Analyzing Changes in Quality of Care After Private Equity Acquisitions of Hospitals

Abstract

Given the increase in private equity investment in the healthcare sector over the last two decades, this paper analyzes the impact of private equity acquisitions of hospitals on quality of care. Specifically, this paper uses a difference-in-differences analysis coupled with an event study analysis to study hospital operational measures, clinical-process quality of care measures, and mortality and readmission rates for acute myocardial infarction, heart failure, and pneumonia. Overall, the paper finds that quality of care either does not change or, for several measures, improves after private equity acquisition of a hospital. Most clinical-process quality of care measures show statistically significant improvement, while most hospital operational measures, and mortality and readmission rates for AMI, HF, and PN, do not change post acquisition. Interestingly, non-parametric event study estimates indicated an increase in the transfer-adjusted case mix index post acquisition, suggesting that hospitals admit sicker patients, on average, after acquisition. Even after controlling for case mix, the results obtained are consistent. Finally, a heterogeneity analysis by private equity fund size reveals that smaller mega-funds reduce total beds and admissions while larger mega-funds do not, and in general, larger mega-funds improve quality of care more than do smaller mega-funds.