Section II: The Compromise of Care: Quantifying Quality Degradation (Focus B)

The financial mandate to maximize profit inevitably conflicts with the need to maintain optimal patient care quality. Since labor costs—particularly nursing staff—are the largest controllable expense for hospital operators, profit-driven pressure systematically results in reduced staffing ratios, directly translating into quantifiable harm for patients and higher long-term costs for the system.

2.1. The Direct Link Between Staffing Ratios and Patient Mortality

Scientific literature overwhelmingly demonstrates a direct causal relationship between inadequate nurse staffing levels and adverse patient outcomes. Reducing the ratio of nurses to patients, a primary cost-cutting measure, jeopardizes patient safety by increasing the workload burden on frontline staff.   

This risk is rigorously quantifiable: research shows that the odds of 30-day mortality for each patient increased by 16% for every additional patient added to the average nurse’s workload (95% CI 1.04 to 1.28). Furthermore, understaffing increases the odds of patients staying in the hospital a day longer by 5% per additional patient in a nurse’s workload, contributing to higher total costs and reduced bed capacity.   

The pursuit of short-term labor savings through understaffing is demonstrably short-sighted and economically irrational from a holistic system perspective. Studies indicate that if hospitals maintained a safe staffing level of a 4:1 patient-to-nurse ratio during a one-year study period, more than 1,595 deaths would have been avoided, and hospitals would have collectively realized savings exceeding $117 million. This profound finding illustrates a systematic misalignment: private financial accounting, which rewards immediate labor reductions, externalizes the massive social and financial costs associated with preventable adverse events (complications, extended lengths of stay, and mortality) onto payers and the public. Regulatory mechanisms like mandatory safe staffing ratios are therefore necessary economic interventions required to correct this structural market failure.   

Beyond mortality, lower ratios of patients-per-nurse are consistently associated with lower odds of hospital-acquired infections (HAIs) and shorter overall lengths of stay. Mandated ratios also offer ancillary benefits by decreasing nurse turnover and increasing job satisfaction, reinforcing the professional stability of the care system.   

2.2. The Failed Promise of Merged Quality

A central industry justification for consolidation and profit-seeking is the promise that centralized management and scale will lead to superior efficiency and quality improvements. This claim is empirically refuted by comprehensive post-merger analyses. A major study analyzing patient outcomes following hundreds of hospital mergers found that the quality of care at acquired hospitals generally stayed the same or worsened. This research directly challenges the idea that higher prices resulting from mergers yield higher quality care.   

A broader review of studies on health care integration found that only 22% showed a positive net impact (such as improved quality or reduced costs), while 54% demonstrated a negative (worse) net impact. The empirical record indicates that the primary motivation for consolidation is enhanced bargaining power over payers, not genuine clinical integration or operational efficiencies.   

Crucially, the evidence shows that competition is the only reliable driver of quality. High prices are only associated with quality improvements in competitive markets. In contrast, in highly concentrated, monopolistic markets (where the Herfindahl-Hirschman Index, or HHI, exceeds 5000 points), researchers find no statistically significant relationship between high prices and quality. This condition effectively destroys the fundamental mechanism of market competition. When providers achieve monopoly power, they no longer face pressure to justify exorbitant prices with commensurate value or investment in care, forcing consumers to pay an exorbitant cost for mediocre or declining services.   

Section III: Private Equity’s Role as an Affordability Accelerator (Focus C)

Private Equity (PE) firms, driven by a short-term, high-risk investment model, act as accelerators of cost inflation and quality degradation in the healthcare sector. PE’s involvement transforms the inherent profit motive into a more aggressive, debt-driven, and systemically risky pursuit of rapid extraction.

3.1. The Mechanism of Financial Engineering: Leveraged Buyouts and Extraction

The foundational element of the PE business model in healthcare is the leveraged buyout (LBO). PE firms finance a substantial portion of the acquisition by taking out debt that is immediately secured by, and saddled onto, the acquired healthcare company itself. This transfer of debt creates an urgent, non-negotiable need for extreme short-term cash flow within the acquired facility to service the loans.   

This financial pressure forces PE-owned entities to prioritize maximizing profit margin and optimizing for a quick acquisition-to-sale timeline. The resultant strategies include extreme cost-cutting, aggressive billing, asset stripping (such as real estate sales), and leveraging superior bargaining skills with insurers, often including the implicit or explicit threat of bankruptcy.   

3.2. Quantifying PE’s Impact: Price Hikes and Patient Harm

PE buyouts translate directly into increased financial burdens for the privately insured population. Studies using proprietary claims data found that PE acquisitions lead to an 11% increase in total healthcare spending for individuals in affected markets. This rise is largely driven by higher bargained prices at PE-backed hospitals and price spillovers to local, non-acquired rivals. Price increases documented across various specialties range from 3% to 26% compared to non-PE practices. In some specialized fields, like neonatology, PE management has been associated with substantial increases in physician spending (54% higher).   

Simultaneously, the cost-cutting driven by PE’s debt burden compromises quality, leading to measurable patient harm. A recent study comparing PE-acquired hospitals to control facilities found that PE hospitals had reduced staff numbers and lower salaries. This operational degradation correlated with a measurable increase in adverse outcomes: an estimated seven more deaths per 10,000 emergency department patients receiving Medicare in PE-acquired hospitals, totaling approximately 700 excess deaths among the million visits analyzed. Other research links PE ownership to a 10 percent increase in mortality among Medicare patients in acquired nursing homes and higher rates of post-operative complications and hospital-acquired infections.   

3.3. PE and the Crisis of Access: Rural and Safety-Net Hospital Closures

PE’s investment model poses an acute risk to healthcare access, especially in vulnerable communities. Financially struggling, yet essential, facilities—including rural hospitals and urban safety-net providers serving low-income and minority populations—may fit the PE business model. Data indicates that at least 27.7% of PE-owned hospitals serve rural populations.   

When the debt and aggressive profit measures prove unsustainable, PE firms often dispose of the assets or force bankruptcy, leading to sudden hospital closures. The 2024 bankruptcy of the PE-backed Steward Health Care system and the 2019 closure of Hahnemann University Hospital (serving mostly low-income Black and Hispanic Philadelphians) exemplify this risk.   

Closures have an outsize impact on communities where healthcare alternatives are sparse, exacerbating existing health disparities. In rural settings, closures force first responders to travel drastically longer distances for emergency care. The reliance of critical infrastructure on PE’s high-risk, short-term model introduces radical financial fragility, where the collapse of a PE-backed system risks disrupting entire regional care networks, often resulting in public bailouts or forced sales that transfer the PE firm’s risk onto taxpayers and the community.   

This level of rapid, high-risk activity has overwhelmed regulatory oversight. Total annual PE acquisitions in health care increased by 167% between 2010 and 2020, yet federal anti-fraud enforcement resulted in only 34 settlements out of thousands of acquisitions during that period. This massive regulatory gap confirms that the market is structurally biased toward rapid, unchecked consolidation and extraction, underscoring the urgent need for specialized regulation and heightened accountability for investor-backed management companies.   

Section IV: Monopoly Power and the Antitrust Enforcement Gap (Focus D)

Provider consolidation, whether horizontal (merging competitors) or vertical (hospital acquiring physician groups), systematically leads to monopoly power that facilitates inflated pricing without corresponding improvements in value.

4.1. The Consolidation Premium: Quantifying Price Increases Due to Market Power

Provider consolidation is overwhelmingly pursued to gain enhanced bargaining power with payers, not for true clinical or operational integration. The result is the ability to demand higher prices by virtue of necessity, regardless of service quality.   

• Horizontal Consolidation: Mergers between hospitals located within 5 miles of each other result in an average price increase of 6%. When hospitals operate as local monopolies, their prices are, on average, 12% higher than those facing competition from three or more rivals. In already-concentrated markets, price increases post-merger commonly reach 20% or 30%, with isolated spikes as high as 65%.   
• Cross-Market Mergers: Acquisitions where the hospitals are more than 50 miles apart (cross-market mergers) represent a growing trend that has historically escaped thorough antitrust scrutiny. These deals still yield significant price inflation: six years after acquisition, cross-market mergers increased acquirer prices by 12.9% (and up to 21.8% for serial acquirers) relative to control hospitals, yet showed no discernible impact on quality measures such as mortality or readmission rates.   
• Vertical Integration: When hospitals acquire physician practices, they gain leverage over private payers. This vertical structure drives up spending—for example, physician spending in neonatology practices managed by PE was found to be 54% higher. Vertical integration also encourages increased self-referrals to facilities within the system and reduces downstream competition.   

4.2. The Antitrust Enforcement Challenge

The consistent empirical evidence demonstrating that consolidation leads to higher prices without clear quality improvements underscores the urgent need for robust antitrust enforcement. However, federal efforts have struggled to stem the decades-long trend of concentration. Between 1998 and 2021, 1,887 hospital mergers were reported.   

A fundamental challenge arises from the economic reality of the oligopolistic healthcare market, sometimes referred to as the “handshake in the snow”. In markets where both hospital systems and insurance companies are highly consolidated, economic theory suggests that the dominant payer and the dominant provider simply split the surplus derived from monopoly pricing instead of engaging in competitive price negotiation. This dynamic means that increased consolidation on the payer side does not necessarily mitigate provider price inflation; rather, it often leads to collusion that extracts maximum value from employers and consumers.   

The regulatory landscape is evolving. Although the FTC has achieved recent court victories against horizontal hospital mergers and system acquisitions of physician groups , major challenges remain. Notably, no hospital mergers have yet been challenged by the Federal Trade Commission (FTC) on cross-market grounds, despite the proven price effects. The release of the 2023 Merger Guidelines signals a more interventionist approach by the FTC and Department of Justice (DOJ), focusing on vertical integration and novel theories of harm. The success of this shift, however, must be measured against the inertia of decades of unchecked concentration.   

Furthermore, consolidation imposes burdens beyond price inflation, including the suppression of wages for skilled healthcare workers, such as nurses, by creating monopsony power in local labor markets. This wage suppression exacerbates staffing shortages, creating a negative feedback loop for quality and retention already identified in Section II.   

Section V: The Direct Cost to Americans: The Crisis of Affordability

The combined effects of the F-P ownership premium, unchecked consolidation, and Private Equity extraction synthesize to impose the ultimate burden on American families: a crisis of affordability resulting in soaring premiums, high out-of-pocket costs, and pervasive medical debt.

5.1. Hospital Prices as the Primary Driver of Rising Insurance Premiums

The structural inflation generated by the provider sector feeds directly into the rising cost of health insurance. Analysis confirms that high hospital prices are the main driver behind rising insurance premiums. Price increases for hospital care have consistently risen faster than the physician price index or insurance premiums net of medical service costs.   

The burden falls heavily on the employer-sponsored insurance (ESI) market, which covers 60% of the nonelderly population. ESI premiums and deductibles have persistently risen above the rate of inflation and wage growth over the past decade. Private insurance plans, operating within market structures dominated by consolidated provider systems, often lack sufficient bargaining power to obtain fair prices. On average, these private plans pay a staggering 224 percent of Medicare rates for hospital inpatient and outpatient services. This enormous price differential is directly transferred to employers and, subsequently, to employees through higher premiums and cost-sharing.   

5.2. The Shifting Financial Burden: Deductibles and Medical Debt

The response by insurers and employers to these elevated provider prices has been to shift costs onto individuals by promoting high-deductible health plans (HDHPs) and other “skinny” coverage options. These strategies ensure that insurance premiums remain manageable in the short term but push substantial financial risk and cost directly onto the patient, undermining the core protective function of insurance.   

This inadequate coverage leaves even the insured financially vulnerable. A survey found that two in five adults covered by ESI reported difficulty affording necessary medical care, prescription drugs, or their premiums. For many, rising healthcare costs force financial coping mechanisms such as taking on additional credit card debt or reducing contributions to retirement savings. The ultimate consequence of this structural price inflation and inadequate coverage is a national crisis of medical debt. High hospital prices transform necessary health events into catastrophic financial crises for a substantial segment of the population.   

The entire chain of financial extraction—from upcoding and gaming regulatory weaknesses to PE debt service and monopoly price demands—represents a massive deadweight loss to the economy. These resources are spent on negotiating inflated prices, handling complex billing, and servicing artificial debt rather than improving patient care or driving true efficiency. This confirms that the affordability crisis is not a simple problem of utilization, but a profound market failure where structural incentives reward complexity and wealth extraction over efficiency and public welfare.

Conclusion and Policy Imperatives for Systemic Reform

6.0. Summary: The Incompatibility of Profit and Public Welfare

The evidence rigorously demonstrates that the pervasive influence of the private for-profit model in U.S. healthcare delivery is the primary structural impediment to affordability and quality. The mechanisms employed by F-P entities—the mandated price premium, the deliberate cost-cutting in staffing that compromises patient safety, the predatory, debt-driven model of Private Equity, and the exploitation of monopoly power—systematically inflate the cost of care. These mechanisms contradict the claimed benefits of efficiency and competition, proving that the profit motive, as currently structured, is fundamentally incompatible with the societal goal of a solvent, accessible, and high-quality healthcare system.

The crisis of affordability stems directly from the provider sector’s ability to impose massive, unjustified prices, which are then transferred through the insurance market to families and employers, generating crippling medical debt. To restore financial sustainability and integrity to the system, policy must target the structural incentives that reward extraction and consolidation.

6.1. Policy Recommendations for Correcting Market Failure

The severity of this market failure necessitates multi-pronged legislative and regulatory actions focused on rebalancing incentives toward affordability, quality, and access:

1. Enhance Antitrust Scrutiny and Enforcement Capacity:
   • Strengthen Merger Review: Federal agencies must greatly strengthen their review of horizontal, vertical, and cross-market mergers, recognizing that price inflation occurs even when merging hospitals are not direct local competitors.   
   • Mandate Ownership Transparency and Liability: Require enhanced transparency regarding the ownership structures of all provider entities, particularly Private Equity firms. Critically, investor-backed management companies must be held strictly liable for fraudulent and abusive practices, such as upcoding and False Claims Act violations, to curb aggressive revenue maximization tactics.   
   • Prohibit Anti-Competitive Contracting: Ban contract terms that restrict competition or preserve monopolistic advantage, including “most-favored-nation” clauses and agreements that allow dominant providers and payers to split monopoly surplus.   
2. Payment System Reforms to Neutralize Incentives:
   • Implement Site-Neutral Payments: Congress and the Centers for Medicare and Medicaid Services (CMS) should aggressively implement site-neutral payment policies. Eliminating the disparate rates paid for identical procedures based on whether they are delivered in a hospital outpatient setting or an independent physician office will remove a core financial incentive for hospitals to acquire physician practices solely to increase reimbursement.   
   • Close Exploited Loopholes: Reform payment structures to remove incentives for revenue gaming, specifically addressing facility fees and the aggressive upcoding practices that inflate costs across Medicare and private markets.   
3. Mandate Quality Minimums and Public Welfare Accountability:
   • Enforce Safe Staffing Ratios: Implement federal or state-level mandatory, minimum, nurse-to-patient ratios. The evidence confirms this is a necessary intervention that demonstrably reduces mortality, improves quality, and leads to net system savings by avoiding adverse events.   
   • Strengthen Non-Profit Oversight: Reform the criteria for tax-exempt status for not-for-profit hospitals. This status, valued at an estimated $28 billion annually , must be directly tied to quantifiable increases in community benefit and charity care, ensuring that the public subsidy is utilized for patient welfare rather than accumulating unutilized cash reserves.   
4. Protect Access as Critical Infrastructure:
   • Stabilize Essential Facilities: Introduce protective measures and financial backstops to safeguard rural and safety-net hospitals from financial instability caused by debt-laden acquisitions or bankruptcy. These facilities must be recognized as essential public utilities, requiring targeted intervention to prevent service discontinuation and subsequent exacerbation of health equity disparities. 

1. For-Profit vs. Nonprofit Hospitals

• Payments for Care at Private For-Profit and Not-For-Profit Hospitals: A Systematic Review and Meta-Analysis – PMC
• For-Profit Hospitals Have Thrived Because of Public Reimbursement Schemes, Not Efficiency – PMC
• The High Costs of For-Profit Care – PMC
• How For-Profit Hospitals Billed More Aggressively Than Nonprofits for Medicare Outlier Payments – Penn LDI
• Summary and Conclusions – For-Profit Enterprise in Health Care – NCBI Bookshelf
• Nonprofit Hospitals: Profits and Cash Reserves Grow, Charity Care Does Not – Health Affairs

2. Staffing and Patient Outcomes

• Patient Outcomes and Cost Savings Associated with Safe Nurse Staffing Legislation – PMC
• RN Staffing Ratios: A Necessary Solution to the Patient Safety Crisis – National Nurses United
• Research Linking Safe Patient Limits to Safety – Massachusetts Nurses Association
• Acute Care Nursing Staff Shortages That Compromise Patient-to-Nurse Ratios – NCBI

3. Hospital Billing, Upcoding, and Administrative Burden

• Hospital Upcoding Decisions Under Medicare Audits – Jianjing Lin
• Evidence of Upcoding in Pay-for-Performance Programs – Stanford University
• Claims Denials: A Step-by-Step Approach to Resolution – Journal of AHIMA
• Skyrocketing Hospital Administrative Costs and Insurer Policies Impacting Care – AHA

4. Consolidation and Antitrust

• How States Can Advance Equity When Addressing Health Care Consolidation – TCF
• Hospital Consolidation Matters – Equitable Growth
• Addressing Healthcare Consolidation in the U.S. – Brown University
• Hospital Consolidation: Mergers, Antitrust & Health Equity – NIHCM Foundation
• Congressional Request on Health Care Provider Consolidation – MedPAC
• Ten Things to Know About Consolidation in Health Care Provider Markets – KFF
• Mitigating the Price Impacts of Health Care Provider Consolidation – Milbank Memorial Fund
• Defending Healthcare Vertical Merger Challenges After the 2023 Antitrust Guidelines – Houston Health Law Review
• Healthcare & Antitrust: What to Expect in the New Trump Administration – WilmerHale

5. Private Equity and Hospital Ownership

• How Private Equity Has Looted Our Hospitals – American Federation of Teachers
• How Private Equity Undermines Rural Health Equity – AMA Journal of Ethics
• Bargaining with Private Equity: Implications for Hospital Prices and Patient Welfare – Northeastern University
• Private Equity’s Appetite for Hospitals May Put Patients at Risk – Harvard School of Public Health
• Private Equity Hospital Tracker – PESP
• Policy Framework for the Growing Influence of Private Equity in Health Care Delivery – PMC
• Private Equity Takeover of Hospitals Led to Rise in Medicare Deaths – The Guardian
• Private Equity’s Role in Health Care – Commonwealth Fund

6. Federal and State Oversight

• HHS Consolidation in Health Care Markets – RFI Response Report
• Understanding the Role of the FTC, DOJ, and States in Challenging Anticompetitive Practices – KFF
• Impacts of Cross-Market Hospital Mergers on Prices and Quality – PMC

7. Economic and Access Impacts

• Why Does the Cost of Employer-Sponsored Coverage Keep Rising? – PMC
• Health Insurance Costs Are Squeezing Workers and Employers – CAP
• The Impact of Rural Hospital Closures and Mergers on Health System Ecologies – PMC
• Health Policy 101: Health Care Costs and Affordability – KFF
• Inadequate Health Insurance Coverage Drives Medical Debt – AHA