Private Equity and Productivity in U.S. Healthcare

Atul Gupta, Health Care Management, The Wharton School; Sabrina T. Howell, New York University; and Constantine Yannelis, University of Chicago

Abstract: Private equity (PE) investment in U.S. healthcare has increased dramatically in recent years. On one hand, widespread PE participation may be one avenue to stem rising costs and increase productivity, which have been elusive objects in U.S. healthcare. Research from other sectors has shown that PE firms apply best-in-class management practices to improve productivity and firm value. On the other hand, high powered financial incentives for PE managers may create conflicts with the interests of consumers and of taxpayers, who finance about 45% of healthcare spending. This project aims to study how PE investment affects quality and productivity of healthcare delivery in the U.S., issues of first order importance for both policy and business. We have assembled the most comprehensive set of data resources used to study this question – confidential micro data on PE investments in healthcare firms, and national data on services, spending, and outcomes for about 30 million Medicare beneficiaries over 2000–17. We will deploy a differences-in-differences research design, exploiting variation in the timing of PE acquisitions across firms over this long panel. We will examine effects on 1) growth 2) operating efficiency, and 3) quality of care delivered, over the short and long-run.