Private equity firms own at least 130 rural hospitals: 8 things to know

Private equity healthcare deals were down in 2022 but still had their second-biggest year on record, according to a Jan. 10 Bain & Co. report. The industry has an estimated $1.78 trillion lined up for potential investments in 2023, a 35 percent increase over September 2021.

A new Private Equity Stakeholder Project report provides a deep dive into the private equity industry’s rural healthcare incursion. It examines private equity's level of investment in rural health and explores case studies highlighting the risks posed by private equity-owned companies in multiple sectors of rural healthcare.

By creating separate hospital management companies, private equity firms are creating new avenues to reap profits from both nonprofit and public healthcare providers, entities that historically would have not given high returns for their ownership.

Eight things to know from the PESP report:

1. Private equity firms own at least 130 rural-serving hospitals, though since they are not generally required to publicly disclose acquisitions, the true number is likely much higher.

2. Of those hospitals, 85 benefit from CMS payment designations of sole community hospital, Medicare-dependent hospital, rural referral center, or critical access hospital.

3. The highest concentration of private equity-owned hospitals is in the South. Texas had the most with 17.

4. A handful of private equity firms dominate the list: Apollo Global Management (Brentwood, Tenn.-based LifePoint Health and Louisville, Ky.-based Scion Health, two of the largest nonurban hospital chains) owns 71 rural hospitals, GoldenTree Asset Management and Davidson Kempner (Brentwood, Tenn.-based Quorum Health) own 17, and Equity Group Investments (Nashville, Tenn.-based Ardent Health Services) owns 15.

5. Lateral Investment Management owned Santa Cruz Valley Regional Hospital in Green Valley, Ariz., until it closed in 2022, leaving the area without its only hospital. Lateral had more than doubled its investment by then, having bought the hospital in 2018 for $26 million and sold the hospital’s real estate for $60 million in 2021.

6. Rural Texas health system Little River Healthcare, owned by Riverside Capital, permanently shuttered in 2018 after filing for bankruptcy earlier that year. The bankruptcy landed amid investigations into a billing scheme with the lab testing company Little River contracted with, True Health Group, which was owned by Monroe Capital.

7. Nueterra Capital owned Kansas City, Mo.-based Noble Health, which purchased two struggling hospitals in Missouri. Noble separated the real estate assets from operations, shut down services and furloughed most staff, and sold the operating company for $2.

8. Ardent Health Services is a 30-hospital system owned by Equity Group Investments that has in recent years appeared to suffer distress related to high levels of debt. Ardent Health's Lovelace Women’s Hospital in Albuquerque, N.M., was found in a federal investigation to be racially profiling Native American patients.

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