Private Equity in U.S. Healthcare: Trends in 2023 Deal Activity

The Private Equity Stakeholder Project released a report providing an in-depth analysis of private equity dealmaking in the healthcare sector throughout 2023. Titled “Private Equity in U.S. Healthcare: Trends in 2023 Deal Activity” the report delves into key trends shaping the industry and raises important considerations for policymakers, regulators, and patients.

Private Equity in U.S. Healthcare: Trends in 2023 Deal Activity

In light of growing investor interest in healthcare and the risks associated with private equity ownership of healthcare companies, the Private Equity Stakeholder Project (PESP) publishes monthly blog posts that track private equity-backed healthcare acquisitions. This report looks at the 2023 private equity deals data in review, identifying and analyzing recent major investment trends in healthcare.

Click here to view a catalog of our monthly acquisitions blog posts for 2023.

Key Points

• Historically, a combination of factors has made healthcare an optimal space for private equity investment: a permanent demand for healthcare services, an aging population defined by a high disease burden, and the fact that many subsectors within healthcare are fragmented and therefore ripe for consolidation.
• 2023 was the second year in decline for private equity dealmaking in healthcare from its peak in 2021. This is in part due to macroeconomic challenges impacting most sectors, such as high interest rates and labor shortages.
• Despite the headwinds, many private equity firms continued to invest in the healthcare space. PESP identified 1135 unique deals, consisting of 148 buyouts, 259 growth/expansion investments, and 728 add-on acquisitions to 422 unique platform companies in 2023. These deals involved approximately 675 private equity firms, business development corporations, venture capital firms, private credit funds, and other types of investors.
• Some investors were more active than others. There were at least 22 private equity firms in 2023 that executed 10 or more healthcare deals. The most active firm by deal count was Quad-C Management, which executed 31 add-on acquisitions.
• Outpatient care deals, dental care, health IT, and medtech were the busiest subsectors among those PESP tracked. Biotech, pharmaceuticals, and medical aesthetics were also hot dealmaking areas.
• Private equity’s growing presence in the health sector and propensity for consolidation of healthcare services is cause for concern. The common private equity strategy of pursuing outsized returns over relatively short periods of time can lead to cost-cutting efforts that negatively impact patients and workers. Further, private equity firms often use debt to fund their investments, leading to unwieldy debt service obligations that can divert money away from patient care and fair compensation for employees.
• In the past couple of years, private equity’s use of debt to fund its healthcare investments has become a major liability as interest rates have risen. These high debt burdens can make it difficult for companies to dynamically respond to a changing regulatory landscape and volatile market conditions while meeting their debt service obligations.
  • Major private equity-owned healthcare companies that declared bankruptcy in 2023 include Envision Healthcare, GenesisCare, Air Methods, and American Physician Partners.
• In light of continued investor interest in healthcare and the risks associated with private equity ownership of healthcare companies, regulators and lawmakers should scrutinize private equity acquisitions of healthcare companies more closely and pass and implement commonsense policies to ensure access to affordable and quality healthcare for all patients in the US.

To view the full acquisitions report click here.

You can also download a printable PDF version of this report.