Private Equity in the Hospital Industry

58 Pages Posted: 20 Sep 2021 Last revised: 25 Feb 2022

See all articles by Janet Gao

Janet Gao

Indiana University - Kelley School of Business

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Yong Seok Kim

Indiana University

Date Written: September 15, 2021

Abstract

We examine employment and patient outcomes at hospitals acquired by private equity (PE) firms and PE-backed hospitals. While employment declines at PE-acquired hospitals, core medical workers (physicians, nurses, and pharmacists) increase significantly. The proportion of wages paid to core workers increases at PE-acquired hospitals whereas the proportion paid to administrative employees declines. These results are most pronounced for deals where the acquirers are publicly traded PE-backed hospitals. Non-PE-backed acquirers also cut employment but do not increase core workers or reduce administrative expenditures. Finally, PE-backed acquirers are not associated with worse patient satisfaction or mortality rates compared to their non-PE-backed counterparts.

Keywords: Private Equity, Hospital Acquisitions, Employment, Operational Efficiency, Real Patient Outcomes and Satisfaction

Suggested Citation

Gao, Janet and Sevilir, Merih and Kim, Yong Seok, Private Equity in the Hospital Industry (September 15, 2021). European Corporate Governance Institute – Finance Working Paper No. 787/2021, Available at SSRN: https://ssrn.com/abstract=3924517 or http://dx.doi.org/10.2139/ssrn.3924517

Janet Gao (Contact Author)

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Yong Seok Kim

Indiana University ( email )

107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States

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