PE healthcare investment tops $1T over 10 years

Private equity firms have invested more than $1 trillion in debt-financed healthcare deals in the last decade. Often these investors have relied on financial models that negatively affect the quality of patient care. A study of all leveraged buyouts in 2022 found that PE-owned companies maintain dangerously high debt-to-cash flow ratios averaging 7.1, more than double that of public healthcare companies. This is well above the 4.0 threshold that financial regulators consider to be high. Almost inevitably, this level of leveraging leads to reductions in staff, which are likely to compromise the quality of patient care. On the plus side, private equity firms provide capital and strategic expertise to the entities in which they invest. They can, and often do, improve operational efficiency and offer strategic guidance. These firms operate in many sectors and within each sector deploy a wide range of operating models. In the context of healthcare, some of these firms have adopted responsible practices, suggesting that industry-wide reform is possible. In publishing this report, our goal is not to call for the elimination of private equity firms in healthcare. Instead, we propose a series of reforms to incentivize PE firms to prioritize the quality of patient care in the communities where they operate.