U.S. healthcare industry should be wary of private equity’s acquisition of Steward Health Care physician network

Statement from Mary Bugbee, Healthcare Director at the Private Equity Stakeholder Project (PESP), on the announcement that Steward Health Care will sell its physician network to Rural Healthcare Group, an affiliate of the private equity firm Kinderhook Industries. Kinderhook created Rural Healthcare Group in 2022 as a platform company to acquire rural family medicine practices.​

Background: This summer, PESP published research on the corporate pillaging that led Steward Health Care (previously owned by private equity firm Cerberus Capital Management) to declare bankruptcy in May 2024. Cerberus Capital Management, aided by hospital landlord Medical Properties Trust (MPT), extracted significant profits from the Steward health system even as the system financially struggled.​

“I’m skeptical of Rural Healthcare Group’s acquisition of Steward. This organization seems to be a practice management company, and the physician practice management industry appears to have been created, largely by private equity firms, to avoid regulation that prohibits investor ownership of clinical practices.

“These companies often market themselves as being able to help physicians focus on the ‘clinical’ side of healthcare, but in practice, many of these companies will prescribe business practices that can impact the clinical side of medicine.

“In private equity firms’ quest to increase revenues and cut costs at their portfolio companies, patient care can often be impacted. A growing body of research suggests private equity’s acquisition of physician practices has led to consolidation and higher costs for payers. Research also suggests these companies may use fewer physicians to deliver care.

“Steward’s bankruptcy underscored how the U.S. healthcare system allows private equity investors and others to put profits ahead of patients and community wellbeing. We should be wary that Steward’s physician network will now be owned and operated once again by private equity investors.”

Kinderhook Industries was also recently the subject of a PESP report concerning its role in the duopoly of a critical translation tool for Deaf and hard-of-hearing individuals used for facilitating communication with family, medical providers, and emergency services. Kinderhook’s ownership of ZP Better Together, two of the three total Video Relay Service (VRS) companies in the United States, has profited from increased federal reimbursement rates while underpaying and overworking interpreters for the Deaf and hard-of-hearing community.