A story by Buffalo Business First looked at how private equity funders have become increasingly involved in the healthcare industry, resulting in numerous deals nationwide.
Physician practices of various kinds have received investments, leading to a transfer of ownership from local practitioners. However, critics argue that healthcare matters should be handled by providers without the influence of profit-driven funders.
Buffalo Business First May 22, 2023: Private equity provides opportunity—and risk—in health care
In the article, PESP Healthcare Director Eileen O’Grady described the ways that the healthcare industry has emerged as a leading investment choice by PE firms. These firms have invested in many sectors within the industry, ranging from biotech and pharmaceuticals to hospitals and freestanding emergency departments, nursing homes, specialty care like urology and anesthesiology, as well as primary care.
“Where care gets more complex, and thus more expensive, private equity sees opportunity to profit,” O’Grady said. “Compared to other asset classes, health care outperforms so it is sort of an obvious pick.”
From the article:
“In some cases, those deals can prove harmful to providers, she said. Turning a profit in a short period requires cost cutting, which could mean reduced staffing or a failure to invest in the capital needs of facilities. In other cases, PE firms might do a sale-leaseback deal to that provides hospitals and physician practices with upfront cash, but leaves fewer assets for operations and reduces their overall assets.”
Check out the PESP investigation that looked into all the healthcare companies that private equity firms acquired in 2022.
For a PDF version of the Buffalo Business First story click here.