Better Solutions for Healthcare

Revcycle Intelligence: Private Equity-Acquired Hospitals Charge More for Common Services

By Jacqueline LaPointe

August 27, 2020

Hospitals acquired by private equity firms are either charging more for common services, such as inpatient stays and emergency department visits, reducing operating costs, or both after acquisition, according to a recent study from Harvard University.

The study published in JAMA Internal Medicine earlier this week found that hospitals acquired by private equity firms between 2005 and 2017 demonstrated a mean increase of $407 in total charge per inpatient stays three years after acquisition.

After acquisition, the hospitals also experienced an increase of 0.61 in their emergency department charge to cost ratio and a 0.31 increase in total charge to cost ratio.

Overall, private equity-acquired hospitals boost profitability after being bought by the firms, increasing annual net income by a mean of $2.3 million, researchers found.

“Although further research is needed, our findings suggest that policy makers should consider monitoring or thoughtful oversight of changes in care delivery and billing practices in hospitals acquired by private equity firms to ensure proper stewardship of societal resources and the prioritization of patient interests,” wrote lead author Joseph D. Bruch, BA, of the Harvard T.H. Chan School of Public Health, and colleagues.

The healthcare industry has been an attractive target for private equity firms. Hospitals, physician practices, and other provider organizations have a lot of opportunities to increase productivity and lower cost, which can mean big profits for private equity firms that acquired the organizations.

But research is still lacking on whether private equity investments in healthcare benefit patients and their communities.