Private equity firms have taken a large stake in the U.S health care system in recent years with acquisitions of hundreds of hospitals in the country. These buyouts have reached record highs in recent years, in 2017 alone there were 440 transactions valued at 52 billion. The following year that record would be broken with deals valued at 65 billion with over 500 transactions (Shinkman, R. 2016).
These firms buy ownership stakes in companies of interest where they see the value. The U.S. spends around 20% of its GDP on healthcare. This total equates to about $4.1 trillion; the pandemic accelerated this process of equity firms’ attempt for them to increase their value.
One of the issues that many organizations had during the pandemic was supply chain management. As there were many shortages of supplies for medical equipment in the country. The existing tools didn’t meet the capabilities that were required for people to get the right care. These firms gave health systems more access to critical drugs and supplies with the right funding.
Private equity firms could bring more business acumen when it comes to negating prices with insurers. The negotiation process can be a grueling one, but the data has shown in recent years hospitals that have been taken over by these firms have had success in that arena.
Even with many positives for Private equity firms in health care, there has been a backlash on some of the growth of these firms. One of the negatives is that the primary goal of equity firms is to make money for their investors. This is not the ultimate goal for health care, the healthcare providers’ mission is to help and provide the right care for their patients.
Another issue that has emerged is negotiated contracts with the hospital workers
*The investment firms pay physicians the median compensation for their specialty in the market. Recently these firms would pay out their partners in a big buyout if they are near retirement. Unfortunately, if they’re a mid-career partner that is less likely.
It’s essential to understand that private equity firms are going to take over the health care system even more in the future. Since 2000 these deals have increased twentyfold and will not stop in the near future.
Shinkman, R. (2016, July). Healthcare spending will make up 20% of U.S. economy within a decade. Fierce Healthcare.