Private equity firms will intentionally make a local hospital less profitable and less efficient to help a different hospital succeed.
These firms use a platform strategy where they buy multiple hospitals and then strip the add-on facilities of their best services. They centralize the most profitable and intense medical procedures at a single main location, leaving the smaller hospitals to struggle. We assume that any new owner wants every business they buy to grow and improve. This evidence proves that intentional deterioration is a calculated tool for system-wide profit. Local patients end up with worse care at their neighborhood clinic so the investment group can maximize returns elsewhere.
When Buy-and-Build Breaks: Serial Private Equity Acquisitions in the Hospital Industry *
SSRN · 5416094
I study the operational heterogeneity of private equity buyouts in the U.S. hospital industry. Classifying targets into platforms and add-ons, I document that these acquisitions serve different structural roles within a consolidated buy-and-build network. Post-acquisition, platform hospitals experience significant and persistent profitability gains, whereas local add-ons exhibit severe contractions in patient volume and profitability. Rather than reflecting managerial failure, this localized det