New research on the increased presence of private equity ownership of psychiatric hospitals finds no difference in care quality compared to facilities of different ownership types.

Private equity investors have taken an interest in the behavioral health space. The share of private equity-owned freestanding psychiatric hospitals increased to 14.1% in 2021, compared to 8% in 2013. 

In terms of raw numbers, the study identified 42 private equity-owned freestanding psychiatric hospitals in 2013 and 87 in 2021, a 76% increase. 

“PE-owned hospitals performed better on several measured quality characteristics in adjusted models,” the study states. “Data on staffing and quality in this context needs to be strengthened to better support accountability and learning.”

The study — conducted by researchers from Yale University and Washington University in St. Louis — found private equity-owned freestanding psychiatric hospitals had lower use of patient restraints. On an adjusted basis, these facilities also had better follow-up rates and lower readmissions. 

The study cast a doubtful eye on staffing levels. Point to extant research on other types of facilities owned by private equity: it associated lower staffing levels at skilled nursing facilities and lower care quality.

“However, not all studies have found that PE is associated with declines in staffing under PE ownership, and the literature on the correlation between psychiatric staffing and care quality is limited,” the study reads.

The study also notes a limitation on patient experience data collected by facilities that engage with the Medicaid program, a key source of data for the study. The study and identification of freestanding facilities were limited to those who participated in the Medicare program. The federal government didn’t start requiring this data to be reported until this year. This year, reporting experience data is optional. Next year, Medicare payment determinations will be required. 

“Psychiatric hospitals serve a particularly vulnerable patient population in settings with limited observability, limited choice among consumers, and substantial funding from public insurance programs,” the study states. “Evidence on PE’s role in this context has relevance for patients, their families, and policymakers.”

These data and others generated by studying the presence of private equity in behavioral health show that fears of a takeover of the space by private investment are growing quickly but overstated.

A study by Oregon Health & Science University (OHSU), the University of Pennsylvania and Yale University found that private equity owns 6.2% of all mental health facilities and 7.1% of all addiction treatment facilities.

Both studies, which have one co-author in common (Susan Busch), find that there is wide variability across specific geographies when it comes to private equity ownership. But both identify that Southern states have a greater share of private equity-owned facilities than any other region.

According to the psychiatric hospital study, private equity-owned psychiatric hospitals were less likely to be affiliated with a medical school and provide social services.

Populations served also differed. Private equity-owned facilities were less likely to care for geriatric patients, pediatric patients with severe needs and forensic (court-impacted) patients.

It also calls into question the higher occupancy levels at these facilities. On average, private equity-owned facilities had 7.7% higher occupancy than others but saw no significant difference in length of stay metrics.

However, the study highlights news media reports on allegedly inappropriate actions by staff and harmful patient outcomes resulting from poor staffing at Acadia Healthcare (NASDAQ: ACHC) facilities.

“Information on patient-reported experiences would be useful in interpreting occupancy rates,” the study reads. “However, in contrast with acute care hospitals, [the federal government] has only recently started to collect these data as part of the [Medicaid prospective payment] program.

“In acute care hospitals, PE acquisition has been associated with reductions in the quality of patient experiences, including overall hospital rating and patient reports of whether they would recommend the hospital.”