By T N Ashok
NEW YORK: Over the past decade Private Equity (PE) firms have invested over $1 trillion in U.S. healthcare, acquiring hundreds of hospitals as for-profit assets. In India private equity, both domestic and overseas, and venture capital investments in Indian health care systems and hospitals has jumped to a whopping $5.3 billion till date from the previous $2 billion.
Does private equity picking up stake in hospitals expanding health care or restricting it with high costs? Equities look for profits within three years as they are not long term players which puts hospitals under pressure to return the monies invested.
First, the US Scenario – Steward Health Care System, once backed by Cerberus Capital Management. Prospect Medical Holdings, majority-owned by Leonard Green & Partners. Both collapsed under debt-laden systems, forcing closures and disrupting care in communities across Pennsylvania, California, Connecticut, and Massachusetts.
PE acquisitions typically load hospitals with debt, then pay large dividends or do sale-leasebacks, weakening financial stability. Steward and Prospect paid out $1.4 billion in dividends before insolvency.
A 2023 JAMA/National Institutes of Health–funded study found PE hospitals saw 25 % more hospital-acquired conditions, including central-line infections and falls, compared to peers. Patients tended to be younger and less socioeconomically disadvantaged.
A U.S. Senate Budget Committee report accused prospect of prioritizing profits over safety, under‑staffing, unsafe buildings, and cutting corners.
A U.S. Department of Health & Human Services report blamed PE ownership for higher patient deaths, especially in nursing homes, and reduced competition. Heart-attack mortality rose at PE‑owned sites due to staffing cuts.
A matched control analysis in Health Affairs found that PE‑acquired hospitals reduced cost per adjusted discharge (by about $432 and increased operating margins (by ~1.8 pp), alongside staff reductions—5 % fewer total personnel, 4.4 % fewer nursing FTEs—with beds reduced too
Insurance companies often see increased billing for services, while deeper cutbacks and less experienced staff can generate medical-necessity disputes. ERs owned by PE firms have adopted profit-first models: reduced physician coverage, faster turnover, increases in unnecessary admissions and charges—all contributing to compliance issues despite protections like the No Surprises Act.
In India, between 2021 and 2024, PE/VC investments into Indian healthcare rose from about $2 billion to over $5.3 billion annually, with hospital consolidations accelerating.
The Key deals include: Temasek’s ₹16,300 Cr (~$2 billion) investment into Manipal Health Enterprises (29 hospitals, ~8,300 beds) to raise its stake to 59 %., Blackstone’s acquisition of controlling stakes in CARE Hospitals and KIMS Kerala, creating a large combined chain worth over ₹8,300 Cr (~$1 billion), General Atlantic purchased Ujala Cygnus Healthcare (~1,600 Cr valuation), expanding its hospital bed count significantly. Max Healthcare’s acquisitions: Alexis Multi-Speciality Hospital (Nagpur) and Sahara Hospital, totalling ₹1,350 Cr ($110 million) in urban expansion. Manipal Hospitals acquired AMRI Hospitals in Kolkata (~84% stake for ₹2,400 Cr) in Sept‑2023, folded into its network by 2024. Baby Memorial Hospital (BMH) in Kerala was acquired by KKR’s Asian Fund IV (~₹2,000 Cr) in mid‑2024. Ontario Teachers’ Pension Plan took over Sahyadri Hospitals, Maharashtra’s largest chain (~₹2,500 Cr) in 2022.
PE brings capital, enabling acquisition of high-end surgical suites, robotic systems, and expansion of single-specialty chains (e.g., oncology, eye care). The single-specialty market is projected to grow from $15 billion to $31 billion by 2028, reaching 40 % of total healthcare services due to repeatable PE models.
PE-backed hospitals often adopt modern processes, best-in-class EHR systems, and unified branding to attract urban clientele. They also drive regional expansion into smaller cities under a platform logic.
Patients report higher fees, mandatory diagnostics, and reduced doctor choice. For example, patient accounts note consultation fees rising from ₹900 to ₹1,200, mandatory blood tests before consultation—even for follow-ups—with each consumable billed separately, often excluded from insurance reimbursement lists. Longstanding doctors are often replaced with revenue-driven new hires.
Insurance approvals are delayed or denied due to inflated pricing; patients shoulder balance bills. Hospitals optimize “non-payable” line items—gowns, gloves, file fees—leading to disputes with insurers.
The Indian government has actively liberalized healthcare: allowing 100% FDI in health, streamlined permissions, and supportive regulations for infrastructure investment. This, plus a booming consumer base, lowers entry barriers for PE funds and institutional hospital chains.
Critics say opposition parties and local hospitals decry this: smaller doctor-led hospitals feel marginalized, unable to compete with PE-backed chains in capital or marketing. They warn that unchecked expansion could create oligopolies. The government’s openness to global capital has raised voices of concern/regulatory scrutiny, but momentum remains strong.
According to Onsurity analysis, private hospital costs are 2–20× that of government hospitals: ICU daily stay: ₹1,500 in public vs ₹30,000 in private; Open-heart surgery: ₹95,000 (public) vs ₹280,000 (private); Cancer treatment: ₹22,500 vs ₹93,300.
Under CGHS, reimbursements to private hospitals have soared from 24% in 2019–20 to 60% in 2023–24, reflecting rising reliance on empanelled private care. Reimbursements jumped from ₹935 Cr to ₹3,646 Cr. Fraudulent claims and denial of care have caused concerns. Unlike Ayushman Bharat (₹5 L cap), CGHS has no ceiling, leading to unchecked reimbursement to private hospitals.
Government-run CGHS facilities offer standard charges, minimal extras, and nearly full coverage—but access is limited and infrastructure often overloaded. Patients report long waits, limited technology, and sometimes absentee doctors. Private PE-backed hospitals offer better infrastructure and faster service, but at much higher cost.
In USA, insurers face inflated charges from PE‑owned hospitals, leading to raised premiums and narrower networks. They attempt to push back—requiring prior authorizations, negotiating bundled payments—but often lack leverage when large hospital chains dominate regions. The No Surprises Act helps limit shock billing, but other overcharges persist. Insurers increasingly network only with non–PE hospitals, where possible, to contain cost and quality risk.
In India, insurers push back on non-standard items. Some insurers try to enforce CGHS rates, but most have contracts based on market pricing. The rise in utilisation under CGHS has forced the government to increase budgets, shifting costs to taxpayers. Employers with per-employee private insurance see rising premiums tied to hospital billing inflation.
Insurers may prefer lower-cost public hospitals, but capacity constraints push many claims to private networks, reinforcing the dominance of PE-backed chains. In India, private care costs can exceed government/hospital CGHS prices by 2× to 20×; yet CGHS reimbursements to private hospitals now top 60% of expenditure, indicating significant public burden.
In the U.S., communities face hospital closures after PE exits, leaving gaps in emergency and primary care coverage that fall to taxpayers and nonprofits to fill. Insurance companies have adapted by narrowing networks, contesting inflated billing, and pushing for price controls—though their leverage is uneven.
Policymakers must strike a balance: allow infusion of capital and innovation, but regulate aggressively to protect quality, affordability, and access. In both countries, unchecked profit-driven hospital ownership may undermine the social mission of healthcare. Ultimately, while PE fuels growth, the question remains: whose health is served—and at what cost? (IPA Service)
