Does private equity ownership impact hospital AI adoption?

Hospitals owned by private equity firms adopt health AI at higher rates than their non-PE-owned counterparts, at least in the for-profit space, new research reveals. Non-profit hospitals have AI adoption rates similar to those of PE-owned hospitals.

Published in Health Affairs Scholar, the study examines the relationship between PE investments in healthcare and technology adoption. The study cited data from the Private Equity Stakeholder Project, which shows that more than 400 U.S. hospitals are owned by private equity firms, including 27% of all for-profit hospitals.

Using a database of PE acquisitions and exits and the 2024 American Hospital Association Annual Survey, the researchers linked hospital PE ownership to clinical and operational AI adoption. The study sample included 4,305 hospitals, of which 224 were PE-owned, 417 were for-profit but not PE-owned and 3,664 were nonprofit, including government hospitals.

The research shows that the AI adoption rate in PE-owned hospitals was on par with nonprofit hospitals, at 31.4% and 34%, respectively. But both groups far outstripped AI adoption in non-PE-backed for-profit hospitals, which stood at just 8.6%.

Further, the probability of adopting clinical or operational AI was 33.3% for PE-owned hospitals and 32.4% for nonprofit hospitals, but only 8.8% for for-profit hospitals not owned by PE firms.

Notably, adoption of operational AI tools did not differ widely between the three groups. But clinical AI adoption rates followed overall AI adoption, with PE-owned and nonprofit hospitals having similar rates, higher than those of other for-profit hospitals.

The research found nonprofit hospitals were more likely than PE-owned hospitals to report cost and resource challenges to AI adoption. Meanwhile, PE-owned hospitals were more likely than non-PE for-profit hospitals to report staff-training challenges.

"One explanation consistent with our findings is that the returns to clinical applications are more immediate than those to operational ones," the study authors wrote. "Prior evidence that PE-acquired hospitals selectively added robotic surgery and digital mammography suggests that revenue-generating clinical technology, rather than revenue-cycle automation, is where acquisition capital is directed."

The study findings provide a "preliminary empirical basis for evaluating the claim that PE investments drive technological improvements in health care," the researchers concluded.

So far, research has not shown positive associations with PE ownership in healthcare. Private equity acquisitions of hospitals have been linked to an increase in hospital-acquired conditions, including falls and central line-associated bloodstream infections, a 2024 study revealed.

Additionally, the results of a federal inquiry into PE giants Apollo Global Management and Leonard Green & Partners showed that they prioritized investors' wealth over the well-being of patients and providers at hospitals they had acquired.

In the Health Affairs Scholar study, researchers had some suggestions to better align investors' incentives with technology adoption to improve patient care. Regulators could link payments more directly to technology-enabled quality improvements and require public reporting of technology adoption alongside patient experience and safety metrics. They could also establish minimum technology investments beyond AI as criteria for approving PE acquisitions, they suggested.

Anuja Vaidya has covered the healthcare industry since 2012. She currently covers healthcare IT and innovation, including artificial intelligence, digital healthcare, EHRs and interoperability.