Private equity ownership of behavioral health providers is growing nationwide, though Oregon is below the average, an Oregon Health & Science University study found. (Getty Images)
Private equity firms now own up to a quarter of behavioral health practices in some states, according to a new national study by researchers from Oregon Health & Science University, the University of Pennsylvania and Yale University.
But private equity ownership of outpatient and residential behavioral health facilities in Oregon is lower than the national average, the study found. In the big picture, private equity investors are showing an increased interest in behavioral health, even though this health care sector is notorious for low profit margins.
Private equity firms invest other people’s money, usually with an incentive to make large profits on a short term basis – akin to flipping a house. In the health care industry, the growth of private equity has raised eyebrows, as policymakers worry that physicians and their patients will lose the ability to make the best choices possible in a push for short-term gains.
The study makes no determination about whether private equity ownership affects a patient’s access to care or its quality.
“It all comes down to what kind of care they’re providing,” said Dr. Jane Zhu, the study’s lead author and associate professor of medicine in the OHSU School of Medicine. “If these firms are expanding to increase access for people who otherwise wouldn’t be able to receive behavioral health treatment, that could be positive.”
Some studies have shown that when corporations or private equity investors buy out a health care company that patient care suffers. As an example in Oregon, officials at Oregon Medical Group in Lane County, told patients this spring they had to go elsewhere because their doctors had left the practice. As The Oregonian/OregonLive reported, that followed by purchase of the practice by Optum, Inc. in 2020.
For the university study, researchers combed financial databases to identify behavioral health practices acquired by private equity investors between Jan. 1, 2012 and July 31, 2023. They found 6.2% of mental health facilities were acquired by private equity investors and 7.1% of addiction treatment facilities were nationwide. That translates to 642 mental health clinics and 1,152 addiction treatment clinics nationwide with private equity ownership.
The states with the highest private equity ownership rates were Colorado, Texas and North Carolina, where private equity investors owned about a quarter of all mental health treatment practices.
Oregon is on the low end: Just 2.3% of the state’s mental health outpatient and residential facilities were private equity-acquired as of July 2023, the study said. And 4.6% of the state’s addiction treatment facilities were private equity-owned, the study said. That’s three mental health facilities and 11 addiction treatment facilities statewide.
The differences in states is partly because of factors like the regulatory systems and demand for services, Zhu said. Overall, the findings point to a trend happening in health care overall, she said.
“It’s sort of a microcosm of what’s happening more broadly in the health care system,” Zhu said. “There’s an increase in investors that are sort of managing health care services and that has a lot of unknown impacts, not only on the care delivery and the prices that patients bear but also on the providers themselves.”
Policymakers continue to keep an eye on the issue and monitor the role that private equity plays in health care, Zhu said.
“That all sort of comes to a head in behavioral health because we’re currently in a behavioral health crisis, particularly in Oregon,” Zhu said. “We have such an access gap in Oregon, and so it’s going to be very, very important for us to understand how these pressures – investor pressures – are affecting long-term outcomes in this state and elsewhere.”
Private equity bill in Legislature
Private equity in health care has attracted attention in the Legislature. In the last session, House lawmakers passed House Bill 4130, which would have prevented private equity firms from controlling medical practices and dictating patient treatment or hiring decisions. That bill, which stalled and died when it failed to advance in the Senate, would have excluded behavioral health providers, telemedicine providers, hospitals and long-term care facilities.
The bill’s chief sponsor, Rep. Ben Bowman, D-Tigard, said he plans to bring the bill back in the 2025 session. In an interview, Bowman said legislators would likely need a separate bill if they wanted to pass a proposal that would apply to behavioral health providers.
Not all private equity is bad, but it poses problems if physicians and patients are hampered in their care and decision-making, he said.
“It is part of a larger national private equity pouring into the health care space,” he said. “To me, the important question is: What is being bought in exchange for that investment of capital? And if that investment leads to boardrooms controlling physicians and controlling patient care, that is incredibly alarming.”
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