years ago, only a few private equity firms had dedicated healthcare components,
but today, nearly
everyone does” says Dmity Podpolny of McKinsey & Company, one of
the largest consulting firms in the world. Private equity and medicine are now
on the rise. For years, private equity firms have invested in healthcare.
However now, the rapidity is significant private equity firms increase
their presence in a compartmentalized healthcare industry, grasping on alliance
opportunities to obtain a better business model. PwC
Health Research Institute explains that “private
equity’s acquisitions and investments in the health sector have become
increasingly diversified and frequent; they include such things as new entrants
in technology and convenient care delivery, contract research organizations,
and ophthalmology and dermatology practices”.
Last year, private equity continued
to move into new medical specialties, according to a 2018 report. The report outlined three major points
to consider. The
third quarter of 2018 saw roughly $30.4 billion in deal volume, rising 8
percent year-over-year. Private equity will likely continue to push into the
health sector, specifically in medical specialty practices.
Researchers estimate that industry players have roughly one million dollars to
invest in certain businesses. The urgent care realm for example, has grown by 5.8%
in 2018. PwC
notes that due to the high quantities of these deals involving private equity,
other firms may make the decision to sell themselves to these private equity
groups to better improve their business model.
Moving forward, this means several
expects this trend to accelerate even more in 2019, giving conventional
healthcare companies various opportunities to sell portions of certain
“noncore” assets and really focus on their core functions. Alternatively,
conventional healthcare companies could partner with private equity in
acquisitions, which they would otherwise be competing against or unable to
accomplish without the partnership.
example, last month KKR & Co., a private-equity firm, entered
into an agreement to purchase Envision Healthcare, an emergency department
staffing company. The deal was valued at $9.9 billion, including debt. If approved
by shareholders, the deal would be the largest in a string of recent
health-care investments by KKR. These investments include an ambulance service,
a company that helps treat children with autism, and a creator of various
What does this mean? Private equity
change in the industry. “Private equity
investment in healthcare isn’t going to single-handedly improve care quality,
enhance the patient experience or reduce healthcare costs to consumers,” PwC
stated. “But it likely is fueling
the efforts already in place.” Private equity firms bring wealth and
knowledge from other industries that can contribute to the healthcare
industry’s efforts to rein in costs and achieve better outcomes.