Private Equity Firms Research Articles

Caregiver-Reported Quality in Hospices Owned by Private Equity Firms and Publicly Traded Companies

This study compares differences in caregiver-reported hospice quality across categories of ownership, including for-profit private equity firm (PEF)/publicly traded company (PTC)–owned and non-PEF/PTC–owned hospices as well as not-for-profit–owned hospices.

Abstract 4138609: Patient Care Experience Worsens After Private Equity Acquisition of US Hospitals: Implications for Cardiovascular Outcomes

Background: Patient care experience is strongly associated with outcomes among individuals with cardiovascular disease. There is growing concern that the recent and precipitous rise in private equity acquisitions of US hospitals may worsen patient-centered care, and ultimately, cardiovascular outcomes. However, little is known about how private equity acquisitions of hospitals impact patient care experience. Research Question: To evaluate whether the acquisition of US hospitals by private equity firms was associated with changes in measures of patient-reported experience compared with matched control hospitals (not acquired by private equity) between 2007-2019. Methods: This cohort study identified 74 US acute care hospitals newly acquired by private equity firms and 298 matched control (non-acquired) hospitals from 2007 to 2019. CMS Hospital Compare files were used to obtain patient experience measure scores for each hospital from Hospital Consumer Assessment of Healthcare Providers and Systems (HCAPHS) survey results. A quasi-experimental difference-in-differences design was used to evaluate changes in patient experience measures at private-equity acquired hospitals compared with matched control hospitals 3 years before vs 3 years after acquisition. Results: The percentage of patients rating hospitals as a 9 or 10 out of 10 at private equity acquired hospitals and control hospitals is shown in the Figure. There was a differential decrease in patient ratings (of 9 or 10 out of 10) at hospitals acquired by private equity firms compared with control hospitals (-2.4 percentage points [95% CI -3.9, -0.9]). A similar trend was seen in the percentage of patients that would definitely recommend the hospital, with a differential decrease at private equity-acquired hospitals relative to control hospitals (-2.2 percentage points [95% CI -3.6, -0.7]). For both measures, the relative decrease in patient care experience at private equity hospitals compared with control hospitals steadily grew with each subsequent year after acquisition. Conclusion: In this national study, patient-reported care experience worsened after private equity acquisition of US hospitals, which has important implications for cardiovascular care and outcomes.

Private equity involvement in primary care: the case of Ireland.

Private equity (PE) firms play an increasingly important role in healthcare. Yet, existing research remains uneven, mostly focused on the United States and on certain sectors such as nursing homes. Some geographical areas and health specialties remain under-explored. This brief paper outlines a research agenda focusing on three key issues: (1) PE's significance and (2) business strategies in healthcare, and (3) PE's impacts on health and healthcare. The paper uses primary care in Ireland as an example. The proposed research agenda should improve our understanding of the nature of PE in healthcare and serve as a basis for policy-makers to explore appropriate and effective regulation of PE to reduce its negative impacts if and when they exist.

Plundered or profitably pumped-up? The effects of private equity takeover

We study the effects on firms that are acquired by private equity firms in a leveraged buyout, using detailed Swedish registry data covering 1998-2022. Acquired firms see a large increase in their debt and debt related variables, but no significant change in productivity. This suggests that, on average, private equity firms target profitable firms and increase their size through the addition of leverage.

Does the disclosure of ESG information by private equity firms impact the success of their fundraising efforts?

This study examines the impact of private equity fund managers' (GPs') ESG disclosure on fundraising. To this end, a sample of global private equity and venture capital funds that completed fundraising between 2020 and 2022 is employed. Our findings indicate that an increase in ESG disclosure by GPs is associated with an increase in fundraising. This indicates that GPs' ESG disclosure diminishes information asymmetry and has a favorable impact on fundraising. Conversely, the level of ESG disclosure among limited partners (LPs) has no significant impact on the relationship between GPs' ESG disclosure level and fundraising. The findings of this study have significant implications for private equity stakeholders, including GPs, given the current context of declining investment demand due to rising interest rates, recessionary concerns, poor performance and tighter regulations on private equity management. In this environment, ESG disclosure is becoming increasingly challenging for private equity firms to utilize as a fundraising strategy.

Assessing Private Equity Involvement in Ophthalmology: Parallels with the Past, Concerns for the Future

PurposeTo discuss the history and current state of private equity in ophthalmology and explore potential implications for ophthalmology practices, physicians, and patients. DesignPerspective. MethodsReview of selected articles in ophthalmology and non-ophthalmology medical literature and commentary based on the authors’ experiences. ResultsInvestment in ophthalmology appeals to private equity firms because of high procedural volumes, fragmented private practices, opportunities for real estate ownership, and an aging population in need of eye care. As a result, acquisition of private practices by large private equity companies has swelled since 2015. Metropolitan areas and practices that possess ambulatory surgical centers or a high proportion of retina surgeons receive the greatest investment. However, little objective data exists regarding the benefits of this trend. Initial research suggests that private equity ownership may negatively impact patient care through greater costs, shorter appointments, and fewer Medicare/Medicaid patients seen. Skeptics of private equity also highlight concerns that include financial risk falling primarily on the acquired practice itself, a short-term business approach that rewards profit maximization, and the erosion of physician autonomy. Furthermore, young ophthalmologists express reservations about working for private equity firms. 78% of trainees indicated they would not consider employment by a private equity owned practice and 81.4% of vitreoretinal fellows voiced concerns about autonomy and job security. Proposed legislation aimed at limiting private equity acquisitions is currently under review at the statewide level, adding additional uncertainty to the future of private equity involvement in ophthalmology. ConclusionAlthough investment by private equity offers potential financial rewards and operational improvements for practices, it also raises significant concerns reminiscent of those experienced by physician practice management companies in the 1990s. Nonanecdotal data is needed to assess the benefits and future of private equity involvement in ophthalmology.

A Study of the Impact of Private Equity Funds on the Value of SMEs

Private equity (PE), a type of equity investment in unlisted companies, has gradually become more popular in the domestic market as a result of China's economy's rapid development. According to certain experts, private equity significantly affects businesses. Less research has been done, though, on how private equity funds affect business value. The focus of this article is therefore the impact of PE on the valuation of SMEs. Based on the GEM data from 2019 to 2022, the empirical analysis of the results by means of multi-linear regression model indicates that the value of private equity firms is higher than that of non-private equity investors, and the lower the balance sheet ratio, the higher the return on net assets ratio, or the higher the research and development intensity of the enterprises participated by private equity institutions, the more conducive it is to increase the value of small and medium-sized enterprises.

ESG Disclosures in the Private Equity Industry

ABSTRACTThis paper offers the first systematic evidence on environmental, social, and governance (ESG) disclosures provided by a large global sample of private equity (PE) firms. Using historical websites from 2000 to 2022, we develop and validate a novel dictionary‐based measure of voluntary PE firm ESG disclosures. Descriptive statistics reveal an increasing time trend in these disclosures, with social topics becoming as important as environmental topics recently. Multivariate analyses show that the demand for ESG information from fund investors is a significant determinant of PE firms’ ESG disclosures. Leveraging data on PE firms’ portfolio companies, we document that more PE firm ESG disclosures are associated with better ESG outcomes at the portfolio company level, suggesting that voluntary ESG disclosures align with real actions for the average PE firm.

Equity Investment in Physician Practices: What's All This Brouhaha?

There have been two waves of equity-based investment in physician practices. Both used a combination of public and private sources but in different mixes. The first investment wave, in the 1990s, was led by public equity and physician practice management companies, with less involvement by private equity (PE). The second investment wave followed the Affordable Care Act and was led by PE firms. It has generated concerns of wasteful spending, less cost-effective care, and initiatives harmful to patient welfare. This article compares the two waves and asks if they are parallel in important ways. It describes the similarities in the players, driving forces, acquisition dynamics, spurs to consolidation, types of equity involved, models to organize physicians, and levels of market penetration achieved. The article then tackles three unresolved issues: Does PE investment differ from other investment vehicles in concerning ways? Does PE possess capabilities that other investment vehicles lack and confer competitive advantage? Does physician practice investment offer opportunities for supernormal profits? It then discusses ongoing trends that may disrupt PE and curtail its practice investment. It concludes that past may be prologue, that is, what happened during the 1990s may well repeat, suggesting the PE threat is overblown.

Financial and Clinical Characteristics of Hospitals Targeted by Private Equity Firms

This cross-sectional study examines whether private equity targets financially or clinically more distressed or successful hospitals for acquisition.

O-288 Pro

Abstract Currently and globally, the majority of ART treatments are performed either fully in the private medical sector or are partially subsidized in the public sector but with common treatments spill-over to the private sector; countries where there is sufficient public coverage of ART are in fact rare. While private clinics and hospital have been the norm in ART for decades, in recent years the field has undergone significant consolidation, and this has resulted in an influx of large financial players such as private equity (PE) firms. The results are a series of mergers and acquisitions that are shaping the geography of ART provision. In this debate, I will take on the “pro” side and I will highlight the scholarship around the changes in care brought about by PE ownership of medical practices, bringing examples from branches of medicine such as dermatology, dentistry, long term care or Ob&Gyn that have experienced market consolidation in the last decades. I will show that available evidence indicate that the change in ownership to PE of private medical practices is associated with an increase in the number of patients treated and a net increase in payments to clinicians. Moreover, PE ownership has been repeatedly associated with a perception of higher quality care by patients, while clinical KPIs have not gotten worse and, if anything, have improved. This is usually due to greater intentional focus on standardization and quality control, streamline and protocolization of treatments, and centralization of certain administrative areas. I will further argue that, in large PE owned networks, best practices tend to be enhanced by peer to peer sharing and central medical boards, while centralization and digitalization of patient data collection favors research and development in a field that sorely lacks public funding for reproductive research.

ESG in the Top 100 US Private Equity Firms

ESG in the Top 100 US Private Equity Firms

California Bill Would Tighten Oversight on Private Equity Hospital Purchases

No abstract available. Article truncated after 150 words. According to Medscape California lawmakers are considering a bill that would tighten oversight of private equity and hedge fund buyers of hospitals and healthcare facilities (1). Private equity investment in hospitals and physician groups has been under scrutiny in recent months after a slew of high-profile failures, including bankruptcies and hospital closures. California lawmakers have drafted a bill that would require private equity firms and hedge funds to give the state attorney general written notice before purchasing a healthcare facility or provider group. The attorney general would have to approve the transaction. Buyers would also be required to submit written notice to any federal or state agency as required by law within 90 days of the transaction, and the attorney general could extend that period. The bill gives the attorney general the power to halt an acquisition if there is a "substantial likelihood of anticompetitive effects" or if it would …

Do corporations benefit from divesting to private equity acquirers? An empirical investigation

AbstractResearch SummaryFrom the perspective of the divesting firm, do divestitures to private equity (PE) acquirers perform differently from divestitures to corporate acquirers? If so, why? This question‐based, empirical study shows that on average, divestitures to PE acquirers correlate with lower divesting firms' shareholder returns than divestitures to corporate acquirers. The study explores whether these lower returns when divesting to PE acquirers are explained by the differences in PE acquirers' distinct value creation strategies when it comes to target selection, ownership, or transaction timing. The results reveal that divesting firms' lower shareholder returns when divesting to PE acquirers are more likely correlated with differences in value creation by PE acquirers due to their distinct ownership and transaction timing strategies, but not their selection strategies.Managerial SummaryPrivate equity (PE) firms are prominent buyers of corporate divestitures, and PE firms' strategies for creating value when acquiring divested businesses tend to differ from those of corporate buyers. Yet the performance implications, from the perspective of the divesting firm, of divesting a business to a PE acquirer versus a corporate acquirer are not clear. In this study, I explore the differences in returns to firms divesting to PE acquirers versus those divesting to corporate acquirers. First, on average, divesting firms' returns are lower when divesting to PE acquirers. Second, these lower returns are more likely to occur when the PE acquirer may be expecting to create less value, or when firms choose to divest at a suboptimal time.

Dual holdings and shareholder–creditor agency conflicts: Evidence from the syndicated loan market

AbstractWe examine implications from the expansion of private equity (PE) firms into the collateralized loan obligation (CLO) (i.e., leveraged lending) business. Due to similarities in the investment universes of CLO managers and PE firms, asset managers running both of them frequently hold debt and equity claims of the same company. Our results indicate lower credit costs for these companies through the mitigation of shareholder–creditor agency conflicts. The lower funding costs imply increased equity returns for the sponsoring PE firms. In addition, our findings suggest that PE‐affiliated CLO managers benefit from informed trading in the secondary leveraged loan market.

Climate issues in portfolio investment decisions: a comparison of Private equity and venture capital

ABSTRACT Private equity (PE) and venture capital (VC) firms increasingly consider climate issues in their portfolio investment decisions. However, what are the underlying motives and which exact consideration strategies are employed? Based on the responses of 479 VC and 215 PE fund managers from two large surveys carried out in 2021, four motives emerge: ethical responsibility, responding to external stakeholders, product differentiation, and portfolio performance. Responding to external stakeholders and portfolio performance motives matter more to PE firms, while the product differentiation motive is more important for VC firms. No difference is found with respect to ethical responsibility as a motive. Regarding climate consideration strategies, screening strategies (positive and negative) are the most popular. Differences between VC and PE firms exist, and the motives to consider climate issues have an impact on the strategies employed. The implications for policymakers and the entrepreneurial finance sector are discussed.

Control strategies for impactful exits in impact private equity firms

AbstractTraditional private equity firms aim to maximise their financial returns when exiting an investment. In contrast, a major consideration for impact private equity firms is to ensure an impactful exit from their investments – increasing the chance of impact continuity in portfolio companies post exit. However, impactful exits may not be realised due to ownership‐, management‐, and operations‐related threats. Drawing on data from 45 impact private equity firms, we identify the control strategies that impact investors use throughout the investment lifecycle to manage impactful exits from investment. We also highlight how control‐related issues differ between traditional and impact private equity firms.

Navigating Legal Responsibilities in Chinese Private Equity Investments: A Comprehensive Study on Human Resource Management Practices

Human Resource Management (HRM) plays a pivotal role in the success and sustainability of ventures, particularly within the complex domain of Chinese private equity investments. This study delves into the multifaceted legal responsibilities inherent in HRM practices within this context, aiming to provide comprehensive insights essential for effective organizational management and compliance. Drawing upon specific Chinese laws, empirical data, and relevant citations, the study scrutinizes crucial areas such as employment law compliance, corporate governance obligations, adherence to industry-specific regulations, and compliance with international labor standards. Through a detailed examination of key legal obligations and regulatory frameworks, the research illuminates the challenges faced by human resource professionals and private equity firms in China, offering valuable insights for practitioners and organizational leaders alike. By emphasizing proactive compliance initiatives and the significance of ethical labor practices, this study contributes to the cultivation of a regulatory-aware and ethically conscious environment conducive to organizational success in the dynamic landscape of Chinese private equity investments.

Life cycle of private equity investments in physician practices: an overview of private equity exits.

Private equity (PE) firms acquire and grow physician practices through add-on consolidation, generating outsized returns on the sale of the acquisition in 3-8 years ("exit"). Private equity's abbreviated investment timeline and exit incentives may deter long-term investments in care delivery and workforce needed for high-quality care. To our knowledge, there has been no published analyses of the nature or duration of PE exits from physician practices. We address this knowledge gap by using novel data to characterize PE exits from dermatology, ophthalmology, and gastroenterology, physician specialties with the largest number of acquisitions between 2016 and 2020. Of 807 acquisitions, over half (51.6%) of PE-acquired practices underwent an exit within 3 years of initial investment. In nearly all instances (97.8%), PE firms exited investments through secondary buyouts, where physician practices were resold to other PE firms with larger investment funds. Between investment and exit, PE firms increased the number of physician practices affiliated with the PE firm by an average of 595% in 3 years. Findings highlight the rapid scale of ownership change and consolidation under PE ownership and motivate evaluations by policymakers on the effects of PE ownership over the life cycle of PE investments.

164 Characterization of Market Movements and Private Equity in Neurosurgery Practices and Hospitals

INTRODUCTION: Surgical services could be faced with shifts in corporate management, restructuring, and incentives as trends such as private equity (PE) investment in healthcare continue to evolve. The number of surgical services acquired by PE firms has increased significantly over the last 20 years. Due to financial vulnerability and movement towards digital health, PE activity within healthcare has further grownsince the COVID pandemic. METHODS: PitchBook and Mergermarket were used to query deals involving neurosurgical practice within the United States at any time. Exclusion criteria consisted of non-neurosurgery practices and debt restructuring deals without a change in ownership. The company name, deal type, financing year, and state were extracted for each deal. Deal type was stratified by the following categories: angel investment, mergers and acquisitions, private equity and venture capital (PE/VC), and corporate buyout. Internal debt refinancing such as leveraged recapitalization was excluded from the analysis. RESULTS: A total of 125 companies were discovered in the initial search. After further review, 63 companies were included in final analysis. The deals occurred between 1994 to 2022 and involved companies in 27 different states. Of the 63 companies, 36 (57.1%) involved mergers or acquisitions, 16 (25.4%) involved private equity or venture capital firms, 7 (11.1%) involved corporate buyouts, and 4 (6.3%) involved angel investments. CONCLUSIONS: PE is increasingly involved with neurosurgery practices, with an associated decline in mergers and acquisitions. Future qualitative investigation is required to help characterize physician attitudes of PE-run practices in comparison to non-PE practices.