Another important factor in rising healthcare costs are increased consolidations among medical industry vendors, especially among hospitals which are acquired by private equity investment firms and then go on to  acquire other hospitals and  also absorb  formerly independent physician practices. The effects of such consolidations are felt everywhere. A hospital that once operated as an independent community facility may now bear the branding of a national or regional  chain whose primary goal changes from community service to  profit maximization.  A local physician’s office, formerly an affordable option for routine care, may after acquisition by such a hospital chain become  classified as a hospital facility. Hospital outpatient fees may then be added on as an additional layer of fees together with an upgrading of billing codes for  all other  charges and inclusion of   a  hefty “hospital facility fee” even if the service is provided in a free standing building  physically separate from the hospital system which bought the doctor’s practice. All these new charges reflect the changed emphasis from local control and concerns  to making  money for the  distant venture capitalist shareholders who run  these consolidated systems. Patients who once had multiple choices for specialist care may find themselves limited to one hospital network, with referral options dictated not by medical necessity but by system affiliations.

Despite claims that hospital mergers lead to improved efficiency and better patient outcomes, the data tells a different story. Instead of reducing costs , consolidation has created  a system where hospitals can change more, leaving patients and the employers who fund their health insurance with no alternatives.  Indeed escalating  hospital charges constitute a primary factor in the  rise of healthcare costs overall. The notion that larger hospital  systems provide a seamless patient experience often fails to match reality. Many patients find themselves facing longer wait times, higher bills, and fewer choices, while hospital executives simply focus on expanding their market share. The effects of these changes are seen in rising insurance premiums, higher deductibles, and unexpected hospital bills that patients and the employers who provide their insurance benefits struggle to afford. Even the so called nonprofit hospitals are caught up in this frenzy of consolidation and increased charges for services and procedures , along with the explicitly for profit hospital  chains controlled by Wall Street investors.        

One example of the healthcare disasters resulting from the recent wave of takeovers of what were once nonprofit community hospitals by Wall Street  private equity capital investors is the fate of the Steward Healthcare Hospital group. It once took care of entire communities with care and compassion as a nonprofit entity affiliated with the Catholic Church.  Then new owners stepped in as private equity investors. Their main goal was to make as much money as they could out of each hospital in the network and to use any accumulated cash to acquire even more hospitals. The problems showed up fast. Suppliers who had provided lifesaving equipment to the hospitals stopped getting paid. Bills piled up until hospital vendors finally stopped shipping even basic items to these hospitals. Aging and neglected pipes burst in these hospital buildings. Patients had to wait so long for emergency room treatment that they literally collapsed in hospital waiting rooms. Then came the breaking point. Steward filed for bankruptcy in 2024 as the hospitals closed or cut services. Entire communities lost access to convenient emergency room and trauma care and  other hospital services . Meanwhile the CEO of Steward walked away with millions of dollars . He bought himself a $40 million yacht , a private island, a private plane, and expensive second homes in Europe.

This is a pattern being repeated all over the United States, where private equity investors now control almost five hundred hospitals. Today nearly one quarter of all for profit hospitals are owned by private equity firms.

 In Connecticut, several other private equity investors took over several hospitals and stripped their assets for their own private gain. Hospital owned ambulances were unable to fuel up because their credit cards had been cut off. Hospital elevators stopped working due to neglected maintenance. Patients died of infections as these hospitals became short staffed and ran out of medicines. Meanwhile the rich investors who owned the hospitals through their private equity firm paid themselves $658 million in “advisory fees”.        

Studies show that patients who go these private equity owned hospitals have worse outcomes. These patients are 25% more likely to get hospital acquired complications ,  38% more likely to get  hospital acquired infections in their bloodstream, and 42% more likely to die after an operation in these hospitals. Your surgeon may congratulate you when  the operation itself   is over, but that does not mean that you are out of danger. Not if the hospital is understaffed, the equipment is old and not properly maintained,, not if in infection spreads through the ward, and not if one nurse must watch twelve beds at once as is commonly the case. In private equity owned hospitals.   

One other factor contributing to the rising cost of drugs for all hospitals is their use of a new type of for profit middleman, called a group purchasing organization (GPO)  to bargain with drug manufacturers to acquire drugs for hospital use.   Since GPO fees are based on  a percentage of sales, they have little incentive to promote the use of cheaper drugs because that decreases their own revenue. These for profit GPO’s are not to be confused with the   non profit employer group purchasing coalitions discussed later in this website which constitute bands of employers who  self fund their respective employee group benefit plans and bargain directly with drug manufacturers and medical service providers for the best rates, which are paid without middlemen involvement.