Amid calls for reform, Penn experts discuss effects of private equity funding in health care

In the past few years, several Philadelphia-area hospitals have shut down after being acquired by private equity firms. 

Critics of private equity have long argued that firms prioritize financial success over factors such as patient care and worker stability. Amid increasing calls for regulation, The Daily Pennsylvanian spoke to Penn experts about the role of private equity in health care and the risks it may pose. 

Management professor and Senior Fellow in Healthcare Management Steve Sammut explained that private equity firms raise large amounts of money from wealthy individuals and institutions to buy entire private companies, “with the goal of improving them and selling them later for a big profit.”

Sammut outlined two differing perspectives on private equity’s involvement in health care. On one side, he said, are those who believe the “profit motive” in the health care field “diminishes the quality of care, access to care, or cost effectiveness of care.”

On the other hand, he argued, some believe that private equity can ultimately improve health care “if free market principles are applied in the right way.”

Family Medicine and Community Health assistant professor Victor Roy described private equity firms which own hospitals as “extractive,” since firms are often under time constraints to make financial gains. 

“A short time horizon can lead to a lot of different strategies that aren’t going to improve care for patients, but are going to generate more profits,” Roy — who also serves as a senior fellow at the Leonard Davis Institute for Economics — explained. 

According to Roy, cost-cutting measures may include staff reductions, which can cause longer wait times and more complications in patients, due to a higher likelihood that signs and symptoms are missed.

“You might not have the ratios of nurses that you need to care for an entire ward of patients,” said Roy.

School of Nursing and Perelman School of Medicine assistant professor Jane Muir cited her preliminary research linking for-profit hospital ownership with a decrease in investment for nursing services and higher rates of burnout and job dissatisfaction. 

“This means that for-profit hospitals may invest less in safe patient-to-nurse staffing ratios and high-quality nurse work environments,” Muir wrote in a statement. “Over 20 years of research at Penn Nursing demonstrates that these modifiable nursing factors are associated with worse patient quality and safety outcomes including more hospital readmissions and deaths, when under-invested in.”

Last year, Delaware County’s Crozer-Chester Medical Center closed soon after being acquired by the private equity fund Prospect Medical Holdings. The shutdown affected 3,000 employees and nearly 75,000 patients.

According to Sammut, Crozer had “a stellar reputation” and served as a training ground for many young physicians. 

“Crozer was in a situation where it needed new capital, and had the opportunity to be acquired by a private equity fund, which, at first, went well,” Sammut said.

Prospect later sold the hospital’s properties to a real estate investment trust, “burdening the system with over $200 million in mortgage debt and failing to address $150 million in pension obligation,” according to a May 2025 Pennsylvania Gov. Josh Shapiro press release.

Crozer went on to file for bankruptcy and shut down both its Medical Center and Taylor Hospital. Prospect also previously shut down two other Pennsylvania hospitals in 2022 — Delaware County Memorial Hospital and Springfield Hospital.

In 2019, Philadelphia’s Hahnemann University Hospital — the primary teaching hospital for Drexel University’s School of Medicine — closed less than two years after it was acquired by Paladin Healthcare Capital. Hahnemann served mostly low-income patients and produced patient outcomes that “rivalled those of practically any hospital in the country,” according to the New Yorker. 

Private equity firms often look for hospitals “in distress” that need access to capital, Roy explained. 

“That can lead to a lot of risk, which Crozier and Hahnemann both have experienced,” he said. “Private Equity acquisition of hospitals, in many states, has not come under regulatory scrutiny as much; it will in the future, because of some of these high-profile examples.”

He added that the lack of “regulatory guardrails” around private equity ownership makes acquisitions more attractive to firms.

In a budget address last year, Shapiro called to reform private equity in the state’s health care system. He explained that these firms generate revenue for themselves by “stripping money and resources from those facilities and compromising care.”

“I’m done letting private equity treat Pennsylvania hospitals like a piggybank they can empty out and smash on the floor,” Shapiro said at the time. “As a Commonwealth, it’s time for us to stand up for our local hospitals and nursing facilities and put in place real safeguards against private equity.”

Since Shapiro’s address, legislation hoping to curb private equity’s influence has gained momentum. 

Pennsylvania House of Representatives Bill 1460 — the Health Systems Protection Act — aims to ensure “certain transactions involving health care entities” in the state require prior approval from the Department of Health and the Office of Attorney General. The bill — which Shapiro said intends to “prevent the next Crozer” — was referred to Pennsylvania State Senate Committee on Institutional Sustainability & Innovation last June.

House Bill 2115, which would provide antitrust protections for health care transactions, was referred to the House Judiciary committee on Jan. 12. This bill is intended to protect patients and workers from “anti-competitive behaviors that prioritize profits” over patients.

Many other states have followed Pennsylvania’s lead in introducing such legislation — including New York, Rhode Island, Virginia, Vermont, and Hawaii.

Sammut, however, said that “negative press” can cause “imbalance in perception” on private equity in health care. The overall benefits of private sector investment, he said, “don’t get the same level of public attention or media attention” as the negative impacts.

“If a private equity fund is looking at taking over a hospital or a hospital system, it should be done with a great deal of caution and oversight, and transparency and participation in the governance by the community — I think that becomes really important,” Sammut said. “On the other hand, private equity can be used to improve the operation of a hospital or even a function within the hospital.”

Roy echoed a similar sentiment, arguing that private equity firms can help leverage capital to improve physician practices, such as by increasing access to technology.

“In some cases, that might be useful,” Roy said. “But it carries a lot of risks with it.”

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