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Original Investigation
August 24, 2020

Changes in Hospital Income, Use, and Quality Associated With Private Equity Acquisition

Author Affiliations
  • 1Department of Social and Behavioral Sciences, Harvard T.H. Chan School of Public Health, Boston, Massachusetts
  • 2Harvard Medical School, Boston, Massachusetts
  • 3Department of Health Care Policy, Harvard Medical School, Boston, Massachusetts
  • 4Department of Medicine, Massachusetts General Hospital, Boston, Massachusetts
JAMA Intern Med. 2020;180(11):1428-1435. doi:10.1001/jamainternmed.2020.3552
Key Points

Question  Is the acquisition of a hospital by a private equity firm associated with changes in hospital income, use, and quality?

Findings  In this analysis of 204 private equity–acquired hospitals and 532 similar hospitals that were not acquired by private equity, net income, charges, charge to cost ratios, and the case mix index differentially increased for private equity–acquired hospitals after acquisition relative to controls. Some quality measures improved among a subset of private equity–acquired hospitals relative to controls; Medicare’s share of discharges decreased for private equity–acquired hospitals after acquisition relative to controls.

Meaning  Private equity acquisitions were associated with changes in a range of hospital-level economic measures and with improvements in a subset of quality measures.


Importance  Rigorous evidence describing the relationship between private equity acquisition and changes in hospital spending and quality is currently lacking.

Objective  To examine changes in hospital income, use, and quality measures that may be associated with private equity acquisition.

Design, Setting, and Participants  This cohort study identified 204 hospitals acquired by private equity firms from 2005 to 2017 and 532 matched hospitals not acquired by private equity. Using a difference-in-differences design, this study evaluated changes in net income, charges, charge to cost ratios, case mix index (a measure of reported illness burden), share of discharges for patients with Medicare or Medicaid coverage, discharges per year, and aggregate hospital quality measures associated with private equity acquisition through 3 years after acquisition, adjusted for case mix, hospital beds, calendar year, and adjustment for multiple hypothesis testing. In subgroup analyses, changes in outcomes for private equity–owned Hospital Corporation of America (HCA) hospitals and non-HCA hospitals relative to matched controls were assessed.

Primary Outcomes and Measures  Eight hospital income and use measures and 3 aggregate hospital quality measures were examined.

Results  Relative to 532 control hospitals, the 204 private equity–acquired hospitals showed a mean increase of $2 302 391 (95% CI, $956 660-$3 648 123; P = .009) in annual net income, an increase of $407 (95% CI, $296-$518; P < .001) in total charge per inpatient day, an increase of 0.61 (95% CI, 0.48-0.73; P < .001) in emergency department charge to cost ratio, an increase of 0.31 (95% CI, 0.26-0.37; P < .001) in total charge to cost ratio, an increase of 0.02 (95% CI, 0.01-0.02; P = .007) in case mix index, and a decrease of 0.96% (95% CI, 0.46%-1.45%; P = .002) in share of Medicare discharges. Medicaid’s share of discharges (−0.16%; 95% CI, −0.86% to 0.53%; P > .99) and total hospital discharges (98; 95% CI, −54 to 250; P > .99) did not change differentially in a statistically significant manner. The aggregate quality score for acute myocardial infarction increased by 3.3% (95% CI, 1.6%-5.0%; P = .002), and the aggregate score for pneumonia increased by 2.9% (95% CI, 1.8%-3.9%; P < .001) in private equity–acquired hospitals relative to controls. The aggregate score for heart failure (1.3%; 95% CI, −0.2% to 2.7%; P = .92) did not differentially change in a statistically significant manner. In subgroup analyses, HCA hospitals showed similar findings to the entire sample. Among non-HCA hospitals, the only statistically significant relative changes were the increase in the emergency department charge to cost ratio (0.30; 95% CI, 0.12-0.48; P = .02) and the decrease in Medicare’s share (−1.15%; 95% CI, −1.88% to −0.43%; P = .02). Non-HCA hospitals showed a decrease in the aggregate heart failure score (−3.3%; 95% CI, −5.3% to −1.3%; P = .01) and no statistically significant changes in the aggregate score for acute myocardial infarction (2.4%; 95% CI, −0.7% to 5.4%; P > .99) or pneumonia (0.2%; 95% CI, −1.4% to 1.7%; P > .99).

Conclusions and Relevance  Hospitals acquired by private equity were associated with larger increases in net income, charges, charge to cost ratios, and case mix index as well as with improvement in some quality measures after acquisition relative to nonacquired controls. Heterogeneity in some findings was observed between HCA and non-HCA hospitals.

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