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Private equity firms increasingly buying into behavioral health, study finds

Buying and selling behavioral health practices proves attractive to investment firms seeking quick profits, but some experts say the trend is not good for consumers or the public
May 7, 2024

Private equity firms have bought a growing share of behavioral health and substance use disorder services nationwide, a new study finds, even as experts sound increasing alarm that private equity ownership prioritizes profits over the quality of care.

The study, led by an Oregon Health & Science University medical doctor, tracked the number of behavioral health practices acquired by private equity firms from 2012 to 2023, using a variety of data sources. It found that more than 6% of behavioral health practices and 7% of substance abuse disorder practices are now owned by private equity entities, although the percentage varies from state to state. In Oregon, the penetration is at the low end, at 2.3% for mental health and 4.6% for substance use disorder, while in some other states more than one fifth of these types of practices are owned by private equity, the study found.

The vast majority of the purchases took place in 2018-23.

Dr. Jane Zhu, an OHSU research and lead author on a new study on private equity's acquisition of behavioral health practices. 

It is unclear what impact private equity ownership has on behavioral health and substance abuse facilities, including the quality of care, said Dr. Jane Zhu, who co-authored the study along with OHSU’s Emmanuel Greenberg, University of Pennsylvania’s Marissa King and Yale University’s Susan Busch.

But other research Zhu has carried out documented that prices rise after private equity firms buy health care clinics.

Behavioral health and substance-abuse practices are likely attractive acquisition targets because of increased money flowing to the work, improved health insurance coverage, increased demand from patients, and legislation that mandated parity of behavioral health care, the study said.

For-profit corporate acquisition of health care providers has drawn rapidly-increasing attention from lawmakers, researchers, advocates and others. 

But because health care mergers and acquisitions are scantily regulated, there’s a lack of comprehensive data about deals and ownerships.

 “There’s very little transparency,” Zhu told The Lund Report. 

“It’s likely that we’re underestimating the scope of the behavioral health acquisitions,” she added, calling the report “as close as possible to a complete picture.”

Oregon is among the most aggressive states in monitoring health care business deals. The state in early 2022 launched its Health Care Marketplace Oversight program. Created by state legislators, the program screens large deals to see if they will degrade health care services or unduly raise prices. The state can reject deals that don’t serve the public interest, but has not done so yet. Nationally, about half a dozen states monitor health care business deals, although some of the programs are skimpy. Nevada, for example, simply requires entities to file disclosure paperwork in advance of a merger or purchase.

However, earlier this year a bill in the Oregon Legislature intended to curb corporate control of the practice of medicine died in the face of industry opposition.

State Rep. Ben Bowman (center), along with Dr. Bruce Goldberg (left) and former Gov. John Kitzhaber speak during a hearing on a bill to limit large corporations' role in medicine.

In March, the federal government launched a fact-finding inquiry into private-equity and other corporate control over health care. The inquiry is being led by the Federal Trade Commission, the Department of Justice’s Antitrust Division, and the U.S. Department of Health and Human Services. “The cross-government inquiry seeks to understand how certain health care market transactions may increase consolidation and generate profits for firms while threatening patients’ health, workers’ safety, quality of care, and affordable health care for patients and taxpayers,” the FTC said in announcing the probe. To date, the public has filed more than 1,400 comments.

The federal move “highlights the fact that there is a lot of policy attention on this issue right now,” Zhu said.

In the United States, for-profit entities have long owned many health care services, including hospital chains. But private-equity interest in health care as a potential source of big profits is relatively new, emerging over the past several decades.

Private-equity firms scour a wide array of industries, buying up companies they believe they can streamline, consolidate or expand, and later sell at a profit. Equity firms typically hold onto their acquisitions for roughly 3-8 years, then sell. Prominent private equity firms include The Blackstone Group, KKR & Co. and The Carlyle Group. Private equity firms get their acquisition money from a variety of sources, including pension funds, academic or other foundations, high-wealth individuals, and government-owned investment funds. All these organizations seek better returns than they might get through conventional investing in the stock and bond markets through mutual funds or other methods open to the general public.

“Bad and good actors”

In Oregon’s health care sector, private-equity funds have played a relatively small role. Much of Oregon’s health care industry, including hospital systems, clinic chains and health insurer, is owned by non-profits. But the arrival of big for-profit corporate owners has created waves. UnitedHealth Group, through its Optum arm, bought the Oregon Medical Group clinic chain based in Eugene, and The Corvallis Clinic chain, based in Corvallis, prompting complaints from patients and the public.

“There can be bad and good actors for every form of ownership category,” Zhu said. But with private equity ownership, “you are trying to maximize profit in as short a timeline as possible,” she said. “It’s a different set of incentives compared to a typical for-profit.”

Zhu’s team relied on proprietary databases, company announcements, regulatory filings and other sources to track private-equity ownerships.


In the time period studied, 652 behavioral health facilities, out of 10,324 nationwide, came into private-equity ownership, and 1,152 substance use disorder facilities, out of 16,174 nationwide, came into private equity ownership, the study said.

The study didn’t track if any of those practices were sold off by private equity companies during that time, but Zhu said many will likely still be in private equity ownership, given that most were only recently bought by private equity.

Many of the purchases were concentrated in a handful of states, including Texas and Arizona, and in the Southeast, Zhu noted. She attributed that to a variety of factors, including opportunities for private equity firms to profit from consolidating practices, and more “friendly” regulatory climates.


Impacts need to be studied

Determining the extent of private equity ownership is only a first step, she said. Next, it will be important to determine the effect of that kind of ownership, she said. “Does it improve access or worsen access for certain types of patients, Medicaid patients for example?” she asked.

Zhu said her next study will gather nationwide data to try to determine the effects on primary care clinics when they are bought by private equity firms.

Traditional practice owners, such as practitioner groups, regard private equity groups as being among the range of entities they can sell to, Zhu said. Other potential buyers include hospital systems, she said. Practitioners seek to sell in part because health care has become so complex, with uncertainties regarding reimbursement, and requirements for electronic medical records and other technology upgrades, she said.

Research about ownership patterns and their impact on health care can inspire lawmakers to put in place “guardrails” to protect patients, Zhu said.

You can reach Christian Wihtol at [email protected].