CORPORATE TAKEOVERS ARE CHANGING U.S. HEALTHCARE

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What’s Happening

Big investors and profit driven companies  — like private equity firms and large corporations — are buying up hospitals, nursing homes, and doctor’s practices across the country. Sometimes this brings new money and updated technology, but often it puts profit first rather than patient welfare.  The healthcare sector has a harmful relationship between profit and patient value because the two objectives do not align.  The profit motive can lead companies to prioritize financial returns, especially where patients are vulnerable and quality is hard to measure (e.g., nursing homes). Examples include PE-owned nursing homes linked to lower quality of care and higher mortality rates. 

Why It Matters

• Higher costs: Since 2008, about 1,000 hospitals have merged together to increase market strength driving prices up as much as 65% while healthcare employee wages stay the same.

• Lower quality: Private equity–owned nursing homes have shown worse staffing and poorer outcomes.

• Reduced access: Financial tactics used by corporate owners have contributed to hospital closures and cut services, especially in rural and low-income areas.

• The PE firms and REITs use sale-leaseback arrangements whereby the care provider disposes of its building and leases it. This divides the real estate profit and the profit in the care business, and the first step is usually the reduction of staff and decline in the quality of care.

• Pressure on doctors: Companies use loopholes to control medical practices and influence care decisions.  The corporate groups employ MSOs to acquire and combine practices, and this centralizes power and may force the physicians to perform the lucrative procedures as opposed to the necessary ones.  

What States Are Doing

• Oregon (SB 951): Cracks down on corporate control of doctor’s offices by closing legal loopholes and banning noncompete contracts tied to these deals.  Many companies use management-services organizations (MSOs) to run practices behind the scenes, even though corporate ownership is technically banned. SB 951 blocks doctors with financial ties to an MSO from owning a majority stake in a practice and bans contract terms — like noncompetes — that MSOs use to keep control. It also requires that medical practices, not MSOs, make the final decisions that affect patient care.

• Massachusetts (HB 5159): Stops risky real-estate schemes (sale–leasebacks) that helped push hospital systems like Steward into crisis and increases state oversight.

What Needs to Change

To keep healthcare focused on patients, not investors, states and federal leaders should:

• Patient welfare should be the priority, and regulators should implement health outcome-focused value-enhancing strategies.

• Require full transparency about who owns healthcare facilities.

• Set minimum staffing and quality standards, especially in nursing homes.

• Reform Medicare and Medicaid payments so they don’t reward consolidation.

• Strengthen oversight of corporate deals that could raise costs or reduce access.

• Antitrust law does not consider healthcare-related harms that do not involve a price increase. The system does not consider non-price effects including employment cut-backs and quality decline in a set payment services (e.g., nursing homes and Medicare/Medicaid). The system does not consider the financial operations that make use of market power to grow profits and power. These operations (e.g., sale leasebacks and MSOs) use the usual market power methods to get around the law.