The United States healthcare system has experienced an expansion of private equity ownership. In new research, Theodosia Stavroulaki argues that private equity acquisitions risk harming healthcare by increasing prices, reducing quality of care, limiting access to care, and hurting the labor force.
Private equity has become a dominant force in American healthcare, generating far-reaching, often detrimental consequences for healthcare workers and the general population alike. By 2022, nearly five percent of physicians were employed by private equity-owned practices, and by 2023, private equity firms had secured controlling shares in several specialty physician markets, including anesthesiology, dermatology, and emergency medicine.
Private equity’s rapid expansion into healthcare has sparked intense debate. Proponents contend that private equity contributes capital that enables medical practices to cut costs and improve efficiency. Critics present a more troubling picture. To them, private equity buyouts are associated with rising healthcare spending, inferior quality of care, and reduced access to essential healthcare services—particularly for the populations most in need. Increasing evidence suggests that these concerns are not unfounded: private equity’s relentless pursuit of large yet short-term profits often prioritize financial returns over patient care, putting healthcare providers under extreme stress and harming health equity and access to affordable care.
My research demonstrates that many of these harms could be prevented if antitrust enforcers challenged private equity acquisitions that result in higher prices, lower quality of care, labor-related harms, or reduced access to healthcare services. The reason is straightforward: under the 2023 Merger Guidelines, any merger or acquisition likely to create or enhance market power—and thereby reduce output, diminish innovation, increase prices, or lower quality—may violate Section 7 of the Clayton Act.
Private acquisitions lead to higher prices
Private equity buyouts in the healthcare sector are associated with increased healthcare costs. Firms frequently implement “roll-up” strategies to secure immediate profits, acquiring and consolidating multiple firms within the same market segment under a unified corporate structure. These strategies enhance the firms’ market power, enabling them to negotiate higher reimbursement rates from health insurers, leading to higher health insurance premiums and higher uninsurance rates. One study assessing how private equity buyouts affect hospital rates found that insurers faced an 11 percent increase in prices following an acquisition.
When health insurance premiums rise, racial and health inequality in the United States tends to worsen. Between 1988 and 2019, the share of total compensation (wages plus premiums) allocated to health insurance premiums for American families with employer-based coverage increased from 7.9 percent to 17.7 percent, contributing to significant wage stagnation among households with employer-sponsored insurance, representing nearly 53.8 percent of Americans. These rising costs also had unequal distributional effects: Black and Hispanic families experienced a greater proportional decline in wages associated with insurance premium growth than white families.
Former antitrust cases have demonstrated that private equity acquisitions that increase healthcare prices should be evaluated for competitive harm. In its lawsuit against U.S. Anesthesia Partners (USAP) and its private equity backer, the Federal Trade Commission (FTC) relied on this theory of harm to demonstrate the negative effects such buyouts can have on consumers. The FTC alleged that by implementing a roll-up strategy, USAP had acquired every major anesthesia provider in Texas, entered into price-fixing agreements with remaining independent providers, and neutralized a key competitor through a market-allocation deal. By pursuing these strategies, USAP increased its market power, enabling it to charge extremely high prices and impose tens of millions of dollars in additional annual costs on patients in affected communities. According to the FTC, these tactics demonstrated how private equity-driven consolidation undermines competition and harms consumers in multiple ways.
The FTC has also challenged several hospital mergers on the basis that they were likely to lead to higher health insurance premiums. For instance, The FTC attempted to block the merger between Jefferson Health and Einstein Healthcare Network, two leading hospitals providing inpatient general acute care (GAC) and inpatient acute rehabilitation services in Pennsylvania. The FTC was concerned that the merged entity would have reduced competition between the merging entities by increasing their bargaining power with health insurers, to the detriment of employers and consumers.
Lower quality care among private equity mergers
Importantly, private equity buyouts do not merely lead to escalating healthcare costs—they also compromise the quality of care. Private equity takeovers are associated with lower staffing ratios as firms cut costs. Staffing shortages have been linked to worse patient outcomes and higher mortality rates. Additionally, Medicare patients treated in hospitals acquired by private equity experience poorer health outcomes, including higher fall rates and bloodstream infections. As firms shift staffing, physicians are burdened with heavier workloads, contributing to job dissatisfaction and burnout, which may reduce optimal care.
The FTC has long challenged hospital mergers on the ground that they may harm consumers by degrading the quality of care. Consider its challenge to the Advocate Health Care Network–NorthShore University HealthSystem merger, which involved two leading providers of GAC inpatient hospital services. The FTC argued that both Advocate and NorthShore had invested substantially in expanding and improving their services to attract patients and increase market share, while also closely monitoring and adjusting each other’s quality of care and service offerings to remain competitive. The proposed merger would “dampen the merged firm’s incentive to compete on quality of care and service offerings, to the detriment of all patients who use these hospitals,” and therefore should be blocked.
Healthcare shutdowns and reduced access to care
Private equity buyouts are correlated not only with inferior care but with reduced access to healthcare services. Private equity-owned medical practices often cut less profitable yet essential healthcare services, such as pregnancy-related admissions, leaving many patients without access to vital care. Private equity also encourages medical practices to prioritize patients with private health insurance coverage and limit access to Medicare and Medicaid patients, thereby undermining health equity and access to care. Following a private equity buyout, physicians face strong incentives to prioritize patients requiring less complex treatment over those with more complicated medical needs. In some cases, private equity goes even further by pushing medical practices to establish new clinics in wealthier areas rather than in poorer communities where access to care is most needed.
Antitrust enforcers could address the harm to healthcare access that private equity buyouts often entail in at least two ways. First, they could challenge such acquisitions on the ground that they undermine a core dimension of healthcare quality: access. Avedis Donabedian, a foundational figure in healthcare quality research, conceptualized healthcare quality as encompassing, among other things, effectiveness, efficiency, acceptability, equity, legitimacy, and optimality. Donabedian further argued that “acceptability” itself comprises several narrower dimensions, including accessibility, or the ease with which patients can obtain care. Antitrust enforcers could adopt this multidimensional conception of quality to challenge private equity buyouts on the basis that they harm an essential dimension of healthcare quality: access to care.
Alternatively, antitrust enforcers could contend that a buyout is likely to lead to diminished output. As the 2023 Merger Guidelines explain, antitrust enforcers can challenge deals that undermine competition through reduced output, higher prices, or inferior quality. Private equity acquisitions that eliminate vital healthcare services can sharply reduce the availability of specific services—including cancer treatment or psychiatric care—for vulnerable patients. Antitrust enforcers could therefore challenge such deals on the ground that they diminish access to essential healthcare services for certain groups of patients constituting a separate product market.
How private equity harms labor
To increase care utilization—and thereby boost profits—private equity-acquired health entities are encouraged to expose patients to unnecessary medical testing and treatment, including routine screenings, such as colonoscopy and biopsies, as well as surgical procedures. Physicians employed by private equity are also under constant pressure to meet higher volumes of patients and minimum targets for medical procedures. Meeting these goals, however, contributes to higher levels of burnout and job dissatisfaction for the healthcare workforce. This has devastating outcomes on population health as workers leave the profession or retire early.
Do the Agencies have the necessary legal tools to challenge a buyout because it may cause severe harm to labor? The Guidelines note that just as mergers among sellers can harm buyers, under Section 7 of the Clayton Act, mergers among buyers, including employers, can harm sellers including employees.
The antitrust enforcers’ commitment to consider labor harms in merger reviews was illustrated in the FTC’s complaint attempting to block supermarket Kroger’s proposed acquisition of Albertsons. The FTC alleged that the deal would limit competition for union grocery workers: the merged entity would have increased negotiation leverage, undermining workers’ ability to ensure higher pay, improved benefits, and better working conditions. The U.S. District Court for the District of Oregon sided with the FTC, stopping the merger.
Potential counterarguments
The battle does not end with enforcers indicating that the proposed buyout should be challenged due to potential higher costs, inferior quality, and reduced access. Private equity firms may argue that proposed mergers would not inflict harm, but could actually create large efficiencies that would benefit competition and consumers. One argument is that proposed buyout could significantly reduce the cost of care, leading to lower health insurance premiums for consumers and employers. However, this argument fails to recognize that any cost savings arising from staff reductions would not be considered cognizable efficiencies. The 2023 Merger Guidelines make clear that “[a]ny benefits claimed by the merging parties are cognizable only if they do not result from the anticompetitive worsening of terms for the merged firm’s trading partners.” As Suresh Naidu, Eric Posner, and Glen Weyl explain, “a merger that does create competitive concern should not be excused simply on the basis that it allows the firm to cut costs by destroying jobs. In such cases, antitrust doctrine does not allow efficiency gains in other markets to offset losses in one market.” This principle is in line with the U.S. Supreme Court’s holding in Philadelphia National Bank, which made clear that any procompetitive benefits in one market cannot surpass anticompetitive harms in another. Hence, in this case, the defense would need to prove that any potential savings were not at the expense of employee jobs.
Enforcers could also argue against potential procompetitive efficiencies by assessing post-acquisition patient care in multiple markets. Although empirical research demonstrates that private equity buyouts correlate with increased healthcare costs, evidence on their impact on quality of care is less definitive. Limited research suggests that, in certain contexts, private equity-owned facilities are likely to perform better than their independent counterparts. One study found that private equity-owned hospitals performed better in quality for acute myocardial infarction and pneumonia. Other research suggests that private equity ownership may reduce appointment time in private dermatology practices for Medicare patients and patients with private health insurance coverage. However, it may at the same time increase waiting times for Medicaid patients. These findings could provide private equity firms with a potential argument that acquisitions sometimes enhance quality of care and generate efficiencies, but Philadelphia National Bank makes clear that procompetitive benefits in one market cannot justify a merger that creates anticompetitive harms in another, e.g. Medicaid patients receiving dermatology services. Hence, private equity firms would need to prove that their claimed efficiencies are not harming another market, or risk rejection.
Conclusion
Private equity’s growing influence over American healthcare creates profound public health concerns. When profit-driven business strategies lead to higher healthcare costs, inferior care, reduced access to essential services, and worsening labor conditions for physicians, the consequences extend far beyond market consolidation. They worsen inequality and hurt vulnerable communities. The 2023 Merger Guidelines provide antitrust enforcers with effective legal tools to prevent these harms. By challenging private equity buyouts that harm competition, access, labor conditions, and healthcare quality, antitrust law can serve not only as a mechanism for preserving markets, but also as a safeguard for public health and health equity in the United States.
Authors’ Disclosures: The author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
Subscribe here for ProMarket’s weekly newsletter, Special Interest, to stay up to date on ProMarket’s coverage of the political economy and other content from the Stigler Center.
