Kindred Hospital North Florida went private in 2021, three years after investors acquired its parent company for more than $4 billion.
From the outside, it seemed like nothing had changed. But a prominent asset management firm had assumed the helm.
The Kindred location in Green Cove Springs, about 30 miles from Jacksonville, runs a long-term acute care facility and a rehabilitation unit. It primarily treats patients with critical illnesses, such as respiratory failure, sepsis and stroke, according to the company’s website.
Before the buyout, Kindred was sitting on a hefty pile of debt and suffering from declining revenues. That’s when private equity, or PE, investors swooped in.
ScionHealth, the care network that absorbed Kindred, is under Apollo Global Management’s control. Apollo is one of Wall Street’s largest powerbrokers, overseeing more than $800 billion in assets. Its involvement in the healthcare industry has exploded in recent years — the firm controls about 220 hospitals, making it the country’s single largest private equity owner in the space.
Sometimes, PE deals can rescue hospitals teetering on the brink of bankruptcy. Other times, it can drive indebted facilities deeper into the red, leaving patients in the lurch.
ScionHealth representatives did not respond to requests from WUFT News for comment.
As PE’s role in the U.S. health care system draws more scrutiny, lawmakers are mounting efforts to curb its reach.
What is a PE buyout?
Private equity firms deploy large pools of debt to buy privately held companies or to take public companies private. Their eventual goal is to sell those assets at a profit.
In a buyout, PE firms acquire a controlling or entire ownership stake in a company and work to enhance operational efficiency. That often entails cost-cutting strategies to generate more returns for investors.
Within hospitals acquired by private equity, one of the first expenses on the chopping block is labor, according to a 2021 analysis of PE’s impacts on the industry.
Among the hospitals studied, total employment fell by about 6% in the first four years post-acquisition and stayed lower thereafter. Wage expenses fell by up to 9% after eight years. Employees in administrative roles were most affected by the job cuts, while core medical staff remained largely insulated.
The researchers suggest private equity transactions improved efficiency and short-term profitability without measurable harm to care quality.
But private capital has its limits.
Strengths and shortcomings
PE investment can be a lifeline for some struggling hospitals, said Harold Miller, who leads the Center for Healthcare Quality and Payment Reform, a national policy center. For others, the issues run deeper than cash can address.
In early 2024, about half of rural hospitals in the U.S. had negative operating margins, meaning they were losing money on patient services and related activities, according to the health care consulting firm Chartis. That’s up from 43% in 2023.
“It isn’t necessarily the case that simply a private equity firm or anybody else coming in to take over the hospital is going to be able to fix that because the problem is really coming from the health insurance side,” Miller said.
As more Americans switch from Medicare to Medicare Advantage, under-resourced hospitals will suffer, he said. Advantage plans typically provide hospitals with lower reimbursements for health treatments than traditional Medicare. Its associated insurers are known to frequently reject claims, delaying or denying payment for services deemed unnecessary.
As of 2025, more than half of Medicare beneficiaries have switched to Advantage plans, which are privately operated. That’s sapped critical revenue for small, generally rural, facilities, according to the American Hospital Association.
Affiliation with a large health care entity can help small hospitals negotiate with insurers — at a cost.
Debt used to finance a hospital buyout often falls on the facility itself. Acquired hospitals are expected to shoulder a large portion of the purchase price, typically by meeting revenue targets. Their physical assets, including land and buildings, serve as collateral.
That places the brunt of the financial burden on the hospital itself, which should be focusing on health outcomes rather than meeting profit metrics, according to Eileen Appelbaum, co-director of the Center for Economic and Policy Research, a nonpartisan think tank.
“They have very limited skin in the game,” Appelbaum said, referring to PE investors. “They can be as risky as they want, because if they win, all that debt is going to magnify their returns.”
Then there are the fees. PE firms charge acquired hospitals for their management services.
Leonard Green & Partners, which owned hospital operator Prospect Medical Holdings, collected more than $13 million in fees from the now-defunct health care chain, according to a recent report from the U.S. Senate Budget Committee.
The payments — along with $424 million in payouts to Leonard Green investors — saddled Prospect with debts it eventually defaulted on, a practice the senators determined predatory.
“They are playing with other people’s money,” Appelbaum said. “My view is the house never loses.”
Regulatory backdrop
A series of high-profile scandals and a slew of recent hospital bankruptcies have raised concerns about whether PE investors have skirted oversight designed to protect patients and ensure fair billing practices.
The group of senators behind the scathing budget committee report alleged in January that Wall Street’s priorities are misaligned with those of the health care field, prompting some states to make targeted policy changes.
Daniel Sternthal, a Texas-based attorney who represents health care providers, including hospitals, said with sufficient political will, the proposed changes could serve as a bulwark against perverse incentives in the industry.
“A threshold question that I think we should be asking as a country is how should we be delivering health care,” Sternthal said. “Should it be solely on this type of model, or is there a need for some sort of alternative approach to try to insulate health care from market pressures?”
California recently passed a new bill designed to limit the role of private equity in health care. The bill prohibits PE or hedge-fund investors from influencing decisions across health systems, including payments.
The move comes on the heels of similar legislation Massachusetts passed in January, which expanded transaction disclosure requirements for private equity investors, following the collapse of Steward Health Care, a system PE firm Cerberus Capital Management acquired in 2010.
Steward owned more than 30 hospitals across the U.S., including eight in Florida, before it imploded last year. The company had racked up more than $9 billion in total liabilities by the time it filed for bankruptcy. Several of its facilities have shuttered, some temporarily, others permanently.
That’s left patients in limbo.
In areas where Steward hospitals have shut down, some seeking care have to travel at least half an hour to reach a provider who can treat severe injuries.
Closures have strained nearby facilities and taxpayers. State and local governments, with the help of community nonprofits, have drawn on tens of millions of dollars to bail out bankrupt hospitals. Some have raised property taxes to cover gaps in care and to pay down the levies Steward and Prospect were delinquent on.
Orlando Health bought three of Steward’s Florida facilities in October 2024. The remaining five, located in South Florida, were surrendered to Steward’s landlord, Medical Properties Trust, as part of a bankruptcy settlement.
If a distressed facility is a community’s only care provider, locals have little choice but to bail it out, said Rui Guo, a University of Florida graduate student who has studied private-equity ownership in hospitals.
Guo said the Steward and Prospect failures raise critical questions about the sustainability of highly leveraged hospital buyouts.
“Using the leverage in the acquisition may be a risk for the community’s access and welfare,” Guo said. “It really depends on whether this kind of acquisition is saving the hospital in this standalone area or [if it’s] destroying it.”