Despite concerns from patient advocates and lawmakers about the influence of private equity (PE) in healthcare, a new report from PitchBook reveals a surprising truth: PE-backed providers represent less than 4% of the US healthcare market. This finding challenges the perception of PE firms as dominant forces shaping healthcare delivery.
Critics have long accused PE firms of prioritizing profit over patient care. Studies have linked PE ownership to higher costs for patients and potentially lower quality care. A 2022 JAMA study even suggested a connection between PE ownership and increased adverse events like infections or falls at hospitals.
However, PitchBook’s report suggests this narrative may be overblown. The report specifically avoids addressing criticisms of PE’s impact on clinical outcomes. Instead, it highlights a shift in PE investment focus. PE firms are seemingly moving away from traditional hospital and nursing home acquisitions, looking instead to invest in areas like healthcare IT and pharmaceutical services.
This shift aligns with historical trends. While PE groups were actively acquiring hospitals and skilled nursing facilities during the 2000s and early 2010s, their current focus is on lower-acuity outpatient settings.
“Most PE firms seek to invest in growing industries with long-term demand tailwinds and are therefore attracted primarily to outpatient care delivery,” explains Rebecca Springer, lead healthcare analyst at PitchBook.
The report also notes a decline in PE interest in areas previously attractive due to out-of-network billing practices. Acquisitions in physician staffing, substance use disorder treatment, and emergency medical transport, once popular targets, are now less appealing. The No Surprises Act of 2022, which limits surprise medical bills, likely plays a role in this shift.
“Due to payer pushback and the clinical inadequacies of this model, PE investment in SUD treatment and other mental health models swung in the late 2010s toward acquiring in-network, in-state, medically focused providers almost exclusively, as out-of-network reimbursement is considered too risky and volatile to underwrite,” Springer writes, pointing to both payer pushback and concerns about the clinical effectiveness of some previous models, particularly in substance use treatment.
While concerns about PE’s influence in healthcare remain valid, PitchBook’s report offers a new perspective. The data suggests PE’s footprint in the US healthcare market might be smaller than previously thought, and their investment strategies are evolving.
