A Modern Healthcare piece looked at the long-term appetite that private equity firms have in regards to investing in the healthcare sector. Despite recent bankruptcies of private equity-backed healthcare firms such as Envision Healthcare and GenesisCare, the story reported that experts believe the pursuit of acquisition targets in the industry will continue.
Modern Healthcare July 17, 2023: Private equity’s still bullish on healthcare despite setbacks
Envision Healthcare, supported by KKR, filed for Chapter 11 bankruptcy with $7.7 billion in debt, followed by GenesisCare offloading its U.S. operations. Additionally, the Center for Autism and Related Disorders, majority-owned by Blackstone, filed for Chapter 11 bankruptcy with a $25 million sale agreement.
While these setbacks occurred due to economic challenges, reimbursement issues, and high debt, private equity remains interested in healthcare, especially specialized services like cardiology and oncology. Physician practice acquisitions have surged over the past decade, and an acceleration of deal activity is anticipated in the near future, according to industry insiders.
PESP’s healthcare director Eileen O’Grady contributed to the story, specifically on autism care and the Center for Autism. “Before its bankruptcy filing, the Center for Autism tried to expand in states with higher reimbursement rates but that strategy didn’t work,” she commented to Modern Healthcare.
On existing private equity investment opportunities, O’Grady explained how PE firms wil continue to look for “fragmented markets where they can consolidate individual operations across a geographic area.”
“I think where there is any kind of payer, there will be private equity firms attempting to fill the gap,” O’Grady said.