Professor Merih Sevilir will present the paper “Private Equity in the Hospital Industry”.
This paper studies the growing presence of private equity (PE) firms as acquirers in the hospital industry. We examine employment, operational efficiency and patient satisfaction outcomes at hospitals acquired by PE firms. While there are significant employment cuts at target hospitals, the proportion of physicians and nurses in the total workforce of the hospital increases when the acquirer is a publicly traded PE backed hospital. Consistent with reduction in overall employment, target hospitals exhibit a significant reduction in their total wage bill and in operating costs per treated patient. Reduction in employment, total wages and operating costs are also observed in target hospitals acquired by non PE acquirers, although non PE acquirers are not associated with an increase in the proportion of skilled employees. In line with the observation that PE firms increase the proportion of skilled employees, patient satisfaction outcomes do not worsen (or improve along some dimensions) at hospitals acquired by publicly traded PE backed hospitals whereas they significantly worsen at hospitals acquired by non PE acquirers. Overall, our paper provides a comprehensive look at the role of PE acquirers in the hospital industry, and documents nuanced differences between PE and non PE acquirers, as well as between PE backed acquirers with and without access to public capital markets.