Germany’s health care system is under severe pressure. Staff shortages, rising costs, and structural deficits raise fundamental questions about how health and care services should be organised and financed in the future. The debate becomes particularly acute where services for older people and outpatient medical care are largely funded publicly, yet increasingly shaped by actors whose primary concern is financial returns. At this point, one player stands out: private equity.

Private equity: Where the boundaries between everyday life and financial markets blur

Few places seem further removed from financial markets than a grandparent’s nursing home. Yet for decades, the boundaries between the real economy and financial markets have been dissolving. Financial-market logic is creeping into everyday life — a development commonly described as financialization. Private equity firms are a striking example of this process.

Private equity firms such as Blackstone, KKR, and Carlyle set up investment funds that pool capital from institutional investors (for example, pension funds) and very wealthy private individuals, with the explicit goal of achieving high returns. Investors are promised annual returns of 15 to 20 percent. By comparison, the long-term average return on stock markets — accessible to broad segments of the population — is around 7 to 8 percent. The private equity firms themselves charge substantial management fees and additionally take a share of the profits.

The private equity business model: Returns, debt, and a rapid exit

The capital raised by private equity funds is used to acquire companies, with a single fund typically purchasing between 8 and 20 firms. To maximise the number of acquisitions, a large share of the purchase price is financed through debt. These transactions are structured in a way that shifts the debt onto the acquired companies.Interest and principal repayments must be serviced from their ongoing revenues, and the risks associated with high leverage lie with the companies — not with the funds.

After an acquisition, far-reaching restructuring often follows: rapid revenue growth targets, aggressive cost-cutting, and sharply reduced investment. Profits are frequently shifted into offshore financial centres through tax optimisation strategies. The aim is simple: boost the company’s value quickly and sell it at a profit. Private equity is not about long-term ownership — investors typically exit after five to seven years.

In this sense, private equity  acts less like  a long-term owner, but more like  a trader, reselling companies after a short holding period. There is little room in this model for long-term sustainable development strategies.

Although private equity firms regularly claim that they increase efficiency and make companies more competitive globally, the results of this “shock therapy” are often negative. Short-sighted cost-cutting undermines the long-term viability of many firms. According to a study of 423 case examples, 20% of companies acquired by private equity ended up in financial distress (Scheuplein 2020).

Public services as investment assets

In their search for new investment opportunities, private equity funds have increasingly targeted sectors of public services, including health care, nursing care, housing, and infrastructure. These sectors are attractive because they are essential to everyday life and often publicly financed — even when services are delivered by private providers. Demand is therefore relatively secure, significantly reducing risk for investors.

Many private providers have delivered responsible services in these areas for decades. However, the entry of private equity can create serious problems. In sensitive sectors such as care and health services, the consequences are often severe, involving social strain and declining quality.

Private equity is moving into nursing homes and medical practicesElder care facilities provide a clear example. These institutions care for highly vulnerable people who depend on dignified and humane treatment. Management focused primarily on financial metrics often stands in tension with these needs.

Private equity firms acquire nursing homes and pursue so-called “efficiency gains” — in practice: staff reductions, intense cost pressure, and deteriorating care quality. Studies indicate that nursing homes owned by private equity exert greater pressure on care staff and deliver lower-quality care (Geraedts et al. 2016). In many cases, staff are severely overworked, and personnel shortages are increasingly filled through temporary agency labour (Finanzwende 2021).

Findings from the United States are particularly stark. In hospitals taken over by financial investors, measurable increases were observed in patient falls, sepsis cases, and wound infections (New York Times 2021). In US nursing homes acquired by private equity, mortality rates even increased (Gupta et al. 2023).

More recently, private equity firms have also gained growing influence in Germany’s outpatient medical care, for example, through the creation of large networks of medical practices organised as Medical Care Centers (Medizinische Versorgungszentren, MVZs). Profit orientation increases pressure to prioritize economic over medical considerations (Berndt 2023). Media reports describe revenue-driven performance targets, particularly in ophthalmology and dentistry (Wasner 2022). The physician Eleonore Zergiebel summarized this bluntly at the German Medical Assembly: “Cases, cases, cases — and above all, lucrative cases,” she said, is what management demands from doctors (Bangemann 2025).

Investor-owned providers also tend to focus on highly profitable treatments. In their annual reports, ophthalmology chains explicitly described certain procedures as “value drivers” and outlined detailed growth plans for these interventions. Less profitable services are often simply discontinued (Meusel 2022). This problem is exacerbated by the fact that in some regions of Germany, private equity firms have already established near-monopolistic structures (Finanzwende 2023).

How to push back on private equity  in public services?

These examples illustrate how crucial active governance of access to public services is. Responsible private providers can make valuable contributions, while aggressive, return-driven strategies can cause significant harm.

Existing regulatory approaches primarily aim to soften efficiency pressures — for example, by setting quality standards in nursing care, by strengthening physicians’ professional independence, or by limiting the formation of practice chains. However, such regulations are often fragmented and difficult to enforce.

As a result, calls for an outright ban on private equity investors recur. In 2022, former Health Minister Karl Lauterbach announced that profit-driven practice chains would have “their last nice Christmas.” And the Federal Council called for legislation to address the risks posed by investor-owned medical centres. Yet such a law never materialised. A look at the lobbying register shows how intensively various actors influenced the legislative process (Finanzwende 2025).

A more targeted alternative to curb aggressive financial investors is a earnings distribution cap. Under this approach, the maximum amount of profits that can be distributed to owners would be limited to a fixed percentage of the equity they actually invested. Any profits beyond this threshold would have to remain within the company forever and must be reinvested in public services — even in the event of a sale or liquidation. If investors are not able to extract the profits, those profits are worthless to them.; And this is precisely the point. The sector would become unattractive to investors seeking high returns, while responsibly managed providers would remain unaffected. Finanzwende has commissioned a legal opinion to assess the feasibility of such a measure.

In addition, excessive reliance on debt should be restricted. Funds should not be allowed to shift unlimited debt onto the companies they control and should remain liable for outstanding debts even after exiting their investments.

Profit returns at society’s expense

Public service sectors need additional capital investment. The private equity industry currently presents itself as a market-based solution to the public sector’s financing needs. Private equity funds are growing rapidly and are penetrating areas of public services that are central to quality of life and social cohesion — from care and housing to health.

Yet private equity does not provide the type of capital that is urgently needed. Its logic does not follow the public good. Business models are designed to extract as much capital as possible from portfolio companies.

Rising rents  and surging care costs , lead to social exclusion for those with fewer economic resources.. Turning essential infrastructure into financial assets also contributes to growing social divisions and strengthens authoritarian tendencies. In this context, private equity functions as an inequality machine: its business model generates astronomical incomes for financial elites, while many people face rising costs and increasing financial pressure.

A welfare state committed to social cohesion and stability must not leave core areas of public services to the mechanisms of return-driven funds. The influence of private equity in public provision must therefore be limited to prevent essential infrastructure from becoming a plaything of global financial markets.

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Editorial Note:

This article is produced as part of a collaboration between Rethinking Economics International, Makronom and the Economists for Future DE and was originally written in German language. The 2026 contributions engage with ongoing debates on anti-authoritarian and anti-fascist perspectives on economic policy, with particular attention to how social security arrangements can help counter authoritarian and nationalist tendencies. Contributions in this series also explore welfare state design, property relations, pension systems, and institutional reforms with a view to strengthening democratic cohesion, ecological stability, and economic resilience. The views expressed in this article are the author’s own and do not necessarily reflect those of the participating platforms.

About the authors:

Jorim Gerrard works at Finance Watch Germany on issues related to the financial system and the real economy. He studied economics and has worked with the Network for Pluralist Economics as well as in the German Bundestag.

Uwe Zöllner has supported Finance Watch Germany (Finanzwende) as a Fellow since 2021. Previously, he worked for over 20 years as a portfolio manager while focussing on European and global equities. At Finanzwende, he focuses on the impact of the financial sector on the real economy.

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