Private Equity in the Hospital Industry

67 Pages Posted: 20 Sep 2021 Last revised: 12 Apr 2023

See all articles by Janet Gao

Janet Gao

McDonough School of Business

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Yongseok Kim

Indiana University

Date Written: September 15, 2021

Abstract

We examine the survival, profitability, and employment profiles of private equity (PE) acquired hospitals. Target hospitals sustain their survival rates and improve in profitability. Although employment and wage expenditures substantially decline, the effect differs across employee types: The decline in core medical workers is temporary and quickly reversed, while the decline in administrative workers and their wages persists. These changes are more pronounced for nonprofit targets, acquisitions into larger systems, and PEs with healthcare industry expertise. We do not find patient outcomes to worsen at acquired hospitals. Our results suggest that PE acquirers improve hospitals’ operational efficiency without compromising healthcare quality.

Keywords: Private Equity, Hospital Acquisitions, Employment, Operational Efficiency, Real Patient Outcomes

Suggested Citation

Gao, Janet and Sevilir, Merih and Kim, Yongseok, Private Equity in the Hospital Industry (September 15, 2021). European Corporate Governance Institute – Finance Working Paper No. 787/2021, Available at SSRN: https://ssrn.com/abstract=3924517 or http://dx.doi.org/10.2139/ssrn.3924517

Janet Gao (Contact Author)

McDonough School of Business ( email )

Washington, DC 20057
United States

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Yongseok Kim

Indiana University ( email )

107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States

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