Private equity firms back less than 4% of healthcare providers, report finds
Despite growing attention from regulators and the media, the number of healthcare providers owned by private equity firms is relatively small, a report from market analytics firm PitchBook found.
According to the data, providers backed by private equity make up only 3.3% of the total market by revenue. Further, the number of hospitals and provider groups backed by private equity has slowed over the past six years, with the number of new healthcare organizations backed by private equity failing to grow 1% in the first quarter of 2024.
In 2018, the number of private equity-backed healthcare provider organizations peaked at 25%. There has not been a major investment in hospitals or health systems from these investment firms since 2018, PitchBook said.
“Significant attention has been paid to academic studies that investigated the clinical impacts of private equity acquisitions of hospitals and skilled nursing facilities (SNFs) that primarily occurred in the 2000s and early 2010s, and to the recent high-profile bankruptcy of Steward Health Care, which was acquired by Cerberus Capital Management in 2010. These examples have led to incorrect assumptions to the effect that private equity is still rapidly acquiring hospitals and SNFs. In fact, there has not been a significant private equity acquisition of a US hospital since Apollo Global’s acquisition of Lifepoint Health in 2018,” the report read.
While private equity was interested in nursing homes and long-term care facilities in the 2000s and 2010s, PitchBook’s report said those investments have dried up. Now, investors seem to be taking more of an interest in organizations and facilities that provide acute and specialty care.
“Most private equity firms seek to invest in growing industries with long-term demand tailwinds and are therefore attracted primarily to outpatient care delivery,” the report said.
According to their analysis, PitchBook found firms are also taking more of an interest in health IT and pharmaceutical vendors, which offer a safer return on investment.
Trends are shifting
An earlier report from PitchBook released in May showed overall investments from private equity into healthcare have dropped 20% from 2023 to 2024, possibly due to fears over new state and federal regulations, as well as other market factors.
Those market factors could very well be the sheer number of bankruptcies. In its own report from April, industry watchdog the Private Equity Stakeholder Project (PESP) said the number of bankruptcy filings from healthcare organizations backed by private equity have exploded 112% in 5 years.
PitchBook said it is not attempting to address any of the criticisms of private equity’s impact on healthcare delivery or patient care quality, as doing so “would require different datasets and analytical tools than we have.” Instead, the aim of the report is to provide data on the current economic landscape of healthcare.
The full analysis is available here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.