Private equity firms have invested in a record number of clinical staffing companies since 2020 and some doctors worry health systems' use of these companies could mean higher patient loads and understaffing.
Nonprofit health system Ascension's decision to turn staffing at 10 Chicago-area hospitals over to private equity-owned SCP Health exemplifies systems' use of these companies and physicians' concerns. Opponents of the deal — namely, affected employees — argue that contracting with the private equity-backed staffing company will lead to worse patient care outcomes and, likely, lower provider pay.
Related: Ascension uses private equity staffing firm for Chicago hospitals
Here's what to know about how private equity's growing influence on healthcare staffing.
How fast are private equity firms acquiring staffing companies?
From 2020 through 2023, private equity firms acquired 116 healthcare staffing companies and were involved in more than 60% of all clinical staffing transactions, according to a data analysis by The Braff Group, a mergers and acquisitions advisory firm.
Many major healthcare staffing companies are private equity-owned, including CHG Healthcare, Medical Solutions, SCP Health, TeamHealth and Fastaff Travel Nursing.
Last year, private equity investors were involved in 19 clinical staffing deals, according to Pitchbook, a private equity and venture capital database. The majority of the deals were in the physician and post-acute staffing spaces.
“Private equity has become pretty pervasive in physician markets at this point,” said Loren Adler, a fellow and associate director for the Center on Health Policy at Brookings Institution, a think tank. “More recently, we've seen a big push into a handful of office-based specialties like dermatology, ophthalmology and gastroenterology.”
In hospital-based specialties like emergency medicine and anesthesiology, about 20% of the national staffing market is controlled by several large private equity firms, Adler said.
Why is private equity investing in healthcare staffing?
Health systems’ struggles to fill clinical shortages during the pandemic created a breeding ground for private equity deals as investors sought to capitalize on the demand for staffing services, said Mary Bugbee, senior healthcare researcher at the Private Equity Stakeholder Project, a nonprofit watchdog organization. The growth also has been driven by hospitals’ use of federal COVID-19 relief funding to pay staffing companies, she said.
“Both the physician staffing groups and travel nurse agencies provide a way for private equity investors to access patients and nonprofit systems without having to acquire the hospitals themselves,” Bugbee said.
What benefits do hospitals see in contracting with these staffing agencies?
Health systems are generally hoping to drive revenue through these groups' more aggressive billing practices, Bugbee and Adler said. Criticisms of private equity-backed staffing companies include pushing doctors to order more tests, perform more services and admit more patients, which gives a hospital more opportunities for profit to the detriment of clinicians' workloads.
An Ascension spokesperson said in an emailed statement the goal of its partnership with SCP Health is to "deliver safe, high-quality care and an exceptional patient experience with no gaps in service," and the system spent months deliberating before partnering with SCP Health.
How have physicians and nurses reacted to the use of these staffing companies?
Both physicians and nurses have complained about private equity-backed staffing companies pushing higher patient loads on clinicians.
Health systems across the country are using staffing agencies to replace anesthesiologists with certified registered nurse anesthetists and requiring physicians to manage mid-level clinical workers rather than be involved in any direct patient care, said Dr. Marco Fernandez, president of the Association for Independent Medicine.
Fernandez is also president of Midwest Anesthesia Partners, a physician-owned group based in Chicago. He said his experience with a private equity-owned staffing company “led to no fully staffed operating rooms."
"There was not enough incentive for private equity to fix it or to pay physicians what they were supposed to be paid," he said.
As more doctors are put in a position to become employees of staffing agencies, there is a loss of clinical autonomy that could cause more providers to leave their roles, Bugbee said.
For nurses, working for a staffing agency is often more lucrative than being employed by a health system due to the higher pay rates.
Will federal scrutiny affect private equity ownership of staffing companies?
Private equity’s involvement in healthcare is under significant federal scrutiny, but any restrictions probably won’t affect investors' ownership of staffing companies, said Dexter Braff, founder and president of The Braff Group.
Braff said he expects to see more outsourcing of various hospital functions like staffing to investor-owned groups as economic conditions improve.
“Other than ensuring that providers are properly credentialed and meet other basic requirements, the responsibility for maintaining standards of care belongs to the staffing company's customers — the hospitals and other facilities that use staffing [companies] to fill gaps in coverage,” he said.
