The financial burden of running an ASC continues to rise — substantial capital contributions are required for new ventures and skyrocketing operating costs threaten financial viability.
“Private equity isn’t going anywhere,” he said. “Money doesn’t just disappear overnight. People are always looking for investors. We can call it private equity, but the reality is that we need to appropriately approach the idea of outside investors in healthcare and how they operate.”
Private equity firms have shown a growing interest in outpatient care. In 2023, there were 95 private equity deals involving outpatient centers — the highest of any healthcare subsector — according to the Private Equity Stakeholder Project.
While Mr. Schwartz acknowledges concerns about patient outcomes, he believes there are ways to involve investors in healthcare without compromising quality.
Quality concerns with private equity involvement has been a growing industry concern. A study published Dec. 26 in JAMA found that patients at private equity-associated hospitals had 25.4% more hospital-acquired conditions, largely driven by falls and central line-associated bloodstream infections.
However, many physicians have found success in private equity models, which allow them to maintain clinical leadership while financial experts handle the business side and foster growth.
“I don’t think private equity is inherently a bad thing,” he said. “[I]n a capitalist country with a capitalist system, we’re playing within the rules of the game we’ve been given.”
One of the key challenges, according to Mr. Schwartz, is the shifting mindset of younger physicians. Many younger physicians are less prone to invest in themselves and get involved with ASCs.
“They’d rather send money to a chicken farm in Africa with the expectation of getting paid back based on a presentation they saw, rather than investing in their own hands,” he said.
Despite the necessity of outside investment, PE remains largely unpopular among physicians. According to a survey published by MedPage Today, 60% of physicians said that they viewed private equity investment in healthcare negatively.
Regulatory efforts aimed at private equity in healthcare expanded in 2024. New Mexico recently passed the Health Care Consolidation Oversight Act, requiring reviews of proposed hospital acquisitions and other transactions, while Oregon created a similar program to assess transactions for anti-competitive activity. California established the Office of Health Care Affordability to analyze mergers and market-impacting actions, though the governor vetoed a bill that would have further expanded PE scrutiny.
Indiana and Minnesota are actively considering healthcare PE oversight bills, and they may be joined by Massachusetts, New Jersey, New York and Pennsylvania.
“I think there are appropriate ways to regulate private equity, but outright eliminating it from healthcare would set us back significantly,” Mr. Schwartz said.
