Private equity ownership in the Swedish secondary healthcare sector and its impact on financial performance, availability and quality of care

Abstract: As New Public Management reforms began to be implemented in Sweden in the 1990s, a greater degree of private involvement was introduced in the provision of services in the welfare sector, and some of the companies operating in the sector soon came to be acquired by private equity firms known for their aggressive strategies to increase profits. This study examines the extent to which two major providers in the Swedish secondary care sector owned by private equity firms achieved better results in financial terms, quality of care, and availability of services compared to other forms of ownership. Among the other ownership types, we identified private companies that are not owned by private equity firms and public healthcare providers. Financial reports between 2007 and 2016 were used to assess profitability, while data from the patient survey "Nationell patientenkät" and lead times from the database "Väntetider i vården", both managed by the Swedish Association of Local Authorities and Regions, between 2012 and 2016 were used as indicators of quality and availability, respectively. Our findings suggest that, despite increases in net sales for both companies, only one of the two private equity-owned providers was able to increase its annual profits. The same provider also achieved better results for quality and availability. Thus, our study shows that financial performance is not necessarily negatively correlated with quality of care, contradicting public criticism that higher profit margins come at the expense of healthcare quality. The same observation also highlights that the same type of ownership with the same theoretical value creation strategies is not synonymous with similar outcomes. Because of the differences between the two providers, no clear conclusions can be drawn about whether private equity-owned units perform better compared to units of other ownership types in terms of quality or availability, but there is evidence that private equity-owned providers do not necessarily achieve lower scores despite high financial pressure. In the course of the study, we discovered that reporting systems for quality and availability parameters need to be improved to allow for future reliable investigations of ownership types and the value they create.