Media coverage of PESP Medicare Advantage report

A new report, released this year by PESP, examines the role of private equity in the growing multibillion-dollar Medicare Advantage industry. With a rapidly aging population in the US, and therefore growing market for Medicare Advantage products, the MA sector has provided ample opportunity for investors seeking quick profits, be it through insurance plans, in-home health assessment companies, or brokerage and marketing firms.

The report finds that policymakers and regulators should exercise vigilance over private equity’s presence in the Medicare Advantage arena due to the risks that often accompany private equity ownership in healthcare. These include increased consolidation that can create anticompetitive issues and drive-up healthcare costs, business practices that cross the line into Medicare and Medicaid fraud, and highly indebted portfolio companies that engage in cost-cutting to meet their debt obligations, often at the expense of patients and workers.

The report was well-covered in multiple media outlets such as in FierceHealthcare, Modern Healthcare, STAT, Politico, Healthcare Dive, and twice in Becker’s Payer Issues.

FierceHealthcare February 13, 2024: Private equity deals in MA are declining, but experts say regulators should keep an eye on this space

“Private equity firms have seen plenty of potential in the rapidly growing Medicare Advantage space, but deal volumes are slowing, according to a new report.

Analysts at the Private Equity Stakeholder Project dug into deal activity in MA between 2016 and 2023. The report (PDF) found that deals peaked in 2021 and have slowed in the years since as tighter regulations and nationwide inflation impact the sector.The report found that there were 80 PE-backed deals—including leveraged buyouts, add-on acquisitions and growth investments—from 2016 to 2023. Of those, more than half (56.3%) were add-on acquisitions for platform companies.

The two busiest years for dealmaking were 2019 and 2021, with a likely pandemic-driven lull in between, according to the report. However, there were 79% fewer deals in 2023 compared to 2021.”

Modern Healthcare February 13, 2024: Private equity Medicare Advantage investment slumps: report

“Private equity investment in Medicare Advantage has declined in recent years amid rising interest rates and an unfavorable regulatory environment, according to a report the Private Equity Stakeholder Project published Tuesday.

These investor groups inked just four Medicare Advantage-related deals in 2023, the second-lowest total during the seven years the Private Equity Stakeholder Project has tracked such transactions. Over that period, private equity investments in Medicare Advantage insurers, brokerages and other companies peaked at 19 in 2021, then declined the next two years, according to the nonprofit organization, which focuses on transparency in private equity and supports laws to limit these firms’ activities.

The Private Equity Stakeholder Project also partially attributes diminished activity in this space to higher interest rates that made lenders reticent about debt-financed deals. The Federal Reserve may be poised to bring down interest rates this year as inflation fears subside. That could lead to a rebound in private equity Medicare investments, said Mary Bugbee, senior researcher and campaign coordinator for the Private Equity Stakeholder Project’s healthcare division.”

STAT News February 13, 2024: Private equity investment in Medicare Advantage drops

“Overall, private equity investors made only 4 investments in Medicare Advantage-related companies last year, compared with 12 in 2022, down from a peak of 19 in 2021, per the Private Equity Stakeholder Project, a group focused on holding private equity firms accountable for their impacts on people and the planet, according to its website.

But the report’s authors and other experts told STAT that as long as the incentives behind MA remain — and the government doesn’t cut spending on the program — there will be money to be made, and private equity will be making it.

‘The Medicare Advantage industry is a big cash cow for a lot of different players,’ said report author Mary Bugbee, a senior coordinator for healthcare at the Private Equity Stakeholder Project. ‘Publicly traded insurers have gotten a lot of the scrutiny from reporters [and] lawmakers, but private equity firms have operated and continue to operate in this ecosystem.'”

Politico February 14, 2024: Politico Pulse Newsletter: Investing in MA

“Private equity firms’ investment in Medicare Advantage reached a high in 2021 but has since come down amid Biden administration restrictions on marketing, according to a report by the Private Equity Stakeholder Project, a group focused on accountability for private equity.

Why it matters: Medicare Advantage enrollment grew by 8 percent last year, and more than half of eligible Medicare enrollees are covered by an MA plan, according to KFF, a private health foundation.

According to the report, private equity growth in MA presents a number of risks that policymakers should monitor, including consolidation where firms sell smaller plans to larger insurers or buy marketing companies to target potential enrollees.”

Healthcare Dive February 14, 2024: Private equity deals in Medicare Advantage decline, report finds

“High interest rates and new regulations could be driving the slowdown, according to a report by the Private Equity Stakeholder Project.

MA, where private insurers contract with the government to manage Medicare benefits for seniors, has become an increasingly popular option for beneficiaries. The plans often offer additional benefits like dental coverage or gym stipends, and can be lucrative products for insurers.

Private equity firms have made a number of investments in the space over the past seven years, according to the Private Equity Stakeholder Project, a watchdog group that scrutinizes private equity investment.

Overall, the report tracked 80 private equity-backed growth investments, leveraged buyouts and add-on acquisitions — where a firm acquires a company through one of its existing platforms — in the sector between 2016 and 2023.”