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Private equity and healthcare firm behavior: Evidence from ambulatory surgery centers

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  • Lin, Haizhen
  • Munnich, Elizabeth L.
  • Richards, Michael R.
  • Whaley, Christopher M.
  • Zhao, Xiaoxi

Abstract

Healthcare firms regularly seek outside capital; yet, we have an incomplete understanding of external investor influence on provider behavior. We investigate the effects of private equity investment, divestment, and an initial public offering (IPO) on ambulatory surgery centers (ASCs). Throughput is unchanged while charges grow by up to 50% for the same service mix. Affected ASCs witness declines in privately insured cases and rely more on Medicare business. Private equity increases physician ASC ownership stakes, and both simultaneously divest when the ASC is sold. Our findings appear more consistent with private equity influencing the financing of ASCs, rather than treatment approaches.

Suggested Citation

  • Lin, Haizhen & Munnich, Elizabeth L. & Richards, Michael R. & Whaley, Christopher M. & Zhao, Xiaoxi, 2023. "Private equity and healthcare firm behavior: Evidence from ambulatory surgery centers," Journal of Health Economics, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:jhecon:v:91:y:2023:i:c:s0167629623000784
    DOI: 10.1016/j.jhealeco.2023.102801
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    References listed on IDEAS

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    1. Kathleen Carey & James F. Burgess & Gary J. Young, 2011. "Hospital competition and financial performance: the effects of ambulatory surgery centers," Health Economics, John Wiley & Sons, Ltd., vol. 20(5), pages 571-581, May.
    2. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    3. Ashwini Agrawal & Prasanna Tambe, 2016. "Private Equity and Workers’ Career Paths: The Role of Technological Change," The Review of Financial Studies, Society for Financial Studies, vol. 29(9), pages 2455-2489.
    4. Jonathan Roth, 2022. "Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends," American Economic Review: Insights, American Economic Association, vol. 4(3), pages 305-322, September.
    5. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
    6. Shai Bernstein, 2022. "The Effects of Public and Private Equity Markets on Firm Behavior," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 295-318, November.
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    Cited by:

    1. Unruh, Lynn & Rice, Thomas, 2025. "Private equity expansion and impacts in united states healthcare," Health Policy, Elsevier, vol. 155(C).
    2. Richards, Michael R. & Whaley, Christopher M., 2024. "Hospital behavior over the private equity life cycle," Journal of Health Economics, Elsevier, vol. 97(C).

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