Business or Benefactor? The Ethical Dilemma of Private Equity in the Healthcare Industry
This paper analyzes the ethical tensions that rise with private equity investment in medical institutions. When a private equity firm invests in a hospital, financial incentives often take priority over optimizing patient care. Considering the financial realities of today’s medical industrial complex, this paper will explore whether both of these goals, financial and personal, are able to be attended to simultaneously.
Table of Contents
Introduction
Background
The Rise of Financialization in Healthcare
Hospital Valuations
Private Equity Financial Strategies
Stakeholder Analysis
Investors
Private Equity Firms
Hospital Administration
Physicians and Healthcare Professionals
Patients
Ethical Analysis
Conclusion and Optimization
Featured image by: Gerd Altmann
Introduction
This paper will focus on the ethical complexities and conflicts of interest that arise when private equity investment occurs in a healthcare setting. Private equity (PE) investment occurs when investment firms use pooled money from shareholders to buy, raise the financial value of, and eventually sell private companies for profit. This practice has been commonplace since the early 20th century. However it only gained traction in the healthcare industry in the early 2000s, when medicine began presenting increased economic opportunity. As a result, investors began purchasing hospitals, nursing homes, and specialty practices. Although private equity invests billions of dollars into global healthcare annually, its implications for healthcare is a point of concern, as many recognize the frictions between the altruistic and economic aspects of medicine. Namely, since PE prioritizes raising the economic value of a given hospital in a short period of time, it is thought to conflict with the ability to provide patient-centered care. This paper will explore the ethical complexities presented by private equity in healthcare through an ethical analysis of individual stakeholder lenses, drawing on deontological ethics and the principles of biomedical ethics to evaluate the moral implications of profit-driven decision-making in healthcare.
Background
When analyzing the role of private equity in healthcare, it is necessary to first contextualize the rise of financial institutions in healthcare. Particularly compelling is the emergence of financialization as a primary economic process in the late twentieth century.
The rise of managed care organizations (MCO), especially [spurted in] dominance by [corporate] systems after the failure of comprehensive health care reforms by 1994. But this major change in health care organization became a bound solution to access for groups that had always encountered problems in obtaining health services. It had other unforeseen effects on quality of care and the stability of systems, for both safety net and mainstream providers. Early experience showed hoped-for cost control. But as managed care organizations extended their grasp over a larger–and less healthy–share of the population, profits declined and premiums rose, thus creating an enlarging burden on family budgets. Other market realities became visible, such as the reluctance of commercial MCOs to divulge proprietary information needed for adequate monitoring of quality and access to care and the inclination to limit services to contract requirements over needs and to limit noncontractual spending on community prevention activities. Large-scale bankruptcy and fraud also increased, presenting new challenges to public health authorities. All this did not change public health responsibility for monitoring and assuring health and health care for all people. But the traditional ways to do the task were no longer equal to the challenge, especially as disparities in health persisted and widened (Milio 5).
It is clear that with the introduction of corporate structures in healthcare came a shift in systematic priorities. It turned healthcare from a public service into a managed business. It could be argued that the emergence of managed care organizations was a necessary result of the many changes occurring within healthcare at the time. However, this necessity makes it all the more difficult to determine an appropriate course of action when the financial logic of these organizations begins to conflict with public health interests. This reveals a longer standing, recurring problem that emerges when business priorities begin to shape public health institutions.
This pattern of increased financial involvement in healthcare reflects a broader economic shift towards financialization, in which organizations make decisions that align with maximizing profit and financial return rather than the organization’s purpose (Allen 1). Evidently, financialization is not just a shift in one economic aspect of an organization. Rather, it changes the foundation and purpose of the impacted organization. Financialization emerged in the late 1900s, largely due to changes in federal regulation and economic theories that evaluated businesses solely on their shareholder value. Companies made efforts to boost their short-term stock prices and strayed away from longer term investments (Allen 1). By definition, the economic model of financialization immediately raises conflicts with idealistic societal standards when applied to healthcare. This lack of interest in long term investments directly clashes with society’s constant desire for long-term investments and improvements in healthcare.
Furthermore, many health care entities began operating under “shareholder primacy,” meaning that they prioritized the interest of their shareholders over all other stakeholders such as their employees or patients (Allen 1) The theory of shareholder primacy is an ethically complicated model for healthcare entities to employ because it seems to contradict the basic social purpose of a hospital. The primary function of a hospital is to provide care to its patients, not to generate returns for its investors. However, hospitals can not fulfill this goal without the necessary finances to remain open and operational. Since approximately 80% of general acute care hospitals in the United States are privately funded and owned, both private non-profit and for-profit organizations play a role in sustaining hospitals (Crawford). This makes shareholder primacy difficult to dismiss entirely. If shareholder primacy is already such an integral aspect of these private organizations, it may be necessary to prioritize the stability of healthcare organizations in order to preserve care. However, the ethical concern rises when financial ambitions begin competing with and negatively impacting patient care.
There are two main categories or “tracks” of financialized involvement: inside out or outside in. An inside out track involves non-profit hospitals adopting non-health care-related financial strategies, while the outside in track usually involves financial entities moving into health care because they view it as a lucrative investment (Allen 1). This distinction is an important one to make as it shows that financialization impacts hospitals in many different situations. Specifically looking at the inside out track, it is interesting to note that even non-profit hospitals may be experiencing a pressure to align with these financial strategies. Financialization began taking a number of distinct forms in healthcare including venture capital, consolidation, and private equity. One of the most significant of these forms, and the focus of this paper, is private equity investment.
In recent years, private equity involvement in healthcare has grown rapidly. From 2000 to 2018, private equity investment grew from $5 billion to $100 billion and private equity firms have completed more than 8,000 transactions in the past decade with a combined value of $1 trillion (Allen 2). This figure is especially striking when contextualized: it is comparable to the United States defense budget for 2025, which was $919.2 billion. The United States defense budget is consistently the largest in the world, and accounts for about 33% of the global total defense spending (Peter G Peterson Foundation). Evidently, private equity is a major factor in the health sector that shapes the industry as a whole.
There are a number of factors that determine the value of a given hospital such as geographic location, demographics, facility condition, and insurance considerations. For starters, geographic location and community demographics are considered, as a hospital site in an affluent area will likely have a high percentage of commercial insurance patients, which increases profitability. Hospitals in areas with lots of senior citizens tend to have a higher value due to a generally higher inpatient volume while hospitals in remote areas are less accessible and therefore have a lower value (Walz). Factors such as neighborhood wealth and population density are largely outside of a hospital’s control, especially within the short investment timeline that characterizes private equity. As a result, hospitals in more affluent, populated areas are seen as more profitable, while hospitals in rural or poorer areas are seen as less attractive investments. Within this system, the hospitals that are most likely to receive private equity funding are not the ones most in need of financial support. The benefits that come with private equity are unlikely to reach the communities that investors deem financially undesirable. Due to this system, rural or low-income hospitals and their communities are likely to face a growing disparity in terms of medical access. In this way, private equity’s economic logic conflicts with healthcare’s social obligation to serve all populations, including the more vulnerable.
Another determination of a hospital’s value involves the condition of its facilities. Regardless of private equity involvement, modernization is a necessary step for all healthcare institutions to take. When done appropriately, these upgrades can significantly improve hospital functions and patient experience. Yet, there is a fine line between modernizing for functionality as opposed to aesthetics and marketability. Since healthcare settings have a primary duty to patients, facility improvements should ideally prioritize actions that augment patient treatment and experience. This is an ethical standard that may not always be met when hospital valuation is the end goal rather than patient care. For example, a holographic model of the human brain in the neurology unit may create a sense of technological advancement in the hospital, but does little to help the patient who is seeking care. In this way, it is easy for private equity firms to encourage hospitals to invest in the appearance of innovation rather than truly improving it.
Medical staffing also plays a significant role in the valuation of a hospital. It is particularly interesting to note the recent trend toward employment of physicians by hospitals. “At least 47% of physicians were consolidated with hospital systems in 2024—up from less than 30% in 2012” (Government Accountability Office). Physician employment can improve coordination of care and ensure consistency across various departments in the hospital. (Finnegan). However, most private equity firms are not owned or controlled by healthcare professionals. Rather, they are run by investors, whose main goal is financial return. While they may have healthcare advisors of some sort, it is difficult to rationalize the idea of non-medical-professionals arranging a staff composition that would optimize patient care. Regardless of intent, these decision makers will inherently prioritize valuation and financial optimization above all else.
Finally, insurance contracting, particularly the local insurance market, impacts the valuation of a hospital. This is because insurance directly impacts the amount that hospitals are reimbursed. The insurance aspect is a fascinating one to analyze because both insurance companies and private equity firms are working to maximize profit for themselves. Regardless of which party “wins” negotiations over reimbursement rates, neither the insurer nor the hospital ultimately bears the financial consequences. Rather, it is the patients who absorb the impacts of negotiations: favorable reimbursement terms for insurers could result in higher out-of-pocket service costs, while favorable reimbursement rates for hospitals, could result in increased insurance pricing. This dynamic reveals a fundamental problem: patients are the most affected by the decisions made, yet have little to no power in the negotiation process. In this system where both parties are “insured” from significant loss, patient well-being is undoubtedly secondary to financial optimization. When patients are the ones absorbing the outcome of these for-profit negotiations, hospitals are again undermining their social obligation to serve those in their care.
There are a number of strategies that private equity firms use in order to raise the value and return on a hospital. Two primary strategies include the roll-up model and sale-leasebacks. The roll-up model involves serial acquisition by private equity firms, meaning that a firm will target and grow high-revenue practices by acquiring multiple small practices to expand its market share and increase revenues. A direct result of this is further consolidation among health care providers (Allen 2). This model presents the potential for increased monopolization of healthcare, which would introduce an increased variety of equity and access issues. The second model is sale-leasebacks, in which a hospital sells its property to a real estate investment trust. The real estate firm will then lease the properties back to the hospitals that use them (Allen 2). Sale-leasebacks can be a helpful tool for hospitals to gain capital in the short term. However this system can create long term financial pressures on the hospital, which could potentially be burdensome for the hospital’s finances later on.
Sale-leasebacks are just one example of the many situations in which private equity’s short-term investment leads to long-term strains for the hospital itself. In the process of being purchased and sold, hospitals often acquire debt and this continual cycle of debt often leads to repeated dependence on private equity investment.
A common model that the private equity industry follows is called dividend recapitalization. Private equity firms typically load hospitals with debt, while distributing the funds received from the loans back to investors as dividends (Schlafly). Due to these loans, hospitals are often left with much less money and an increased pressure to cut costs. This is largely because after the short term investment is over, the private equity investors do not have an interest in the hospital’s long term success. In fact, in some cases, private equity firms will even benefit from the closure of a hospital. If a hospital declares bankruptcy or closure after private equity involvement, private equity firms are able to write off related expenses in their taxes, allowing them to avoid paying an income tax on their compensation. Because of this loophole, private equity managers keep roughly 17% more of their pay after taxes than they usually would (Schlafly). It is troubling that a hospital’s failure could represent a success for the private equity firm. It seems as though investors and firms would not be at all incentivized to consider the longevity of the hospital. Even with the understanding that private equity firms operate with the intention of maximizing returns, it is still incredibly eye-opening to realize that a hospital’s closure can be financially beneficial to the investors who were potentially involved in its decline. This creates an unbalanced tradeoff: private equity firms maximize and retain financial advantages while hospitals are likely to end up disadvantaged, which ultimately impacts their patients and employees.
To reiterate, the primary function of a hospital is to provide care to its patients. Yet throughout the process of private equity investment, this purpose is not prioritized, leading us to question the ethicality of private equity as a whole. Given the sheer scope of private equity investment within healthcare, these firms can not be dismissed as isolated actors. Rather, they have become deeply rooted within the structure of modern healthcare. However, it is clear that the central models that private equity is built on do not align with the social purpose of healthcare. Ultimately, this leads us to this question: Does the financial necessity of private equity outweigh the harms that the investments cause for hospitals and their patients?
Stakeholder Analysis
There are a number of stakeholders to be considered in a private equity acquisition beginning with the investors themselves. Healthcare is an attractive field of investment due to its relative stability. Historically, even during recessions, the healthcare sector will outperform the broader market (Samaha). This is because medical care consistently remains a constant and urgent point of spending for the general population. When a person’s health or even life is at risk, paying for medical care is less of a choice and more of a necessity. This means that demand for healthcare will remain high regardless of broader economic conditions. However, this stability also corresponds with the ethical danger of treating healthcare as a business opportunity. The profitability of the healthcare industry is largely due to the patients’ dependency on most care. It seems as though the qualities that make healthcare necessary are also the qualities that make it financially exploitable. Meredith Rosenthal, a professor at Harvard’s School of Public Health states, “Because health care is so important, the public expects corporations to prioritize public interest over profits. And that’s not what they’re built to do” (qtd. in Brownstein).
Although shareholders are not directly involved in hospital operations or clinical decision making, their expectation for financial return directly influences the actions of the firms managing these hospitals. In this way, shareholders act more as indirect stakeholders in patient care. Although investments are not usually motivated by patient outcomes, they can still contribute to innovation and infrastructure improvements within hospitals. Furthermore, the financial support that investors provide, contributes to the hospital’s ability to remain operational. While investors are not typically aware of clinical outcomes and improvements in patient experience, these things sometimes result as a byproduct of the investors’ funds.
However, public knowledge about the negative impacts of private equity on healthcare has been increasing (Masoud). As these concerns grow, it becomes more difficult to view investors completely separate from the potential consequences of their investments. After all, their capital is what supports the structures which influence patient outcomes. This raises a question: Do investors have a moral duty to ethically manage how their returns are generated? Because investors are generally hands-off in day-to-day operations, there is an element of ethical ambiguity. This separation creates financial gain without direct exposure to potential patient harm, which eliminates a sense of accountability regarding what their money is going towards. In my opinion, it is unrealistic to place a direct moral duty on investors to manage how their returns are generated. Their role as an investor is largely for their personal wealth management and it would be misplaced for them to carry any sort of direct ethical obligation to the patients. However, I do not believe that this makes the role of an investor ethically “neutral.” Rather, I would argue that investors are morally implicated even though they are not directly at fault. Their investment might not be the deciding cause of patient harm, but by simply participating in a system where profit is derived from human lives, investors benefit from structures that cause harm to others.
Through acquisitions, private equity firms fulfill their duty to maximize returns for their clients, the investors. This means that their primary duty is to their clients, not the hospitals or the patients those hospitals serve. This conflicts with the aforementioned humanity that so strongly characterizes the practice of medicine as a whole. This absence of altruistic considerations entirely can result in a disconnect between the values and mission of the hospital and the firm. However, this led me to wonder: Do private equity firms have a duty to patients, even indirectly? On one hand, private equity is not a charity organization – their care for patient well-being is secondary and it may be unreasonable to ask a group that exists for individual interests to make decisions based on humanitarian needs. They also do not carry the same direct legal or professional duty to patients as a doctor or hospital administrator. Yet, the decisions that a private equity firm makes can affect the conditions under which patients are cared for. Ideally, I believe that these indirect impacts should correspond with a firm’s indirect duty to patients. Perhaps legal standards that require patient welfare consideration should be implemented. However, considering the sheer financial necessity of private equity in healthcare, should a dollar simply be seen as a dollar?
Through these investments, patients are still being helped, but potentially for the wrong reasons. Considering the indirect and disconnected role of the firms in relation to patients, is the intent behind these investments relevant? The intent behind the care delivered by healthcare professionals would remain the same. Evidently, the complex and undefined role of these firms makes it very difficult to concretely determine the extent of their ethical responsibility to patients. However, it is clear that this ethical responsibility does exist and should be catered to more appropriately than it is currently. If private equity firms have the power to shape the operations and impact of an entire hospital, we must also evaluate whether the invested money supports or undermines the purpose of healthcare itself.
Hospital administration can improve operational efficiency through stronger revenue cycle management (RCM) and cost controls. These efforts are heightened with the presence of private equity investment. In some cases, private equity may even prevent the closure of a struggling hospital. This raises the question whether it is better to have a bad hospital or no hospital at all. The bioethical principle of non-maleficence relates to the concept of doing no harm to the patient.
From this lens, it could be argued that having no hospital would be preferable to a bad hospital that is not properly equipped with the resources to adequately treat a patient. However, from a utilitarian perspective, maintaining care for the greatest number of people would offer the greatest overall benefit to society, regardless of the exact quality of that care. However, a major cost-cutting strategy used by private equity firms are staffing cuts. In these cuts, administrative roles seem to be most at risk. While both medical and non-medical workers are cut, the number of medical workers recovers within a few years, while the number of workers in administrative roles does not (Rea). Furthermore, there is an increased pressure to cut less profitable services. Decisions having to do with profitability will often result in the cutting of less profitable services, such as psychiatric care, or less profitable patients, such as those on Medicaid, or no insurance at all (Ferdinand). These choices disproportionately affect vulnerable populations and come at an ethical cost. Continuing to consider the principle of non-maleficence, I wonder if the purpose of a hospital should be to serve all members of its community? Is this realistic when medicine operates as businesses? Focusing on the principle of non-maleficence, hospital administrators need to consider whether financial sustainability justifies potential harm to certain patient populations. Hospitals have a duty to the communities they serve and profit-selective care contradicts that duty. This tension is similar to the dilemma that arises with concierge medicine: patients with the financial flexibility receive increased access and attention while others do not. While these models may be economically sensible, they raise important questions about justice and equity. If equitable access is no longer the standard, the role of hospitals as community-serving institutions must be reconsidered.
Being a physician is a very difficult job. Many physicians pursue medicine as an altruistic endeavor, but oftentimes, altruism does not coincide with financial optimization. In the case of private equity investment, the physician is put in a unique situation where he interacts directly with the patient while also reporting to hospital administration. This means that a physician may have to choose between what is best for themselves and what is best for their patient. Should a physician be expected to keep his oath to “do no harm,” even if it comes at his own disadvantage? Is there a “right choice” in this situation? According to the principle of fiduciary duty, the physician is expected to act “primarily for the benefit of the patient and [make] self-interest a systematically secondary condition” (Ludewigs et al.). On one hand, physicians do benefit from potential improvements that a private equity firm might make to a hospital. As previously mentioned, the increased valuation of a hospital often comes with nicer facilities and technology. This means that physicians may gain access to improved facilities and equipment. Many also argue that especially in the case of private practices, the physician is overwhelmed with the responsibility of caring for patients while simultaneously running a business. In this case, the implementation of private equity could be a positive for physicians, where PE takes on a large portion of the administrative, “business side” of operations. This would allow the physician to focus primarily on the task of patient care. However, with these benefits also comes an increased burden on physicians.
According to an article outlining several consequences of private equity involvement in healthcare, health professional Brian Keyser stated that “Within health care settings, where payroll is generally the largest single expense, the most direct way to cut costs—and therefore maximize revenue—is to decrease staffing” (Keyser et. al.) While staffing cuts are made, private equity also aims to bring in a higher number of patients in order to make more profit. This leads to an overall increase in the ratio of patients to staff, with each physician having to account for more patients.
Although medicine is an altruistic endeavor for many, it is simultaneously a salaried job, which leads to friction in proper compensation from the perspective of a physician. Physicians frequently stay late to care for patients. They cannot in good conscience simply clock out at 7 PM if all their patients are not well and accounted for at the scheduled end of their workday. However, as a salary worker, physicians do not get compensated for this “overtime” work. Particularly for those in specialties that are already very hour-heavy, this is not a sustainable lifestyle and this expectation of unpaid “overtime” will likely lead to burnout. While dedication to patient care is foundational to medicine, reliance on unpaid labor to do so, seems rather exploitative. An example of just how normalized this labor is can be seen through the term “pajama time”, which refers to the time that doctors take after work, often at home in their pajamas, completing necessary administrative and record documentation tasks. Physicians report spending up to an average of 15 hours each week on these at home tasks (Fox). When this is combined with the above mentioned increase in patient to staff ratios, the friction between altruistic care and proper compensation intensifies. From a deontological perspective, this raises the question: Does a physician have more duty to their patient or their administration? Who has a duty to the physician?
Furthermore, when these unsustainable practices come into conflict with a physician's duty to themselves, there seems to be no entirely ethical way to proceed. This presents a paradox in which the physician must “choose” between themselves and their patients, blurring the boundaries within medicine as an altruistic endeavor and medicine as a career.
The presence of private equity in a medical setting often leads to a loss of physician autonomy. Doctors and practice owners describe being naive about being able to retain control over their practices. In one anecdote, a doctor who sold their practice to private equity recounts that “[The doctor] had a special needs patient who required laser surgery that his insurance would not cover. The dermatologist wanted to do it without pay, but the chief operating officer refused. He had to persuade the CEO in order to proceed with this case” (Katz Olson 91). Unfortunately, altruism in cases such as this one is not profitable. This conflicts with the previously stated fact that many physicians pursue medicine for altruistic purposes. However, in this case, the physician was willing to lose some money in their personal practice for the sake of the patient. With the involvement of a third party, the private equity firm, the doctor’s altruism was obstructed by financial incentives.
Finally, the impacts of private equity investment on a patient must be considered. Similarly to hospital employees, patients may have access to modernized facilities, which can improve overall patient experience. Improvements in medical technologies can create advances in effectiveness of care, while structural and even aesthetic improvements can improve patient morale (Reiling et al.) With these improvements, there is the potential for faster administrative work such as scheduling and access to test results. The use of technology in these fields may reduce administrative burden and operational inefficiencies, freeing staff time. They allow hospitals to handle larger patient volumes and make it so that doctors, particularly those owning private practices, are able to focus on their primary role of providing direct medical care.
However, medical care, particularly in the United States, comes at a very high cost. Since the primary goal of PE is to increase profits, it is not uncommon for patients to experience premium prices for the same care. This can be detrimental to patients, especially those who require regular appointments. It is exceedingly unfortunate that in these cases, the people who are most vulnerable and need care, could face difficulty accessing it.
Furthermore, private equity investment has increasingly been linked to a lower quality of care.“A 2023 study found that Medicare patients at private equity-owned hospitals suffered a 25% increase in hospital-acquired complications compared to Medicare patients at hospitals not owned by private equity. These complications included a 38% increase in bloodstream infections from central lines—longer-term, surgically inserted ports through which patients can intravenously receive fluids, medications, and blood—despite 16% fewer central lines placed. Similarly, the rate of surgical site infections doubled at private equity-owned hospitals while those at the control hospitals decreased. And while falls at hospitals not owned by private equity have been trending downward—a product of a nationwide, decades-long hospital safety movement—falls at private equity-owned hospitals have remained steady, amounting to a 27% relative increase” (Brownstein). “Some studies have found that private equity may improve care quality under certain market and regulatory conditions. However, research has also linked the introduction of private equity with lower quality of care, higher risk of hospital-based infections, and increased costs to patients with a “mixed to harmful” impact on quality. Further complicating matters, other research has found that private equity acquisitions have no substantial impact on patient-level outcomes such as mortality or readmission rates for acute conditions” (Allen 4). Contrary to previous analysis, this data seems to directly contradict the entire purpose of healthcare in society. Ethically, it is one thing for an entity to stagnate health care, and an entirely different thing for an entity to worsen healthcare outcomes. This data presents a clear disregard for the bioethical principle of nonmaleficence.
Furthermore, there is clear harm being done to the impacted patients, particularly within a more vulnerable population of Medicare patients.““We believe [these findings are largely explained by staffing cuts,” said the study’s senior author Zirui Song, associate professor at Harvard Medical School and Massachusetts General Hospital” (Brownstein). Furthermore, PE often pushes increases in patient to staff ratios. Quantitative measures of qualitative tasks further disconnect patients and their doctors. Daily quotas for patient care turn patients into tasks to check off on a list. These staffing cuts lead to less investment in patient well-being, and more importantly, come at the cost of adequate patient care. It is also difficult to measure whether or not private equity caused these changes in healthcare quality, or if it was merely correlational. It appears as though there is more research to be done on the precise correlation between private equity investment and a worsened standard of care. Regardless, the consensus seems to be that private equity is either harmful or does not impact patient outcomes. Even if there is no harm being done, should beneficence or non maleficence be prioritized? I am of the opinion that when billions of dollars are being invested into healthcare improvement, there should be a factor of beneficence that is prioritized. If there is no change to the patients, what is the point?
Ethical Analysis
The ethical dilemma central to private equity is not that profit exists in medicine. Rather, the problem arises when that profit begins to determine the way care is delivered. As shown in the stakeholder analysis, each stakeholder holds unique interests and different amounts of leverage within the decision making process. Investors seek financial return while private equity firms operate with a duty to those investors. Hospital administration relies on capital to survive while physicians work to treat the patients who depend on the entire system for the care they need. All of these interests are not inherently “bad” or illegitimate on their own. However, when they exist together, interests begin to compete against each other. Healthcare is intended to meet human needs but private equity evaluates healthcare institutions solely on financial performance. With this comes a system where patient welfare becomes just one of many considerations in medicine rather than the sole guiding principle.
Private equity involvement in healthcare directly challenges the bioethical principles of nonmaleficence and beneficence. Cost cutting measures such as staffing cuts and increased costs of care often lead to a lower quality of care. This very obviously conflicts with the principle of non-maleficence as a lower quality of care would most definitely result in harm being done to the patient. Furthermore, even without a proven direct harm, concerns about beneficence could still be raised. This is because despite the large amount of money entering the system, there may fail to be an actual improvement in patient outcomes. While private equity may be financially necessary to some degree in our current healthcare system, its role should still be judged based on whether it supports the social purpose of healthcare.
Conclusion and Optimization
Upon completing this research, I have come to the conclusion that private equity investment in healthcare is unethical. Analyzing the role of a hospital in society as well as guiding bioethical principles of nonmaleficence, beneficence, and duty have shown that private equity investment is not a practice that ultimately benefits hospitals and their patients. Through a thorough stakeholder analysis, it is evident that there are no significant disadvantages for investors and the private equity firms themselves, while patients and physicians face significant disadvantages with the implementation of private equity. This does not align with the fact that at its core, medicine ought to be an altruistic exchange between patient and doctor. and doctors seem to be the only ones who are not benefiting from private equity in the healthcare system. This clearly points to a need for reform. Private equity firms operate hospitals in the same way that they operate any other business that they acquire. However, in a hospital, a patient entrusting their life takes the place of a customer who consumes a product. Considering just how different the stakes held by these two individuals are, it is logical to conclude that the treatment of these two business models should reflect that.
Although private equity investment in healthcare is unethical, the United States healthcare system is very reliant on private equity and other similar financialization strategies. Therefore, a realistic direction for optimization would be to reform the system of private equity rather than completely eradicating it. One method of reform is Corporate Practice of Medicine (CPOM) Laws. These laws ensure that medical decisions remain solely in the hands of licensed physicians, rather than being influenced by business interests. With the implementation of these laws, private equity firms would still be present in these considerations. However, there would ideally be a more informed decision-making process.
Additionally, a major issue with private equity is its short-term nature. Since private equity firms are usually only investing in a hospital for 5-10 years, there are no incentives for the firm to make decisions that will promote the long-term success of a hospital. By implementing sustainable exit policies, true long-term improvements could be incentivized. Finally, there should be an increased level of transparency around the ownership of medical organizations. Patients should have the right to know who owns their hospitals. By making them aware, they are granted patient autonomy and an understanding of their healthcare providers.
ds
Works Cited
Allen, Alexandra. “Financialization in Health Care: History, Current Trends, and Impacts on Patients.” Healthcare Value Hub, 3 December 2024, https://healthcarevaluehub.org/resource
Brownstein, Maya. “Private Equity's Appetite for Hospitals May Put Patients at Risk.” Harvard T.H. Chan School of Public Health, 16 December 2024, https://hsph.harvard.edu/news/private-equitys-appetite-for-hospitals-may-put-patients-at-risk/. Accessed 18 May 2026.
Crawford, Krysten. “Study: When public hospitals go private, low-income patients lose.” Stanford Institute for Economic Policy Research (SIEPR), 9 January 2023, https://siepr.stanford.edu/news/study-when-public-hospitals-go-private-low-income-patients-lose. Accessed 13 May 2026.
Ferdinand, Pamela. “When profit kills: How private equity is eroding health care.” U.S. Right to Know, 21 January 2026, https://usrtk.org/healthwire/when-profit-kills-how-private-equity-is-eroding-health-care/#:~:text=Maternal%20health:%20PE%20hospital%20acquisitions,
objecting%20to%20sharply%20rising%20costs. Accessed 18 May 2026.
Finnegan, Joanne. “Hospital-employed Physicians Don't Necessarily Improve Quality of Care.” Fierce Healthcare, 6 January 2017, https://www.fiercehealthcare.com/practices/
switching-to-employed-physicians-doesn-t-improve-quality-care-study-finds#:~:text=
Researchers%20for%20the%20latest%20study,acquired%20at%20a%20dramatic%20rate. Accessed 18 May 2026.
Fox, Andrea. “Physicians report 15 hours of 'pajama time.'” Healthcare IT News, 21 February 2024, https://www.healthcareitnews.com/news/physicians-report-15-hours-pajama-time. Accessed 18 May 2026.
Keyser, Brian, et al. “5 Consequences of Private Equity's Expansion in Health Care Services.” Center for American Progress, 30 October 2025, https://www.americanprogress.org/article/5-consequences-of-private-equitys-expansion-in-health-care-services/. Accessed 18 May 2026.
Ludewigs, Sophie, et al. “Ethics of the fiduciary relationship between patient and physician: the case of informed consent.” Journal of Medical Ethics, 2025, https://jme.bmj.com/content/51/1/59. Accessed 18 May 2026.
Masoud, Rai Hasen. “Medicine in the Age of Private Equity: The Ethics of Profit in Patient Care.” Georgetown Law School Denny Center for Democratic Capitalism, 21 October 2025, https://www.law.georgetown.edu/denny-center/blog/medicine-private-equity/#:~:
text=PE%20ownership%20was%20most%20often%20associated%20with,and%20higher%20costs%20to%20patients%20or%20payers. Accessed 18 May 2026.
Milio, Nancy. Public Health in the Market: Facing Managed Care, Lean Government, and Health Disparities. University of Michigan Press, 2000.
Olson, Laura Katz. Ethically Challenged: Private Equity Storms US Health Care. Johns Hopkins University Press, 2022.
Peter G. Peterson Foundation. “The United States Spends More on Defense than the Next 6 Countries Combined.” Peterson Foundation, 7 May 2026, https://www.pgpf.org/article/the-united-states-spends-more-on-defense-than-the-next-6-countries-combined/. Accessed 18 May 2026.
Rea, Brian. “What Happens When Private Equity Buys Into the Hospital Industry?” Georgetown University McDonough School of Business, 15 October 2025, https://msb.georgetown.edu/news-story/research-and-insights/what-happens-when-private-equity-buys-into-the-hospital-industry/#:~:text=Through%20our%20investigation%2C%20we
%20realized,sacrifice%20long%2Dterm%20healthcare%20quality. Accessed 18 May 2026.
Reiling, John, et al. “The Impact of Facility Design on Patient Safety.” NCBI, April 2008, https://www.ncbi.nlm.nih.gov/books/NBK2633/. Accessed 18 May 2026.
Samaha, Lee. “Better Healthcare Stock to Own in a Recession: Defensive or Growth?” Yahoo FInance, 4 April 2026, https://finance.yahoo.com/sectors/healthcare/articles/better-healthcare-stock-own-recession-120500981.html?guccounter=1&guce_referrer=aHR0c
HM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAABzj7jLqhcVDOCeiLUmestDfwfLTa4pYXUCQeJT_q8TwQ0UKAelovLIj6UeIjibuXlIi. Accessed 18 May 2026.
Schlafly, Andrew. “The Harm from Private Equity's Takeover of Medical Practices and Hospitals.” PMC, October 2024, https://pmc.ncbi.nlm.nih.gov/articles/PMC11482842/. Accessed 18 May 2026.
United States Government Accountability Office. “Healthcare Consolidation: Published Estimates of the Extent and Effects of Physician Consolidation.” United States Government Accountability Office, September 2025, https://files.gao.gov/reports/GAO-25-107450/
czE3NzYxNzMxNTQkbzEkZzEkdDE3NzYxNzMyMTEkajMkbDAkaDA. Accessed 18 May 2026.
Walz Group. “Nine Key Factors Driving Hospital Valuations.” Walz Group, 20 October 2023, https://www.walzgroupcpa.com/post/nine-key-factors-driving-hospital-valuations/. Accessed 13 May 2026.
Comments