.

A board-certified dermatologist at a newly PE-acquired clinic was suddenly required to see 45 patients a day—with just one medical assistant. The quality of care suffered. Calls from patients went unanswered. She knew she was sitting on a ticking time bomb of potential malpractice claims. After a year, she quit.

Emergency medicine has also been transformed. One PE-owned staffing company slashed the number of physicians in ERs, replacing them with lower-paid advanced practice providers. Doctors were now expected to see dangerously high numbers of patients per shift, with fewer support staff, while PE executives reaped the financial rewards.

For many physicians, the trade-off isn’t worth it. A JAMA Health Forum study found that physicians working in PE-owned practices are significantly more likely to leave within two years of an acquisition. Burnout is one reason, but so is the loss of autonomy. Doctors who once controlled their own schedules and clinical decisions now find themselves pressured to maximize billable procedures, reduce visit times, and keep referrals in-network—whether or not it’s best for the patient.

Private equity-backed groups now dominate areas like dermatology, gastroenterology, and anesthesiology, and when they do, prices go up. A JAMA study found that PE-acquired physician groups raised procedure costs by 20% after acquisition.

Source: Singh et al (2022)

But the most devastating financial impact happens when private equity leaves. Hospitals burdened with debt can’t sustain operations once their PE owners cash out. After the Steward Health collapse, hospitals in Pennsylvania and Louisiana had to scramble for emergency state funding just to stay open. Others weren’t so lucky—entire service lines, like maternity wards and cancer centers, were shut down to cut costs.

And when hospitals close, patients don’t just lose access to care—they face higher prices and longer wait times at the remaining hospitals in their area. Consolidation doesn’t bring efficiency. It brings market power and, with it, the ability to charge more for the same services.

If you’re an investor, the answer is yes. Private equity firms extract millions—sometimes billions—from the healthcare system.

For everyone else? The answer isn’t so clear. Hospitals burdened with debt. Physicians pushed to their limits. Patients caught in the middle between cost-cutting and quality care.

The private equity model is built for short-term financial gains, but healthcare isn’t a short-term business. When financial engineering takes priority over patient care, the system cracks.

Private equity’s deepening footprint in healthcare isn’t going unnoticed.

The DOJ, FTC, and HHS have ramped up scrutiny of PE-driven consolidation, concerned about its impact on costs, competition, and patient care. Some states are moving to tighten oversight, but others—like California—have vetoed bills that would have required greater transparency and approval for PE-led healthcare deals.

Meanwhile, there’s growing focus on corporate practice of medicine laws, which were originally designed to prevent corporations from controlling medical decision-making. PE firms have sidestepped these laws through management service organizations (MSOs)—a loophole that’s drawing more attention from regulators and advocacy groups.

And despite the increased scrutiny, PE firms are still planning their next moves. Many are eyeing public listings or rolling up multiple healthcare acquisitions into larger corporate entities for resale, ensuring their influence on the industry will persist long after their initial investments.

Private equity has transformed healthcare by consolidating practices, leveraging debt-heavy buyouts, and prioritizing short-term profits, often at the expense of patient care and physician autonomy. While some argue PE brings efficiency and capital, real-world cases—like Steward Health’s collapse and Hahnemann’s closure—show the risks of financial mismanagement in medicine. Regulators are taking notice, but PE firms continue to evolve, using roll-ups, IPOs, and legal loopholes to maintain their grip. The question now is whether policy changes will curb PE’s influence or if healthcare will continue its march toward greater corporate control.

A version of this article was first seen on Healthcare Huddle.