The challenges facing the U.S. healthcare system may be complex, but for many states, finding a villain to blame has been easy: simply point the finger at private equity. Over the past two years, states have moved aggressively to scrutinize private equity’s role in health care, with several laws enacted in 2025. This year, seven states and counting that have put forward legislation to limit private equity’s purchase of medical providers, all in the name of reducing costs, improving quality, and increasing transparency. There’s just one problem: These laws appear to be based on faulty evidence.
The campaign to limit private equity has its roots in academia, and in 2026 alone, the New England Journal of Medicine and NYU’s Stern Center for Business and Human Rights published reports that paint a dark picture of hospital closures, bankruptcy filings, and patient deaths. Both reports are anchored by a widely cited 2023 study in the Journal of the American Medical Association, which found a staggering 25 percent increase in hospital-acquired conditions—infections, falls, and other negative health events—following private equity’s acquisition of hospitals. This one study has been foundational for legislation targeting such activity.
But the 2023 study has serious shortcomings. As Ambar La Forgia and I have documented, hospital-acquired conditions are exceedingly rare, making up roughly 0.2 percent of all hospitalizations. Practically, the reported 25 percent increase would lead to about two more adverse events each year at a typical hospital. Although the headlines report an alarming surge, the risk of a hospital-acquired condition at a private equity-owned hospital is just 0.01 percentage points higher than at a similar facility. For the handful of affected patients, a fall or infection during a stay is of course a personal tragedy. But such a vanishingly small difference in the aggregate is a far cry from a nationwide crisis.
The foundational study’s methodology doesn’t hold up, either. It attributes any divergence in trends to private equity’s acquisition of a hospital. But the data show that acquired hospitals start with better records, and other facilities mostly catch up. The study interprets this as a decline in quality at private equity-backed hospitals, but that’s not the right interpretation: the 2023 study found that more consequential patient outcomes, such as mortality and readmission, either improved or remained the same at acquired hospitals. That’s something to celebrate: Private equity helps reduce—or at least doesn’t increase—mortality rates, a finding that’s been corroborated several times by economists. Yet that fact is altogether missing from the public and legislative conversation.
Why the fixation on private equity? It certainly makes for a convenient villain. No one likes the idea of Wall Street titans swooping in to fire doctors and gut a hospital from the inside out. But that popular image bears no relation to reality. A recent study in the Journal of Financial Economics examined over 1,200 hospital acquisitions from 2001 to 2018 and found no evidence that private equity-acquired hospitals are more likely to close, no changes in inpatient prices for the vast majority of procedures, and, most critically, no increases in patient mortality or readmission rates. Cost-cutting at these hospitals was concentrated in administrative functions, not medical staff.
Other analyses have found PE-backed hospitals succeed financially because of better business practices, not by degrading the quantity or quality of medical services. Taken together with the broader literature, including my own research, these findings paint a consistent picture. Private equity investments in hospitals are not correlated with worse clinical outcomes—and in some cases lead to better ones.
None of this means private equity in health care is beyond reproach. Excessive leverage, opaque deal structures, and aggressive financial engineering can cause harm. But legislative remedies should target specific practices—and not only in private-equity backed hospitals. The American health care system has serious, structural problems that predate private equity’s arrival and will persist long after the current wave of political targeting has passed. If we want to cure what ails health care, we need to start with an accurate diagnosis. Limiting or banning private equity investments that can—and do—improve Americans’ health is no cure at all.
Ryan C. McDevitt, Ph.D., is professor of economics at the Olin School of Business and School of Public Health at Washington University.
