TY - JOUR
T1 - Financial Impacts And Operational Implications Of Private Equity Acquisition Of US Hospitals
AU - Cerullo, Marcelo
AU - Lin, Yu Li
AU - Rauh-Hain, Jose Alejandro
AU - Ho, Vivian
AU - Offodile, Anaeze C.
N1 - Funding Information:
Portions of this article, including preliminary methods and findings, were presented at the American Society of Health Economists meeting (virtual), June 2021. Salary support for Marcelo Cerullo was provided by the Veterans Affairs Office of Academic Affiliations through the VA/National Clinician Scholars Program and the School of Medicine at Duke University. Jose Rauh-Hain is supported by a grant from the National Cancer Institute at the National Institutes of Health (Grant No. K08CA234333). Anaeze Offodile has received research funding from the Blue Cross Blue Shield Affordability Cures Consortium and the National Academy of Medicine unrelated to the submitted work. He also reports honoraria from the Indiana University Department of Surgery. The contents do not represent the views of the Department of Veterans Affairs or the United States government.
Publisher Copyright:
© 2022, Project HOPE. All rights reserved.
PY - 2022/4
Y1 - 2022/4
N2 - Although private equity acquisition of short-term acute care hospitals purportedly improves efficiency and cost-effectiveness, financial performance after acquisition remains unexamined. We compared changes in the financial performance of 176 hospitals acquired during 2005–14 versus changes in matched control hospitals. Acquisition was associated with a $432 decrease in cost per adjusted discharge and a 1.78-percentage-point increase in operating margin. The majority of acquisitions—134 members of the Hospital Corporation of America, acquired in 2006—were associated with a $559 decrease in cost per adjusted discharge but no change in operating margin. Conversely, non- HCA hospitals exhibited a 3.27-percentage-point increase in operating margin without a concomitant change in cost per adjusted discharge. When we examined markers of hospital capacity, operational efficiency, and costs, we found that private equity acquisition was associated with decreases in total beds, ratio of outpatient to inpatient charges, and staffing (total personnel and nursing full-time equivalents and total fulltime equivalents per occupied bed). Therefore, financial performance improved after acquisition, whereas patient throughput and inpatient utilization increased and staffing metrics decreased. Future research is needed to identify any unintended trade-offs with safety and quality.
AB - Although private equity acquisition of short-term acute care hospitals purportedly improves efficiency and cost-effectiveness, financial performance after acquisition remains unexamined. We compared changes in the financial performance of 176 hospitals acquired during 2005–14 versus changes in matched control hospitals. Acquisition was associated with a $432 decrease in cost per adjusted discharge and a 1.78-percentage-point increase in operating margin. The majority of acquisitions—134 members of the Hospital Corporation of America, acquired in 2006—were associated with a $559 decrease in cost per adjusted discharge but no change in operating margin. Conversely, non- HCA hospitals exhibited a 3.27-percentage-point increase in operating margin without a concomitant change in cost per adjusted discharge. When we examined markers of hospital capacity, operational efficiency, and costs, we found that private equity acquisition was associated with decreases in total beds, ratio of outpatient to inpatient charges, and staffing (total personnel and nursing full-time equivalents and total fulltime equivalents per occupied bed). Therefore, financial performance improved after acquisition, whereas patient throughput and inpatient utilization increased and staffing metrics decreased. Future research is needed to identify any unintended trade-offs with safety and quality.
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U2 - 10.1377/hlthaff.2021.01284
DO - 10.1377/hlthaff.2021.01284
M3 - Article
C2 - 35377756
AN - SCOPUS:85127505113
SN - 0278-2715
VL - 41
SP - 523
EP - 530
JO - Health Affairs
JF - Health Affairs
IS - 4
ER -