The Private Equity Playbook Part 2: The Healthcare Empire

The Private Equity Playbook Part 2: The Healthcare Empire

How KKR, Blackstone, and Others Bought 488 Hospitals, 11% of Nursing Homes, and Your Emergency Room—And Why 20,150 People Died

When you went to the emergency room last year, there was a 33% chance a private equity firm owned the staffing company that employed your doctor. If you visited a nursing home, there was an 11% chance it was PE-owned. If you were treated at a hospital, there was an 8.5% chance private equity owned it. Over the past 20 years, PE firms have spent more than $1 trillion buying American healthcare infrastructure. They now own 488 hospitals, thousands of nursing homes, the two largest ER staffing companies, and major air ambulance services. And the academic research shows what happened after they bought in: mortality rates increased 10% at PE-owned nursing homes—resulting in 20,150 additional deaths between 2005 and 2017. Emergency room deaths increased 13.4% after PE hospital acquisitions. Out-of-network surprise billing jumped 81 percentage points when PE-owned staffing companies took over ERs. This isn't healthcare. This is extraction wearing a stethoscope. And most patients have no idea it's happening.

The Scale: What Private Equity Owns in Healthcare

The Numbers

Private equity's penetration into American healthcare has accelerated dramatically over the past two decades. According to research published in JAMA Health Forum, PE ownership of hospitals increased 25-fold from 2003 to 2023.

PE OWNERSHIP OF HEALTHCARE (2024):

HOSPITALS:
• 488 hospitals owned by PE (8.5% of all private hospitals)
• 22.6% of for-profit hospitals
• 25-fold increase from 2003 to 2023

NURSING HOMES:
• 11% of all US nursing homes
• Concentrated in states with higher Medicaid reimbursement rates

EMERGENCY ROOM STAFFING:
• 33%+ of all ERs staffed by PE-owned companies
• TeamHealth (Blackstone): 20,000 employees
• Envision Healthcare (KKR): 69,300 employees

AIR AMBULANCES:
• 57% of market controlled by KKR + American Securities

OVERALL INVESTMENT:
• $1+ trillion invested in healthcare over last decade
• 1,069 PE healthcare deals in 2024 alone

The JAMA study found that PE-owned hospitals are more likely to be for-profit, located in urban areas, and teaching institutions. They're not buying struggling rural hospitals to save them—they're buying profitable urban hospitals to extract from them.

The Major Players

The same firms that destroyed Toys R Us dominate healthcare:

KKR: Owned Envision Healthcare (ER staffing, 69,300 employees), major air ambulance operator
Blackstone: Owns TeamHealth (ER staffing, 20,000 employees)
Cerberus Capital: Owned Steward Health Care (31 hospitals, filed bankruptcy 2024)
Leonard Green & Partners: Significant nursing home portfolio

These aren't niche healthcare investors. These are the same mega-firms that use the LBO playbook across every sector.

Case Study 1: Nursing Homes—20,150 Deaths

The Academic Evidence

In 2021, researchers from NYU and the University of Chicago published a working paper for the National Bureau of Economic Research (NBER). The study analyzed 18,485 nursing homes over a 12-year period, comparing outcomes at PE-owned facilities versus non-PE facilities.

The findings were devastating.

PE NURSING HOME MORTALITY STUDY (2005-2017):

MORTALITY INCREASE:
• 10% increase in mortality at PE-owned nursing homes
• 20,150 additional deaths over 12 years
• 1,680 deaths per year on average
• Concentrated among healthier, older patients (most vulnerable to staffing cuts)

WHAT CAUSED THE DEATHS:
• 3% decline in frontline nursing hours
• Antipsychotic drug use up 50% (sedating patients to reduce staffing needs)
• Decreased mobility for patients
• Increased pain levels

FINANCIAL CHANGES:
• Billing up 11% (charging more)
• Management fees up 7.7%
• Lease payments up 75%
• Interest payments up 325%
• Cash on hand down 38%

SOURCE: Gupta, Howell, Yannelis, Gupta (2021) - NBER Working Paper

How It Happened

The mechanism is the same as Toys R Us: load the facility with debt, extract fees, cut costs to service the debt.

According to the NBER study, after PE acquisition:

Nursing hours per patient declined 3%
Use of antipsychotic medications increased 50%
Mobility declined (fewer physical therapy sessions)
Pain management worsened

Why antipsychotic drugs? Because sedated patients need less hands-on care. You can reduce staffing if patients are quiet and immobile. The study found this increase was concentrated in older, healthier patients—exactly the population that doesn't need antipsychotics but is most vulnerable to their side effects.

The result: 10% more deaths.

The Financial Extraction

While quality declined, PE firms extracted value through multiple channels:

1. Sale-Leaseback Transactions: PE firms sold the nursing home real estate to separate entities, then leased it back to the operating company. This moved assets out of reach of creditors while increasing the facility's lease payments by 75%.

2. Management Fees: Up 7.7%, charged by the PE firm for "oversight."

3. Interest Payments: Up 325% as facilities were loaded with debt.

Meanwhile, cash on hand fell 38%—leaving facilities unable to respond to emergencies or invest in quality improvements.

IMPORTANT: 20,150 deaths is not a theoretical number. These are real people who died because private equity firms cut nursing staff to service debt and extract fees. The study controlled for patient health status, facility characteristics, and market conditions. The 10% mortality increase is attributable to PE ownership.

Case Study 2: Surprise Billing—The ER Extraction Machine

How Emergency Room Staffing Works

Most people assume that if they go to an in-network hospital, the doctors treating them are also in-network. This is often false.

Hospitals frequently contract with outside staffing companies to provide emergency room physicians, anesthesiologists, and radiologists. These staffing companies are increasingly owned by private equity. And after PE acquisition, a 2020 Yale study found, out-of-network billing skyrocketed.

The TeamHealth and Envision Model

TeamHealth (owned by Blackstone) and Envision Healthcare (owned by KKR) together staff more than 33% of American emergency rooms. Both were acquired by PE firms in leveraged buyouts. Both adopted the same business model: go out-of-network and send massive surprise bills.

SURPRISE BILLING AFTER PE ACQUISITION:

EMCARE (Envision's ER staffing arm):
• Out-of-network billing jumped 81 percentage points after acquisition
• Physician payments increased 117%
• Imaging rates up 5% (ordering more tests)
• Admission rates up 23% (upcoding to justify higher bills)

TEAMHEALTH:
• Out-of-network rates increased 33 percentage points
• Physician payments up 68%
• Used threat of out-of-network billing to extract higher in-network rates

PATIENT IMPACT:
• 18% of all ER visits had surprise out-of-network charges (2017)
• Bills ranged from thousands to six figures
• Patients had no choice (emergencies don't allow shopping)

SOURCE: Cooper, Scott Morton, Shekita (2020) - Yale/NBER Study

The Business Model

Here's how it worked:

Step 1: PE firm buys ER staffing company using debt.

Step 2: Staffing company contracts with hospitals to provide ER doctors.

Step 3: Staffing company deliberately goes out-of-network with insurance companies.

Step 4: Patients go to in-network hospitals but are treated by out-of-network doctors.

Step 5: Out-of-network doctors send balance bills for thousands or tens of thousands of dollars.

Step 6: Insurance companies, hospitals, or patients pay to avoid bankruptcy/lawsuits.

The Yale study documented this precisely: when EmCare (Envision's subsidiary) took over an ER, out-of-network billing rates jumped from near zero to over 80%. Physician payments more than doubled. And patients were caught in the middle with no ability to choose their doctor.

The No Surprises Act—And Its Failure

In January 2022, Congress banned surprise medical billing with the No Surprises Act. Patients could no longer be balance-billed for out-of-network emergency care.

The PE industry spent $75 million lobbying against the law, using dark money groups with names like "Doctor Patient Unity" (funded entirely by PE firms).

When the law passed anyway, Envision's debt collapsed. The company filed for bankruptcy in 2023, unable to survive without surprise billing revenue.

But the extraction didn't stop. It just shifted.

Now PE firms use arbitration. When insurers refuse to pay out-of-network rates, PE staffing companies force the dispute into arbitration—a private process where an arbiter decides the payment. According to Axios, TeamHealth and Radiology Partners (another PE-owned firm) account for 43% of all arbitration disputes under the No Surprises Act.

They're still extracting. They're just extracting from insurers instead of patients. And when insurers pay more, premiums go up for everyone.

Case Study 3: Steward Health Care—When Hospitals Collapse

The Rise and Fall

Steward Health Care was founded in 2010 when Cerberus Capital bought six struggling Massachusetts hospitals from the Catholic Church. By 2024, Steward operated 31 hospitals across eight states, employed 30,000 people, and carried $9 billion in debt.

In May 2024, Steward filed for bankruptcy.

What Happened

The playbook, again:

1. Load with debt: Cerberus used massive leverage to acquire hospitals.

2. Sell the real estate: In 2016, Steward sold its hospital real estate to Medical Properties Trust for $1.2 billion, then leased the buildings back. This moved assets out of the operating company while increasing lease obligations.

3. Extract fees and pay executives: CEO Ralph de la Torre was paid handsomely. He bought a $40 million yacht and a $15 million fishing boat. He flew on corporate jets. Meanwhile, hospitals had bats in the stairwells, unpaid trash service, and cancelled surgeries due to equipment failures.

4. Cut costs: Staff went unpaid. Medical supplies ran out. One hospital couldn't afford to fix a broken boiler, leaving patients in unheated rooms during winter.

5. Bankruptcy: In May 2024, Steward filed. By November, most hospitals had been sold or closed.

STEWARD HEALTH CARE COLLAPSE (2024):

BEFORE BANKRUPTCY:
• 31 hospitals across 8 states
• 30,000 employees
• $9 billion in debt

CEO COMPENSATION:
• $40 million yacht (2021)
• $15 million fishing boat
• Private jet use
• While hospitals had unpaid trash service, broken equipment

AFTER BANKRUPTCY:
• Multiple hospitals closed
• 60,000+ people lost ER access
• Communities without hospitals for 30+ miles
• Workers unemployed, patients stranded

SENATE INVESTIGATION:
• CEO refused to testify (held in contempt)
• First contempt charge against private citizen since 1971

The Senate Investigation

In September 2024, the Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings on the Steward collapse. CEO Ralph de la Torre refused to testify, invoking his Fifth Amendment rights.

The Senate voted to hold him in contempt—the first time a private citizen had been held in contempt of Congress since 1971.

His lawyers argued he couldn't be compelled to testify because it might expose him to criminal liability.

The Hospital Death Data

Harvard Study: Emergency Room Deaths Up 13.4%

In 2025, researchers at Harvard published a study examining what happens to hospitals after PE acquisition. They found that emergency room deaths increased by 13.4%—an additional 7 deaths per 10,000 ER visits.

HARVARD PE HOSPITAL STUDY (2025):

MORTALITY:
• 13.4% increase in ER deaths after PE acquisition
• 7 additional deaths per 10,000 ER visits
• Concentrated in preventable complications

STAFFING CUTS:
• 18.2% decrease in ER salary expenses
• Cuts to ICU staffing
• Increased patient transfers (dumping sicker patients)

QUALITY DECLINE:
• 25% increase in hospital-acquired complications
• 38% increase in bloodstream infections
• 27% increase in patient falls
• Despite 16% fewer central lines placed (less care, worse outcomes)

The researchers controlled for patient characteristics, hospital size, and market conditions. The increase in deaths was attributable to PE ownership—specifically, to staffing cuts in emergency rooms and ICUs.

JAMA Study: Hospital-Acquired Complications Up 25%

A 2023 JAMA study found that after PE acquisition, hospital-acquired complications increased 25%. These are infections, falls, and medical errors that happen in the hospital—preventable harms that result from inadequate staffing and quality controls.

The study found:

38% increase in bloodstream infections
27% increase in falls
Despite placing 16% fewer central lines (they cut services AND quality got worse)

This is the same pattern as nursing homes: cut staff, reduce care, extract fees. People die.

Why Does This Keep Happening?

The Regulatory Gap

Healthcare providers are regulated. Hospitals must meet Medicare standards. Nursing homes are inspected. Doctors are licensed.

But private equity firms aren't healthcare providers. They're financial entities. And they operate outside healthcare regulation.

When KKR buys Envision Healthcare, KKR doesn't become a licensed medical provider. It's a holding company. When hospitals cut staff, it's the hospital that gets cited for quality violations—not the PE firm that ordered the cuts to service debt.

This is intentional. PE firms structure deals to insulate themselves from liability while extracting maximum value.

The Sale-Leaseback Strategy

One of the most common tactics: sell the real estate, lease it back.

When Steward sold its hospital buildings to Medical Properties Trust for $1.2 billion, it accomplished multiple goals:

Generated cash upfront (which could be paid to PE owners as dividends)
Moved assets out of the operating company (protecting them from creditors)
Increased ongoing costs (lease payments replace owned property)
Created a separate profit stream for the real estate owner

The nursing home study found the same thing: lease payments increased 75% after PE acquisition because real estate was sold off and leased back at higher rates.

When the operating company goes bankrupt, the buildings are safe.

The Human Cost

What the Numbers Mean

Let's be clear about what we're documenting:

DOCUMENTED HARM FROM PE IN HEALTHCARE:

DEATHS:
• 20,150 nursing home deaths (2005-2017)
• 7 additional ER deaths per 10,000 visits at PE hospitals
• Increased complications, infections, falls

FINANCIAL DEVASTATION:
• Surprise bills reaching six figures
• 18% of ER visits had out-of-network charges (2017)
• Bankruptcies from medical debt

ACCESS LOSS:
• 60,000+ people lost ER access when Steward closed hospitals
• Rural communities left without hospitals
• Workers lost jobs when facilities collapsed

These aren't abstract statistics. These are real people:

A nursing home resident who died from understaffing
A patient who received a $100,000 surprise bill for an emergency
A community that lost its only hospital
A healthcare worker laid off when the PE-owned facility cut costs

The Accountability Gap

When Toys R Us collapsed, 33,000 workers lost jobs. That was a tragedy, but it was retail.

When PE-owned healthcare collapses, people lose access to emergency care. People die from preventable complications. Communities are left without hospitals.

And yet: no PE firm has been held criminally liable for healthcare deaths. No executive has gone to jail. The firms pay fines, settle lawsuits, and move on to the next acquisition.

Ralph de la Torre bought a $40 million yacht while his hospitals had bats in the stairwells. He refused to testify to Congress. As of this writing, he faces no criminal charges.

Private equity now owns 488 hospitals, 11% of nursing homes, and staffs 33% of emergency rooms. The academic evidence shows that after PE acquisition, mortality increases, quality declines, and costs rise. 20,150 people died in nursing homes because PE firms cut staff to service debt. Emergency room deaths increased 13.4% at PE hospitals. Surprise billing became endemic until Congress banned it—and even then, PE firms found ways to keep extracting through arbitration. This isn't healthcare. This is the playbook from Part 1 applied to the most essential service in society. And unlike Toys R Us, when healthcare fails, people don't just lose jobs. They lose their lives. In Part 3, we'll examine the housing empire—how PE bought 500,000+ rental units and became America's landlord. But before we move on, understand this: the firms that killed Toys R Us are the same firms that own your hospital. And the playbook is the same.

NEXT IN THE SERIES: Part 3 examines private equity's housing empire. We'll document how Blackstone became the largest owner of single-family rental homes in America, how PE firms bought mobile home parks and raised rents 40-70%, and how tenants in PE-owned buildings face eviction rates far higher than other landlords. The playbook works the same everywhere: load with debt, extract fees, cut costs, exit. In housing, "cut costs" means deferred maintenance, neglected repairs, and mass evictions. The data will show this isn't just a few bad actors—it's systemic extraction from the most basic human need: shelter.

Sources & Further Reading

Disclaimer: This article presents research and analysis based on peer-reviewed academic studies, federal investigations, and investigative journalism. All claims regarding mortality, quality declines, and financial practices are sourced to published research or public records. Statistical findings are drawn from studies that controlled for patient characteristics, facility attributes, and market conditions. This is educational content, not medical or financial advice.

---THIS NEEDS TO BE READ !!!

the gipster

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Saturday, January 17, 2026