Most Americans are scared of hospital bills — even those who are insured. But few of us go so far as to check who owns these facilities, or whether a hospital has a new owner. A recent paper by Wharton experts revealed how corporate ownership of hospitals—also called “system ownership” — is redefining their business model and what that model means for costs and the quality of patient care. Titled “The Corporatization of Independent Hospitals,” the paper is authored by Wharton professor of health-care management Atul Gupta; Texas A&M School of Public Health professors Elena Andreyeva and Benjamin Ukert; Malgorzata Sylwestrzak, associate vice president at Humana Healthcare Research; and Catherine Ishitani, a doctoral student of health-care management and economics at Wharton.
The Trend
Total bed capacity owned by hospital chains has raced from
Driving that trend is a desire not just for greater market power, but also for increased profitability.
The Study
The authors analyzed 101 independent hospital acquisitions by systems from 2013 to 2017. Data sources included large commercial insurers, Medicare claims, and patient discharges across all hospitals in New York state.
Key Findings
When new corporate owners take over, they cut operating costs.* The authors found that while expenses decline and profit goes up, the quality of care may worsen; the study also found that short-term readmission rates rise after acquisitions. Gupta explained why the quality of care may suffer after corporatization: “While cutting back on staff creates some efficiencies, it might also disrupt the protocols that were already in place at a hospital.”
* Most of the savings come from reducing staff — about 60 percent.
The Takeaway
Does system ownership lead to better hospitals? Gupta said the answer depends on how you define “better.” While profitability improves — the acquired hospital sees an average estimated increase in hospital operating profit of about $60,000 per bed per year — jobs are reduced, which could in turn affect care. Prices also increase, and while “regulators have become more vigilant,” Gupta said, “just the fact that prices go up is unfortunately not enough for them to take action.”
Published as “The Impact of Corporate Hospital Takeovers” in the Spring/Summer 2025 issue of Wharton Magazine.
