While tariffs – among other political turmoil – have spooked the markets in 2025, private equity investments have crept up.
“Investment rose from $210 billion across 2,113 deals to $234 billion across 1,670 deals, marking a strong start to the year,” according to accounting giant KPMG.
Part of that trend has taken the form of increased private equity ownership in U.S. psychiatric hospitals. It’s enough to attract the interest of researchers and policymakers alike. According to a new study, the number of psychiatric hospitals owned by PE firms nearly doubled between 2013 and 2021, jumping from 8% to more than 14%. This growth has raised concerns about how profit-driven investment strategies might influence mental health care.
“Private equity’s presence in behavioral health has increased significantly in recent years, yet we know little about its effect on care,” said Morgan Shields, an assistant professor at Washington University in St. Louis and the study’s lead author. “Psychiatric hospitals are often opaque and underregulated, making it critical to understand how ownership models influence what happens inside.”
Reconciling Care and Profits
The research project looked at ownership trends, staffing patterns, and quality of care among hundreds of psychiatric hospitals. What the researchers found underscore major concerns related to staffing levels, the structure of care delivery, and the broader implications of introducing private equity incentives into such a sensitive sector.
Psychiatric patients usually face limited choices, especially during times of crisis, which often include involuntary hospitalization. Because of that, inpatient psychiatric care remains acutely vulnerable to the effects of cost-cutting measures – a popular private equity strategy meant to boost returns.
While private equity investment can certainly inject capital while improving management and streamlining operations in struggling facilities, the study’s authors warn that it could also emerge as an obstacle to high-quality care.
(Somewhat) Surprising Results
The researchers found that private equity-owned psychiatric hospitals featured much lower staffing levels, particularly among registered nurses and social workers. Specifically, the adjusted data indicated that these facilities employed one fewer registered nurse for every 28 patients compared to non-PE hospitals. Similarly, medical social worker staffing fell substantially. These findings echo past studies of nursing homes and other healthcare ventures, where private equity ownership resulted in lower-quality care and a spike in regulatory violations.
While the researchers might have expected lower staffing levels, they also discovered that private equity hospitals showed slightly improved performance on multiple facility-level quality benchmarks, including follow-up care and readmission rates.
“Our results don’t necessarily mean care is better at a PE facility,” Shield pointed out. “Instead, the results may reflect gaps in how quality is measured, and raise concerns about how well the current system captures the lived experience and safety of psychiatric patients.”
The researchers added that some of these metrics, especially self-reported ones (such as restraint and seclusion hours), might not paint a complete picture. They conceded that the performance differences appear to be slight. And hey didn’t seem to be enough to offset the staffing concerns.
“While there are gaps in current quality measures, the Centers for Medicare and Medicaid Services (CMS) recently started requiring psychiatric facilities to collect and publicly report patient experience data,” Shields said. “Those data should be released in 2026 or 2027.”
Parsing the Data
Geographically, private equity ownership surged in the South, with Texas, Louisiana, and Ohio leading the way. In places like Louisiana and New Mexico, private equity firms owned more than a third of the state’s psychiatric hospitals.
On the other end of the spectrum, more than two dozen states – along with the District of Columbia – had no private equity psychiatric hospitals.
The research also found that private equity-owned facilities tended to serve geriatric populations and, by extension, Medicare patients. They also had higher occupancy rates, a detail that the study’s authors insist warrants further investigation.
The study highlights the importance of collecting better data on care quality (and staffing) in psychiatric hospitals. Given the rapid movement of private equity into this sector – paired with the unique vulnerabilities of the patients – researchers argue that greater oversight and transparency remain critical to ensure that profits don’t come at the cost of patients.
“The population served by psychiatric hospitals is particularly vulnerable,” co-author Susan Busch, with the Yale University School of Public Health, said. “These patients often have limited choice among facilities, their families have limited ability to observe quality of care and there is the possibility of involuntary hospitalization.”
Further Reading
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