Private Equity Buyouts in Healthcare: Who Wins, Who Loses?

113 Pages Posted: 15 May 2020

See all articles by Eileen Appelbaum

Eileen Appelbaum

Center for Economic and Policy Research

Rosemary Batt

Cornell University - School of Industrial and Labor Relations

Date Written: March 15, 2020

Abstract

Private equity firms have become major players in the healthcare industry. How has this happened and what are the results? What is private equity’s ‘value proposition’ to the industry and to the American people -- at a time when healthcare is under constant pressure to cut costs and prices? How can PE firms use their classic leveraged buyout model to ‘save healthcare’ while delivering ‘outsized returns’ to investors? In this paper, we bring together a wide range of sources and empirical evidence to answer these questions. Given the complexity of the sector, we focus on four segments where private equity firms have been particularly active: hospitals, outpatient care (urgent care and ambulatory surgery centers), physician staffing and emergency room services (surprise medical billing), and revenue cycle management (medical debt collecting). In each of these segments, private equity has taken the lead in consolidating small providers, loading them with debt, and rolling them up into large powerhouses with substantial market power before exiting with handsome returns.

Keywords: Private Equity, Leveraged Buyouts, health care industry, financial engineering, surprise medical billing revenue cycle management, urgent care, ambulatory care

JEL Classification: I11, G23, G34

Suggested Citation

Appelbaum, Eileen and Batt, Rosemary, Private Equity Buyouts in Healthcare: Who Wins, Who Loses? (March 15, 2020). Institute for New Economic Thinking Working Paper Series No. 118. Available at SSRN: https://ssrn.com/abstract=3593887

Eileen Appelbaum (Contact Author)

Center for Economic and Policy Research ( email )

1611 Connecticute Ave
Suite 400
Washington, DC 20009
United States

HOME PAGE: http://www.cepr.net

Rosemary Batt

Cornell University - School of Industrial and Labor Relations ( email )

Ithaca, NY 14853-3901
United States
607-254-4437 (Phone)
607-255-1836 (Fax)

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