Introduction

Hospital ownership evokes important questions at the intersection of ethics, economics, and public health. Once founded as charitable institutions devoted to healing the sick, many hospital systems now operate as profit-driven enterprises, raising ethical concerns about whether institutions dedicated to healing should also serve shareholders. At the same time, the burden of rising healthcare costs forces society to confront another dilemma: who should pay? Should the sick bear the weight of their own illness, or society at large through taxation, insurance pools, or public funding? Should religious or philanthropic organizations return to a vital role, or should governments assume full responsibility as a public good? These questions shape how we define hospitals—not just as places of treatment, but as reflections of our collective society.

A Brief History of Hospitals

“Healing centers” date back to the Bronze Age in ancient Egypt and Mesopotamia, where the acutely ill could find refuge. The word “hospital” derives from the Latin “hospitium,” referring to a lodge for guests, and was first observed in early Christianity where many early hospitals started as charities that were operated by the church. Dating back to as early as 272 CE, these hospitals had the goal of providing care for the sick, feeding the hungry, and clothing the poor. Their importance was evident to the communities they served, and their influence continued to grow to the point where, in the 7^th century, Charlemagne demanded that any new cathedral to be built should have an attached hospital.

As cities developed and hospitals were built in the late Middle Ages, the municipality was charged with paying the physician’s salaries while the church supplied the nuns that tended to patient care. Even the crusaders created hospitals to care for the injured, with care provided by members of religious orders.

Over time, these healing centers developed an increasing focus on caring for the infirm and incorporated newer notions of hygiene. The Ospedale Maggiore of Milan which opened in 1456, put into place innovative sewage systems, room ventilation, and a permanent staff of nurses and physicians who were paid for by the city - though later, funds were also raised through legacies, donations, and contributions. This hospital served as a model for many around the world, including the first hospital in the US, Pennsylvania Hospital, which opened its wards in 1751.

Privately supported hospitals were funded by philanthropic donations, bequests and public subscriptions but were the exception among the majority religiously affiliated and supported institutions. A small subset of operational hospitals was owned by groups of physicians. During this period, most hospitalized patients were from poor or socially marginalized populations- those better off would routinely care for their loved ones at home.

Advances in hospital medicine ensued - patients were separated into wings, ventilation was improved, clinical laboratories were created within the hospital. Patients then started to receive more specialized inpatient care and the socio-economic status of hospitalized patients shifted. The increasing number of hospitalizations resulted in a need for more facilities. After the second World War, the US government became more involved in the need for the creation of more hospitals. The Hill Burton Act allocated government funds to the creation of nonprofit community hospitals. Hospital expansion continued into the 1960s after the passing of the Medicare and Medicaid Act. Importantly, hospitals receiving funding from the Hill Burton Act were required to provide free or subsidized care to patients who were unable to pay. The shift towards the creation of more beds in community hospitals continued into the 1970s, and as technology became increasingly entwined with the care of patients, so too did the costs of care.

Identifying potential untapped profit among care of the sick ignited a rise of for-profit hospitals during the 1980s, rendering not-for-profit hospitals more vulnerable - over 600 of them closed following the entry of for-profit hospitals. The 1997 Balanced Budget Act lowered payments to hospitals as a response to the ever-increasing costs of care during the prior decade. This led to more hospital closures, especially among the public hospitals that served the poor and uninsured.

For-profit vs. Non-profit

Some have argued that ongoing healthy competition drives further innovation, as proven in many other sectors of industry. For-profit models help to lower costs by streamlining care and removing inefficiencies. However, when cost reduction and profit bolstering adversely affects patient outcomes, it seems clear that the competition has transitioned from optimizing system inefficiencies to centering strategy around profitability.

Nonprofit hospitals retain a substantial tax-exempt status with the promise that they will reinvest some of their profit back into the local community to improve overall well-being and public health, a principal tenet behind the history of hospitals. A recent study¹ revealed that many hospitals benefit from a large tax benefit with uncertain community reinvestment. The growing gap between the tax-savings a hospital obtains from their non-profit status and the amount they invest in the communities – which should, for tax-exemption status purposes, be approximately balanced - has been under increasing scrutiny recently² leading to some hospitals temporarily losing their non-profit status.³

Nonprofit hospital systems make up half of current hospital ownership.⁴

Private Equity Ownership

As seen in so many other industries, a new player vying for ownership opportunity has recently arrived: private equity (PE) has been buying both hospitals and physician practices given the potential for profitability and short-term returns. PE firms now have a stake in upwards of one third of for-profit hospitals with acquisitions continuing to grow rapidly. PE purchases of hospitals are usually different than purchases of hospitals by healthcare systems. Typically, healthcare systems purchase hospitals without utilizing borrowed funds. PE hospital purchases most often involve a small amount of cash from investors and a large amount of debt, with the acquired hospital assets (including hospital real estate) acting as collateral for the loan. The purchased hospital must then generate revenue to cover the costs of the associated debt.⁵ While PE may result in improved efficiency and cost-cutting, there may also be an increase in high revenue procedures and decrease in less profitable procedures and services.

A recent study⁶ examining four million hospitalization records via Medicare claims at 51 PE-owned hospitals compared to 249 non-PE-owned hospitals found that while mortality did not differ, rates of adverse events were significantly higher. Among these were central-line associated bloodstream infections (CLABSI) and post-surgical infection rates, despite surgical and central line insertion rates decreasing over the same period. Interestingly, the rate of patient transfer to outside hospitals was higher among the PE-owned hospitals. The authors conclude that PE acquisition of hospitals “was associated with increased hospital-acquired adverse events despite a likely lower-risk pool of admitted Medicare beneficiaries, suggesting poorer quality of inpatient care..” Similarly, another recent study⁷ compared ED and ICU salaries, length of stay, patient mortality and transfers between PE owned hospitals and matched control hospitals. The authors concluded that “[PE] hospitals on average reduced salaries and staffing relative to nonacquired hospitals, notably in the EDs and ICUs, which are higher-acuity and staffing-sensitive areas. This decreased capacity to deliver care may explain the increased patient transfers to other hospitals, shortened ICU lengths of stay, and increased ED mortality.”

 Examples of hospital and health care system closures following private equity acquisition have now become widely publicized. Hahnemann University Hospital closed in 2019 after it was acquired by Paladin Healthcare Capital; Steward Health Care filed for chapter 11 bankruptcy and closed in 2024 after its hospitals accrued an insurmountable amount of debt; Crozer Health was acquired by Prospect Medical Holdings and incurred a $200 million debt after a real estate sale, ultimately leading to the hospital’s closure following a bankruptcy filing in January 2025.⁸ Summa Health in Akron, OH, was purchased by Health Assurance Transformation Corporation and this has already led to the closure of ERs and maternity wards in an effort to curb costs, thereby reducing access to healthcare in the community.⁹

While private equity can help to inject investment into hospital systems and can also help to reduce the headache of overhead management for private physician groups, mismanagement, frivolous real estate or side deals under the auspices of trying to gain more profit, and prioritizing profit over community service and patient care have led so many of these systems to eventually fail.

Steward Health serves as a striking example of this - a hospital chain that was purchased by Cerberus Capital, a PE firm - in 2010. Most money used in the purchase was loaned, thereby increasing valuations, but hospitals were left responsible for repaying the debt. Cerberus then sold off multiple medical office buildings and real estate to reward investors and the CEO, leaving the hospital system with ever-increasing debt and an inability to pay for supplies, equipment, or staff. This contributed to the death of at least 15 patients.¹⁰ Steward Health filed for bankruptcy in 2024, owing over $ 7.8 billion.

Interestingly, a book written in 1982 by Paul Starr, ‘The Social Transformation of American Medicine’, predicted many of the changes that we have noted in American Healthcare: the transition to for-profit companies, the shift towards multi-hospital conglomerates adding further layer upon layer of leadership, and the corporatization of healthcare. This corporatization of healthcare has resulted in high-level executives—often disconnected from both medical staff and the communities the hospitals serve—making decisions that prioritize return on investment over access to care.

How do we determine the limits of what is ethically acceptable or not? Do we need to enact laws to protect the community? Do we need to hold these PE systems accountable for the ongoing operation of these healthcare systems? Governor Shapiro of Pennsylvania did call for a Senate investigation into the practices of the firm that led to the closure of Crozer Health, yet little is likely to change without further action.

 A strong starting point would be to eliminate conflicts of interest within healthcare systems and insurance companies. This includes requiring divestment from entities that straddle both the payer and payee roles—such as healthcare conglomerates that own both insurance providers and hospitals.

During hospital ownership transitions, specific safeguards should be enforced to protect patient care and staff integrity. These include maintaining minimum staffing ratios and ensuring the continuation of essential but often unprofitable services, such as labor and delivery or care for uninsured patients.

Additionally, limits should be placed on the amount of debt hospitals can assume, preventing them from being saddled with financial burdens that primarily benefit private equity firms. As an alternative deterrent, restricting investor-owned hospitals and systems from participating in Medicare and Medicaid may discourage profit-driven entities from entering this space.

Some states have already taken proactive steps to preserve the vitality of their hospital systems. For example, New York has implemented a ban on for-profit hospitals, while Rhode Island has introduced a Hospital Conversion Act to regulate ownership changes and maintain service standards.¹¹ Though their approaches differ, both aim to safeguard public health infrastructure from excessive commercialization. A more widely instituted policy that resembles New York or Rhode Island’s approach to PE hospital ownership may be necessary before more hospital systems close their doors, at the risk of stagnating our ability to develop efficiencies or limit innovation.

The Ethical Dilemma of Hospital Ownership

Hospitals have an innate duty to serve – both given the history of how they came to be and as a duty to patients. The most important ethical duties that a hospital respect include the need to:

- Allow universal access while maintaining health equity, all the while remaining accountable and allocating resources fairly – this allows for respect of autonomy and justice

- Maintain quality of care under the imperative that they minimize harm and maximize excellent outcomes – this allows for respect of beneficence and non-maleficence.

While non-profit hospitals may represent the most ethically responsible ownership of hospitals, the limits to funding may limit the resources available and stifle innovation. For-profit hospitals, on the other hand, vie for the opposite though at the same time allow for streamlined operations. The profit-oriented goals may, however, contribute to limiting access and increasing inequity by prioritizing profitable services, thus placing less emphasis on the ethical principles of justice and respect for autonomy.

Private-equity hospital ownership is the most ethically challenging proposition. At best, they may help to infuse capital into systems with limited resources or allow for systems that would have otherwise closed to remain open. At worse, they may increase costs to patients, increase financial debt, apply conflicting pressure to healthcare providers to focus on cost or production thereby undermining trust, worsen the quality of care provided or lead to closures and limit access as explored above.

Conclusion

The healthcare industry has become an easy target for PE firms who seek to make profit without consideration of the potential downstream consequences of their actions. Combined with the industrialization of healthcare, where leaders - who are disconnected from patient care - are making decisions that do not take the patient’s bottom line into consideration, will continue to limit services provided by hospitals, and to the closure of entire hospital systems.

Safeguards must be implemented to ensure that the maximal amount of adherence to ethical responsibilities towards patients is respected.