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![handle is hein.crs/goveqhf0001 and id is 1 raw text is: Private Equity Investments in Health Care:
Selected Enforcement Issues
August 8, 2024
A 2021 report from the Medicare Payment Advisory Commission (MedPAC) found that private equity
investments in health care substantially expanded in the preceding 20 years, particularly with respect to
acquisitions of health care providers, including hospitals, physician groups, and nursing homes. While the
overall significance of these investments to the health care sector is disputed, they have attracted
regulatory, legislative, and academic interest, particularly in the midst of ongoing conversations about
health care quality and costs.
Scrutiny often focuses on the structure and incentives of private equity investment in health care. Private
equity funds typically aim to acquire portfolio companies, increase their value, and exit from these
investments, generally in a defined time frame. The structure of private equity can involve an array of
corporate entities, which may generally shield fund managers and investors from liability. Regulators
have expressed concern that these institutional features may give private equity firms an undue focus on
short-term profits and aggressive cost-cutting that creates unique risks relative to other market
participants, with impacts on patient care and competition. For example, MedPAC's report details
ongoing debates regarding the effects of private equity efforts to increase profitability in health care
investments by increasing revenue while reducing costs. On the other hand, private equity representatives
and other stakeholders argue that such efforts can improve both efficiency and patient care, and that
private equity has been scapegoated for broader issues in the health care system.
In December 2023, the Biden Administration announced that federal agencies, including the Department
of Justice (DOJ), the Department of Health and Human Services (HHS), and the Federal Trade
Commission (FTC), would take increased actions to lower health care costs, increase quality, and protect
consumers. As part of this effort, the agencies released a Request for Information (RFI) soliciting public
comments on the effects of private equity investments on patients and health care workers. The agencies
argued that [a]cademic research and agency experience in enforcement actions have demonstrated that
patients, health care workers, and others may suffer negative consequences as a result of these
investments in the health care sector.
Although there is limited federal law that directly addresses private equity ownership in health care,
private equity firms and funds have recently faced claims alongside their portfolio companies in the
health care sector under federal laws concerning both fraudulent and anticompetitive behavior. Legal
Congressional Research Service
https://crsreports.congress.gov
LSB11215
CRS Legal Sidebar
Prepared for Members and
Committees of Congress](ViewImageLocal?handle=hein.crs/goveqhf0001&div=1&collection=&method=preview&ext=.png&size=3)