A recent study highlights a disturbing trend in the healthcare sector: hospitals owned by real estate investment trusts (REITs) are significantly more likely to close or declare bankruptcy than those not under such ownership. This finding adds to the ongoing scrutiny of the impact of private equity on healthcare delivery.
The study, published in the British Medical Journal on October 5, 2023, reveals that hospitals acquired by REITs are 5.7 times more likely to shut down or file for bankruptcy within four years compared to their non-REIT counterparts. Specifically, 25% of the hospitals examined that were acquired by REITs either closed or went bankrupt during the study period. In contrast, only 4% of non-acquired hospitals experienced similar fates.
This research underscores the potential risks associated with the increasing trend of hospitals being purchased by investment entities focused primarily on profit generation. Joseph Dov Bruch, an assistant professor of public health sciences at the University of Chicago and co-author of the study, noted that prior to this research, the impact of REIT ownership on hospital operations had been largely overlooked. He emphasized that only 3% of U.S. hospitals were owned by REITs in 2021, suggesting a need for more attention from academics and policymakers alike.
Impact of Private Equity Ownership
The findings of this study raise critical questions about the sustainability of hospitals under REIT ownership. The research suggests that the financial strategies employed by these trusts may prioritize short-term returns over long-term viability, ultimately jeopardizing patient care.
The case of Steward Health Care, a private equity-backed hospital chain, serves as a cautionary tale. Eight years prior to its well-documented collapse, Steward sold its properties to a REIT. This deal is now considered a significant factor in the chain’s subsequent downfall, as it shifted priorities from healthcare delivery to profit margins.
These developments indicate a need for regulatory scrutiny and a reevaluation of how hospital ownership structures affect community health services. Policymakers are urged to consider the long-term implications of allowing investment firms to dominate healthcare infrastructure.
Future Considerations for Healthcare
As the healthcare landscape continues to evolve, the implications of this study may resonate across various stakeholders, including healthcare providers, investors, and patients. Understanding the relationship between hospital ownership and operational stability is vital for ensuring that healthcare remains accessible and effective.
With the healthcare sector facing numerous challenges, including rising costs and changing patient needs, the findings of this research serve as a critical reminder of the need for responsible ownership models. The trend of REIT acquisitions may necessitate a broader conversation about the role of profit in healthcare and its impact on patient outcomes.
Overall, as the debate continues, it is clear that the relationship between financial interests and hospital operations warrants further investigation to protect the future of healthcare delivery.
