Private Equity in Mental Health: What Does it Mean?

I've been following healthcare policy and trends for years now and have been watching private equity quietly reshape healthcare - including mental healthcare. What’s striking isn’t just the scale of this shift, but how little most clinicians and patients realize it’s happening.

The private sector has lots of upsides including bringing much needed innovation into healthcare and having more flexibility to practice outside of the box. And a full disclosure: I work part-time in the private sector as a private practice psychiatrist. Healthcare in the U.S. is woefully dysfunctional and with dysfunction and patient dissatisfaction brings opportunity for the private sector to make it better - and to also create profits.

Private equity is a specific branch of the private sector in healthcare. It means financial firms (usually investment groups) are buying and owning healthcare organizations (clinics, hospitals, mental health centers, addiction treatment centers, dermatology groups, anesthesia groups, etc.) with the goal of increasing profit and selling the company for more money within a relatively short timeframe of usually 3-7 years to another investor. In short, their goal is to increase profit.

What Private Equity Seeks Mental Health

Why is private equity so popular in mental health? There is huge demand and there isn't expensive equipment needed. It is also scalable and compatible with virtual care.

Private equity in healthcare is stealthy and usually has great marketing that his highly branded and aesthetic. You often don't even know that the clinic you are going to or referring patients to is run by private equity. In my researching for this post, I was surprised to learn that several mental health groups in the Upper Midwest where I live happened to be private equity-acquired. If you are in the Midwest, maybe you are surprised by these too.

Where PE Shows Up Regionally

Private Equity-Run Mental Health Companies with Locations in the Upper Midwest:

• PrairieCare bought by Newport Healthcare (known for their young adult residential facilities in the Midwest and beyond).

• Ellie Mental Health bought by Princeton Equity.

• Nystrom & Associates/Sagent bought by Nautic.

Independent and Not Private Equity-owned Behavioral Health Systems in the Upper Midwest:

1. Rogers Behavioral Health

2. Allina, Health Partners, Fairview, Gundersen/Emplify, Mayo, Marshfield (these are non-profit, integrated systems)

3. All county or community health FQHCs (these are also non-profit)

What PE Does to Increase Profit in Mental Healthcare

•  Consolidate clinics and scale. They often buy and merge previously independent clinics into a larger system.

• Cut costs. They do this by in several ways, including:

  • Reducing staffing or replacing higher trained clinicians (MDs, DOs, PhDs) with lower cost alternatives (NPs, PAs, techs)

  • Increasing caseloads

  • Having shorter appointment slots

  • Pushing standardized protocols over individualized care

  • Outsourcing or automating billing and administrative functions

• Prioritize revenue-generating services such as:

  • High volume medication management models

  • Spravato clinics

  • Intensive Outpatient Programs (IOPs) and Partial Hospitalization Programs (PHPs)

  • Autism testing

  • ADHD testing

Impact of PE-Owned Healthcare on Patient Outcomes

But what I'm most curious about is what happens to outcomes for patients.

A study published in September 2025 looked at hospitals acquired by private-equity (PE) firms vs. similar non-PE, using Medicare data. The key findings were that among Medicare patients in the emergency department at PE-acquired hospitals, there was a 13% increase in deaths. They also found that the PE-acquired hospitals had large cuts in staffing and salary expenditures vs non-PE acquired hospitals. The hospitals also transferred more critically ill patients out, and ICU stays were shorter, which suggests possible strain in capacity/complex care. This highlights that cost-driven PE ownership may correlate with worse outcomes in higher acuity settings, and can affect staffing and capacity.

Multiple studies have found higher prices or spending after private equity acquisition in healthcare. JAMA Health Forum summarized these studies have found that physicain practices saw 20% higher charges per claim. Additionally, a 2023 BMJ systematic review synthesizing 55 empirical studies concluded that PE ownership is “most closely associated with increases in costs for payers and patients,” in some cases as high as 32%. Together, this evidence indicates that although PE firms may reduce labor costs through staffing changes, the overall effect of acquisition is higher spending driven by increased prices, higher billing intensity, and greater utilization—not lower costs.

Impact of PE-Owned Behavioral Healthcare on Patient Outcomes

Specifically in mental health, the research is limited and mixed.

What We Do Know:

• Overall, PE ownership in behavioral healthcare is growing rapidly and in some states, PE-owned mental health facilities made up 25% of facilities offering mental health treatment.

• PE-owned psychiatric hospitals had significantly lower staffing ratios among RNs and social workers.

• Some measures of care improved with PE-owned psychiatric hospitals such as 7 day and 30 day follow up visits and readmission rates (19.4% vs 20.16%), vs non-PE owned hospitals.

What We Don't Know:

• There are almost no published, peer-reviewed studies that compare clinical outcomes in outpatient psychiatric clinics between PE-owned vs non-PE-owned providers - especially in complex populations.

• How PE ownership affects treatment duration, depth of assessment, integrative/medically complex care, referral coordination, medication management complexity, or patient retention in outpatient psychiatry.

Impact of PE-Owned Behavioral Healthcare on Clinician Burnout

What’s striking is that we still have no research directly measuring clinician burnout in private-equity–owned mental-health clinics, even as PE now owns or controls a huge share of outpatient psychiatry and therapy networks.

The only data we do have come from other settings: physician practices and hospitals. And those studies paint a consistent picture. For example, a large JAMA Health Forum study of 578 PE-acquired physician practices found a surge in productivity pressure after acquisition—more patients, more encounters, and higher-intensity billing. Another JAMA Internal Medicine study of 204 PE-acquired hospitals found rising charge-to-cost ratios and reduced clinician staffing, patterns that typically translate into heavier workloads and less autonomy for clinicians.

In outpatient behavioral health, though, the research simply hasn’t caught up. No study to date has examined how PE ownership affects the day-to-day wellbeing of psychiatrists, therapists, psychologists, or psych NPs. What we do have are the structural shifts documented across these other settings—fewer physicians, more reliance on early-career NPs/PAs, higher throughput demands, and decreased control over clinical decisions—all well-known drivers of clinician burnout. I read commentaries from health-policy experts and clinician surveys that echo the same concerns, but the evidence is descriptive rather than empirical.

In other words, PE is reshaping the conditions under which clinicians practice but we haven’t yet studied how those conditions impact the people delivering the care.

As a psychiatrist watching these shifts from the inside, what stands out to me is how much we still don’t know and how much it matters. At the end of the day, the question that matters most is simple: does this make care better or worse for the people who trust us with their lives? Patients deserve transparency. Clinicians deserve conditions that support good care rather than erode it. My hope is that we keep asking better questions, because the future of behavioral healthcare will be shaped by whether we pay attention now.

References:

Blumberg, L. and Watts, K. Evidence on Private Equity Suggests That Containing costs and Improving Outcomes May Go Hand-In-Hand. Georgetown University Center on Health Insurance Reform. https://chir.georgetown.edu/evidence-on-private-equity-suggests-that-containing-costs-and-improving-outcomes-may-go-hand-in-hand/

Braun, R., Kaplan, H., Gruber, J., et al. (2023). Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: Systematic review. BMJ, 382, e075244. https://doi.org/10.1136/bmj-2023-075244

Bruch JD, Gondi S, Song Z. Changes in Hospital Income, Use, and Quality Associated With Private Equity Acquisition. JAMA Intern Med. 2020 Nov 1;180(11):1428-1435. doi: 10.1001/jamainternmed.2020.3552 https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2769549

Shields MC, Yang Y, Busch SH. Private Equity Among US Psychiatric Hospitals. JAMA Psychiatry. 2025;82(7):701–708. doi:10.1001/jamapsychiatry.2025.0689

Singh Y, Radhakrishnan N, Adler L, Whaley C. Growth of Private Equity and Hospital Consolidation in Primary Care and Price Implications. JAMA Health Forum. 2025 Jan 3;6(1):e244935. doi: 10.1001/jamahealthforum.2024.4935. https://pubmed.ncbi.nlm.nih.gov/36218927/

Singh Y, Song Z, Polsky D, Bruch JD, Zhu JM. Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization. JAMA Health Forum. 2022 Sep 2;3(9):e222886. doi: 10.1001/jamahealthforum.2022.2886. https://pubmed.ncbi.nlm.nih.gov/39820388/