May 2026 | Senior Leadership

Private Equity in Health Care: A Map to Get It Right

Earlier this year, the organizer of a planned webinar on private equity in health care invited nearly 20 U.S.-based PE firms to participate. Most didn’t respond. The ones that did had the same answer: they were sorry, but they didn’t want to take part in any forum where their words might be misinterpreted. The webinar was canceled.

Stephen Sammut, adjunct associate professor of management and senior fellow in health care management at Wharton, was that organizer — and the episode was a telling sign of how fraught private equity’s relationship with health care has become. Reports from Oxfam and Bloomberg have documented negative consequences of PE activity in health care. Private equity-owned companies accounted for roughly a fifth of all large health care bankruptcies in 2023, a figure that had more than doubled by 2025. State legislatures are debating whether to restrict or ban private equity from acquiring hospitals altogether. And high-profile disasters like the leveraged buyout of Crozer Health, a network of community hospitals, have given critics plenty of ammunition.

Sammut has spent much of his recent career thinking about how to fix this, not by pushing PE out of health care, but by redesigning how it operates there. That work is at the center of a session he teaches in Wharton’s Health Care Leadership and Management: Leading Through Change (HEAL) program, which draws senior health care executives from across the country.

What Went Wrong in Chester

The Crozer story is the kind of case study that makes hospital executives nervous. A private equity firm acquired the health system in 2020. What followed was a pattern familiar from PE transactions in other sectors: debt loads, cost cutting, and a management focus on financial targets.

But Crozer wasn’t a bottling factory. It was the primary health care provider for one of Pennsylvania’s most economically distressed communities. The closures, which included the shutdown of emergency services, forced thousands of patients to seek care further away and resulted in roughly 2,600 layoffs. Surrounding emergency departments were overloaded. Remaining inpatients required urgent transfer. Patients lost access to specialized services, including a burn center.

The Crozer and Steward closures illustrate a structural problem with applying conventional PE methodologies to hospitals without due consideration to public health principles and the aim of health care. “It could not be clearer that private equity funds, when they’re in the business of hospital acquisition, have to adopt a model different than they employ in other industrial sectors,” Sammut says.

Why Hospitals Say Yes

And yet the picture is more complicated than the headlines suggest. Sit on the board of a financially distressed hospital and the calculus looks different. The community is counting on you to keep the lights on. When a private equity fund comes with capital and a turnaround plan, saying no is not as simple as it sounds.

Unable to access bond markets or raise enough through philanthropy, a struggling hospital may have few alternatives. A PE fund arrives with capital, a blueprint for restructuring, and operational expertise. In those circumstances, the benefits can be genuine: facility upgrades, investment in electronic health records and other infrastructure, faster decision making than large nonprofit boards can manage, and the kind of operational discipline that struggling hospitals often lack.

“Private equity can expand capacity,” say Sammut. “It oftentimes will improve systems at hospitals in order to hit efficiency targets and modernization. And in many instances, because of those things, the standard of care is markedly improved.”

The Leverage Window

For health care leaders, Sammut’s most urgent, practical message is about timing.

PE firms, by design, conduct acquisitions quietly. They prefer proprietary deals, transactions without investment bankers in the middle driving up the price, which means they work hard to limit who knows what’s happening. The result is that physicians, nurses, and even some senior managers are the last to find out that their hospital is in discussions with a PE fund.

“The only time at which hospital stakeholders will have influence is before the transaction is complete,” Sammut says. His advice to boards and senior management is to treat the pre-signing period as the only real opportunity to shape what the institution becomes. “That means doing serious preparation,” he continues. “Consult with legal counsel and advisors who understand health care transactions specifically and negotiate governance and financial protections directly into the acquisition agreement rather than expecting goodwill after the fact.”

The governance question is central. Sammut argues that post-acquisition hospital boards should not be controlled solely by investors. They should include independent directors, clinicians, and voices from the community. PE investors, he suggests, should hold no more than a bare majority of board seats. This isn’t just a matter of fairness; it’s a structural safeguard against the kinds of decisions, such as service-line cuts, staffing reductions, and deferred capital investment, that erode the community’s access to health care over time.

Sammut also recommends writing specific financial guardrails into the deal: debt capped relative to the hospital’s earnings, minimum cash reserves, and multi-year capital expenditure commitments with funds held in escrow. Quality metrics, including readmission rates, patient satisfaction scores, and nurse staffing ratios, should be hard triggers that suspend investor distributions if breached. “The principle,” he explains, “is to align the PE fund’s financial incentives with patient outcomes rather than allow them to diverge.”

And he suggests that regulators have a role too. State attorneys general and district attorneys should be engaged in reviewing the terms of hospital acquisitions, not as adversaries, but as an accountability mechanism that protects the community’s long-term interests.

A Message for the Other Side

Sammut’s session in the HEAL program is designed for health care executives. But the argument he’s making is equally directed at PE firms themselves.

“The model I’m proposing isn’t a concession. It's a better investment strategy. A PE fund that enters a hospital acquisition with appropriate governance, realistic financial structures, and quality-linked incentives is more likely to leave the institution in better condition at exit, and that translates to better returns, not worse ones.”

The industry, for its part, seems to know it needs a new path. The firms that declined to join Sammut’s webinar weren't indifferent — they were defensive. They’ve read the Oxfam reports. They’ve seen the Bloomberg coverage. They’re watching legislatures.

“It's become a third rail,” Sammut says of private equity’s relationship with health care. “It didn't start out that way, and it didn't need to become that, but the firms now are very cautious and I think they’re looking for better ways to operate, as well as co-operate.”

Sammut is trying to show hospitals and PE funds what those better ways look like — before policymakers decide for them.

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