Private equity investors in Pennsylvania health care don't prioritize patients, critics say
This story first appeared in How We Care, a weekly newsletter by Spotlight PA featuring original reporting and perspectives on how we care for one another at all stages of life. Sign up for free here.
Investors who buy up and sell health companies are drawing scrutiny from critics worried about diminished care and higher costs for patients.
Private equity firms, as these investment groups are called, have a record of cutting services at health providers and leaving them with debt or gaps in care. Sometimes, the providers close, which is the case for Crozer Health's recently shuttered hospitals in Delaware County. They were owned by the private equity-backed Prospect Medical Holdings.
Proponents argue private equity investments can help medical facilities by providing capital or outsourcing administrative duties. But critics such as the watchdog group Private Equity Stakeholder Project (PESP) say these firms are often extractive and focused on generating short-term profits that don't benefit patients.
In Philadelphia and surrounding areas, private equity has established a large footprint, per a 2024 report from the group.
The nonprofit's analysis includes facilities in eight eastern Pennsylvania counties, and in parts of New Jersey and Delaware. Around 650 of the 900 facilities listed in the report are located in Pennsylvania.
To learn more about private equity's footprint in the region and why PESP chose to look into it, Spotlight PA spoke with Michael Fenne, a senior research and campaign coordinator at the organization. The conversation has been edited for length and clarity.
Spotlight PA: This report seeks to give an idea of private equity's footprint in health care in the Philadelphia region. Why did you decide to track this?
Michael Fenne: We wanted to identify the scope of private equity's presence in an area that had already experienced its risks. Pennsylvania has been the site of multiple closures in recent years of hospitals connected to private equity, most recently including two Crozer hospitals which had been affiliated with Prospect Medical Holdings, formerly owned by private equity firm Leonard Green & Partners.
Despite those risks, there's a real lack of transparency around private equity investments generally. Private equity firms … don't have the same kind of reporting requirements that publicly traded companies on a stock exchange would have.
We found approximately 900 locations for health care providers owned by [private equity] in just the Philadelphia area, but considering how difficult it can be to identify private equity-owned companies, we expect that number to actually be larger.
Why, generally speaking, is private equity attracted to health care?
They target areas that are fragmented with the hopes of consolidating certain health care subsectors. So nursing homes, cardiology, anesthesia providers, for example, they may try to consolidate in a given geographic market. And if they're able to do that, it gives them more power to set prices for patients and consumers, to determine wages for workers, and also to shape and determine what kind of services are provided in a given area.
Also, they're seeking short-term profits. Private equity firms typically try to extract profits within three to seven years of investing in an area, and they think they can do this in health care.
What challenges did you encounter in trying to gather this data?
The biggest challenge is that there is limited information available on companies that private equity firms own and what those companies are doing.
We identified which companies were owned by private equity through press releases and through public portfolio web pages of the private equity firms themselves. They're typically not required to disclose their holdings, so anything we know about companies that are owned by private equity usually comes from what they choose to disclose themselves or what's been uncovered by regulators or in bankruptcy lawsuits. We had to work off of that limited list of companies that we identified and just go through and map out all of the locations that they were operating from.
Among the places you identified in the report, it seems like the top three most prevalent types of private equity-owned health care facilities in the Philly area are physical therapy, behavioral health, and dental offices. Is this in line with national trends?
Dental health does seem to be in line with national trends from what we've seen released by other researchers recently. The other two areas, I can't confirm.
Something about the areas that we identified as the most prevalent areas in Philadelphia … Those are the ones that we were able to identify through the method that we used, but it could be that a private equity-owned company that's not in one of those categories is very active, but we haven't identified it as private equity-owned.
Why are these particular areas of health care attractive to private equity?
Private equity is attracted to areas that are fragmented. They want to consolidate providers that operate in the same sub-industry, but are independent. They try to bring companies under one company umbrella. They use what are called platform companies to do roll ups of smaller providers. It's what the former FTC director referred to as a 'stealth consolidation' strategy.
In physician practices, they'll use what are called medical services organizations, MSOs. They handle all of the administrative, billing, business side of running a health care practice. Physicians are attracted to this because it allows them to focus on providing care. But often when they come under the control of a platform company, it means less control of day-to-day operations and how many patients they're seeing and the processes involved with that.
You've talked a lot about transparency. Would more transparency around private equity holdings be beneficial to Pennsylvanians, and why or why not?
It would definitely be beneficial to Pennsylvanians — to patients, to health care providers, to any stakeholders in the Pennsylvania area, really. Patients, providers, and policy makers don't really know where their money is going when they pay a health care provider — whether it's going to the provision of care, whether it's going to pay off debt that was put onto a company by a private equity firm, or whether it's going to fund a private equity dividend. So there's a need for increased transparency around what private equity owns, and what they're doing with their money.
How does private equity's stake in health care impact patients, and how might the care that people receive at facilities that are owned by private equity companies differ from the care that they might get at a nonprofit provider or some other type of for-profit facility?
Private equity firms use a set of tactics that can undermine the financial health of the companies they own, and that can lead to reduced access of care for patients, and also reduced resources spent on care.
So for example, last year, 21% of health care companies that went bankrupt were backed by private equity. We've also seen in the last few years at least four hospital closures in eastern Pennsylvania connected to private equity.
With each of those closures, the patients at those hospitals have reduced access. They have to find new providers. They have to possibly drive farther for that new provider, and for those providers taking on the patients at the hospitals that close, it may mean they have fewer resources for each patient, or it may place an additional burden on them.
What kind of response are we seeing from elected officials when it comes to addressing this?
Specifically in Pennsylvania, the governor earlier this year called for legislation that would give the attorney general [the] ability to review mergers and acquisitions. He also notably called on limitations on sale-leaseback transactions, which would prevent [private equity] firms from making short-term profits by stripping hospitals and health systems of their real estate. We haven't seen that in a lot of other states. It's not just the transparency, but also the tactics that they're using that are important to regulate.
There have also been federal efforts to rein in [private equity]. Last year, in the Senate, the Stop Wall Street Looting Act was introduced, and under the previous presidential administration, multiple regulatory agencies — including the Department of Justice, Health and Human Services, and the Federal Trade Commission — initiated investigations to examine the effects of private equity consolidation in various industries, including health care.
If you learned something from this article, pay it forward and contribute to Spotlight PA at spotlightpa.org/donate. Spotlight PA is funded by foundations and readers like you who are committed to accountability journalism that gets results.
Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
