A recent JAMA network study found that hospital assets decreased 24% after being acquired by private equity. The study comes after a recent Becker's LinkedIn poll found that 50% of respondents feel that PE ownership has a "mostly negative" effect on hospitals.
The study used Medicare cost reports from 2006 to 2021 to assess hospitals' total capital assets, region number of beds, year acquired last, rurality, teaching status and Medicaid inpatient discharge shares.
It then matched acquired hospitals to 10 non-acquired control hospitals, using exact matching on region, bed-size category, year and nearest neighbor matching on total capital assets for the year acquired.
"We analyzed assets of acquired and control hospitals in two years before and after acquisition, using a difference-in-differences event-study specification," the study said. "We used a linear mixed-effects model with year fixed effects and a random intercept term for each matched group to adjust for within-group correlation."
Hospitals with total assets outside the 95th and fifth percentiles during acquisition year and those that were acquired after 2019 were excluded from the study. Nashville, Tenn.-based HCA Healthcare-owned hospitals were also excluded from the study due to prior studies that suggested they are "atypical of private equity acquisitions."
Here are four findings from the study:
1. Of the 197 hospitals that were acquired, 156 met the criteria to be included and were matched with 1,560 controls.
2. The most acquired hospitals were mainly located in the South with anywhere from 50 to 149 beds.
3. Acquired hospital assets were $91,316,399 during acquisition year, with control assets at $96,450,259. Assets decreased by a mean of 15% for acquired hospitals and 9.2% for controls in the two years after being acquired.
4. Sixty-one-percent of acquired hospitals had reduced capital assets versus controls at 15.5% after two years.