PESP report reveals private equity’s failed bet on value-based care, leading to bankruptcies and consolidation

A new report from the Private Equity Stakeholder Project exposes the risks of private equity investments in value-based care (VBC) providers, detailing how debt-based financial strategies have led to bankruptcies, clinic closures, and healthcare consolidation, impacting vulnerable patient populations.

The report, titled “Private Equity’s Failed Bet on Value-Based Care,” includes three case studies of private equity-backed VBC providers that declared bankruptcy in 2024, demonstrating the incompatibility of private equity’s extractive financial strategies with value-based care.

These companies are Cano Health, CareMax, and Miami Beach Medical Group (dba Clinical Care Medical Centers), which all specialized in value-based primary care and served patient populations that were disproportionately dual eligible for Medicare and Medicaid. All three companies were burdened by substantial debt loads stemming from private equity financial strategies such as leveraged buyouts, debt-funded shareholder dividends, and debt-financed growth. 

For example, during the period it was an investor in Cano Health, InTandem Capital extracted at least $575.7 million from the company through debt-funded dividends, annual management fees, and a payout from the reverse merger that brought the company public. The company also took on substantial debt to finance its expansion.

“This report shows that private equity’s debt-driven approach to value-based care is unsustainable. Investors and their debt-based financial strategies operate in ways that are far removed from the goals and ideals of value-based care,” said Mary Bugbee, Healthcare Director at PESP.  

The bankruptcies of CareMax, Cano Health, and CCMC have further contributed to consolidation in the VBC landscape, as vertically integrated insurers and private equity-owned platform companies were able to buy many of the companies’ assets out of bankruptcy. Additionally, both CareMax and Cano Health have closed clinics leading up to or during their bankruptcies, impacting access to care for vulnerable patient populations.

Value-based care models have been touted as solutions to improve care and reduce costs. However, in the current regulatory landscape that allows for aggressive financial strategies, VBC models are vulnerable to extraction from private equity investors and other groups who can drive companies into bankruptcy with little consequence to themselves. 

The report calls for policy solutions to address private equity’s extractive practices in value-based care, including limiting debt that can be used on leveraged buyouts and expansion of healthcare companies, limiting or prohibiting debt-funded dividends, and requiring joint liability for private equity firms and their investments. Stronger antitrust enforcement at the federal and state levels is also needed to help address the growing issue of consolidation in the VBC landscape.

The full report is available here.