Hospitals Sold to Real Estate Investment Trusts Face Higher Bankruptcy and Closure Risks Without Improving Patient Care
A new and detailed study from researchers at Harvard T.H. Chan School of Public Health has raised serious concerns about what happens when U.S. hospitals sell their real estate to real estate investment trusts (REITs). While these transactions are often promoted as smart financial moves that free up capital for better patient care, the evidence suggests a far more troubling outcome. Hospitals involved in REIT deals are significantly more likely to close or declare bankruptcy, even though patient care quality and clinical outcomes remain largely unchanged.
The study, published in The British Medical Journal (BMJ), is one of the first to focus specifically on REIT acquisitions in healthcare. Its findings add an important new layer to ongoing debates about financialization in medicine and how investment-driven ownership structures affect hospital stability and community health.
How REIT Deals Work in the Hospital Sector
When a hospital enters into a REIT transaction, it typically sells its land and buildings to a real estate investment trust and then leases them back under a long-term agreement. In this setup, the REIT becomes the landlord, and the hospital becomes a tenant responsible for ongoing rent payments.
These sale-leaseback deals have grown increasingly common, particularly among hospitals owned by private equity firms or large corporate chains. Supporters argue that selling real estate allows hospitals to unlock capital that can be reinvested into medical technology, staffing, and patient services. Critics, however, worry that these deals are often used to extract value rather than strengthen long-term hospital operations.
Until now, most research focused on private equity or corporate ownership broadly. This study stands out because it isolates the specific role of REIT ownership of hospital real estate, allowing researchers to directly assess its consequences.
Scope and Design of the Study
The researchers examined data from 2005 to 2019, comparing 87 hospitals that underwent REIT acquisitions with 337 similar hospitals that did not. Using a quasi-experimental difference-in-differences design, the study analyzed a wide range of outcomes, including:
- Financial performance indicators
- Medicare claims data
- Hospital staffing levels
- Patient experience surveys
- Clinical outcomes such as 30-day mortality and readmission rates
The clinical outcomes focused on three major conditions commonly used to measure hospital quality: heart attacks, congestive heart failure, and pneumonia.
This broad dataset allowed the researchers to assess not just whether REIT acquisitions affected care quality, but also whether they changed the underlying financial health and survival of hospitals.
What the Study Found About Patient Care
One of the most striking findings is what did not change after REIT acquisition. According to the study, hospitals that sold their real estate to REITs showed no significant differences in:
- Quality of clinical care
- Patient experience scores
- Mortality rates
- Hospital readmission rates
In other words, despite promises that REIT transactions could support better healthcare delivery, there was no measurable improvement in patient outcomes or quality metrics.
At the same time, the study did not find widespread evidence of harm to care quality either. From a strictly clinical standpoint, patients treated at REIT-acquired hospitals received care comparable to those at non-REIT hospitals.
The Financial Impact Tells a Different Story
While patient care metrics stayed largely the same, the financial picture was far more concerning. Hospitals that entered REIT arrangements faced a dramatically higher risk of financial failure.
The study found that REIT-acquired hospitals had a 5.7 times higher risk of either closing or declaring bankruptcy compared with hospitals that did not engage in these transactions. This is a massive difference and one that has serious implications for access to care, especially in underserved or rural communities.
Researchers also observed a significant decline in fixed assets, particularly building and property assets, following REIT acquisition. This makes sense given the nature of the transaction, but it also leaves hospitals with fewer tangible resources and less financial flexibility in times of stress.
Importantly, the study did not find consistent improvements in operating margins, revenue, or staffing levels that might offset these risks. In short, hospitals took on long-term rental obligations without gaining lasting financial stability.
Why These Closures Matter
Hospital closures are not just financial events. When a hospital shuts down, entire communities can lose access to emergency care, maternity services, specialized treatment, and local jobs. Rural areas and low-income urban neighborhoods are often hit the hardest.
The researchers suggest that REIT deals may contribute to what can be described as slow financial erosion. Rent obligations divert money away from clinical reinvestment, and over time, hospitals become less resilient to economic shocks. Eventually, this can push already vulnerable institutions toward closure.
Broader Context: Financialization of Healthcare
REIT acquisitions are part of a larger trend known as the financialization of healthcare, where financial strategies and investor returns increasingly shape how medical institutions operate. This includes private equity buyouts, leveraged acquisitions, and complex ownership structures that prioritize short-term financial performance.
While these approaches can sometimes bring efficiency, critics argue they often prioritize investor returns over community health needs. The study’s findings reinforce concerns that financial engineering alone cannot solve the deep structural challenges facing hospitals.
Policy and Oversight Implications
The authors of the study emphasize that REIT acquisitions are not inherently harmful, but they carry significant risks that deserve closer scrutiny. They argue for stronger federal and state oversight of hospital real estate transactions, including greater transparency around ownership structures and financial obligations.
Regulators may need to consider whether existing policies adequately protect hospitals from arrangements that weaken long-term viability without improving care. As REIT involvement in healthcare continues to grow, these questions are likely to become even more pressing.
What This Means Going Forward
For policymakers, healthcare leaders, and community advocates, this study provides rare, data-driven insight into the real-world effects of REIT acquisitions. The takeaway is clear: while these deals do not appear to harm patient care directly, they are associated with a much higher likelihood of hospital failure.
As hospitals across the U.S. struggle with rising costs, staffing shortages, and uneven reimbursement, decisions about ownership and real estate financing could play a critical role in determining which institutions survive.
Understanding these trade-offs is essential, especially when hospital closures can permanently reshape access to care for entire regions.
Research paper: https://www.bmj.com/content/391/bmj-2025-086226
