Document Type

Restricted

Advisor

Candace Howes

Publication Date

2026

Abstract

Private equity ownership of U.S. hospitals has grown rapidly over the past two decades, yet its effects on patient outcomes and financial behavior remains poorly understood, and existing regulations provide almost no friction against the specific behaviors that are most harmful to patients and communities. This thesis uses CMS Care Compare and Medicare Cost Report data to compare patient outcomes and financial performance at PE-owned and non-PE-owned hospitals across a 2023 cross-sectional analysis of 2,185 hospitals and a 2019-2024 panel study; replicating prior findings on patient harm and providing novel empirical evidence of the specific accounting channels through which PE firms extract financial value. While prior studies examine operating margins or net income individually as outcomes of acquisition events, this thesis is the first to simultaneously model operating profit margin, net income margin, and capital related costs as a unified analytical framework. PE hospitals generate operating margins that are 12% higher than comparable non-PE hospitals yet show no significant difference in net income, a gap explained by persistently elevated capital costs consistent with LBO debt service and sale-leaseback obligations that extract value above the net income line and jeopardize the long-run financial survival of acquired facilities. Patient outcome findings are broadly consistent with prior literature, with PE-owned hospitals exhibiting significantly worse performance on measures including surgical complications, infection rates, and patient satisfaction across both analytical designs. Given that PE hospitals are disproportionately concentrated in rural Southern and Western markets where patients have few alternative sources of acute care, these findings carry significant distributional implications for healthcare access among the most vulnerable communities in the United States.

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The views expressed in this paper are solely those of the author.