Private equity healthcare investments have been silently harming the American healthcare system, according to a new report.
Researchers at the NYU Center for Business and Human Rights demonstrated how private equity financial models could silently erode the quality of U.S. healthcare. The report acknowledges that private equity can provide much-needed cash and strategic expertise to healthcare companies. However, it warns the way these investments are structured is unsustainable for health providers.
“The report is not about condemning an industry,” said Director Michael Posner in a LinkedIn post. “It seeks to identify areas where reforms are needed to address healthcare’s unique demands.”
How Does Private Equity Healthcare Investments Impact Patient Care?
Private equity firms have primarily used debt-leveraged buyouts for their investments. However, the report shows these financial models may not be beneficial longterm based on current outcomes. A 2019 study included in the report revealed public companies bought by private equity firms were 10 times more likely to go bankrupt.
While these private equity firms may have invested more than $1 trillion over the past decade, case studies show that these acquisitions have resulted in aggressive cost-cutting, reportedly leading to measurable declines in patient health. These declines include higher in-hospital complication rates, mortality and increased patient mortality. The report reveals private equity ownership connects to a 11.6% reduction in hospital staff, while nursing home acquisitions correlates to an 11% increase in patient deaths.
The NYU report also cited research highlighting how private equity ownership raised in-hospital complications by 25%. The study’s lead author, Harvard Medical School Researcher Zirui Song attributed the increased complications to staff cuts.
Breaking Down The Current Private Equity Investments Models
The NYU report focuses on the leveraged buyout and sale-leaseback transactions as the source of conflict. The researchers argue that these financing models lead to high operational and human costs for acquired healthcare providers.
In leveraged buyout models, private equity firms often borrow money to buy a healthcare provider. After the purchase, the private equity firms usually place the debt on the acquired provider’s balance sheet rather than keep it on their own books. This financing structure can put pressure on the provider to prioritize debt repayment, which may influence operational and clinical decisions.
The report also highlights sale-leaseback transactions. In this model, a private equity firm buys a healthcare provider that owns its buildings and land. The private equity firm then has the provider sell its property to a third party to generate liquidity. After the sale, the provider no longer owns the property and must pay rent to keep using the land. In return, the provider receives a lump sum payment, which the owning private equity firm often directs to other priorities and investments.
Companies owned by private equity firms tend to have “dangerously high” debt-to-cash flow ratio, according to the NYU report. This ration is a metric that assesses a company’s ability to pay off debt using operating cash flow. Many private equity-backed healthcare providers are operating in what federal regulators traditionally consider “dangerously over leveraged,” per the report.
A 2013 guidance from the Federal Reserve, Department of the Treasury, and US Comptroller of the Currency warns that debt ratios exceeding 6.0 “raises concerns for most industries.” The NYU report found that private equity-owned healthcare firms had an average debt-to-cash ratio of 7.1.
NYU’s Recommendation for Private Equity and Institutional Investors
The push for regulation is even more prevent following a turbulent year for the industry. Although private equity-owned firms represent only about 7% of the U.S. economy, they accounted for 44% of the largest healthcare bankruptcies last year, according to data from the Private Equity Stakeholder Project . In a 2026 report by restructuring firm Gibbins Advisors, there were 45 Chapter 11 bankruptcy fillings for healthcare companies.
Answering this need for change, the report calls for an overhaul of healthcare financing. It adds that the medical field requires stricter standards. Due to the “harmful” effect of these financing models, researchers suggest investors “refrain from sale-leaseback transactions or debt-funded dividends.”
“Healthcare is not like other industries,” lead researcher Michael D. Goldhaber wrote. “When private equity fails in healthcare, patients die, and entire communities lose access to life-saving services.”
To reduce these risks to health providers and patients, the report proposes a suite of “Responsible Healthcare Investment Policies.” These recommendations include mandatory transparency in debt disclosure following the acquisition of healthcare companies. The Center also advises private equity firms to maintain a debt-to-cash flow ratio that is appropriate to the sub sector, suggesting a maximum of 5.0 for hospitals and clinics.
The report emphasizes that increased state and federal oversight is essential to protect public health. As of 2025, only New Mexico and Oregon grant state health agencies the explicit power to halt private equity hospital acquisitions. Two other states, California and Massachusetts, have established agencies to review all healthcare investment transactions, while several other state legislatures are currently debating similar oversight bills.
Oregon is spotlighted as a pioneer in health investment oversight. In 2021, the state passed House Bill 2362, requiring state health officials to review all major healthcare investment deals. The law empowers the Oregon Health Authority to block acquisitions that conflict with the public interest or pose significant risks to public health and safety.
