Private Equity Investment In Healthcare


What Happens When The Money Runs Out

How private equity investment in health care could be driving up costs

To some, the “horse is already out of the barn” as it relates to PE investment in healthcare. There are instances where PE is helpful and beneficial to the bottom line of providers, but there are potential downsides to PE involvement in healthcare.

In August 2020, a JAMA study found hospitals acquired by PE firms experienced increases in net income as well as improvement in quality metrics.

Compared to non-acquired hospitals, PE-bought provider organizations saw a mean increase in annual net income of more than $2.3 million, an increase of $407 in total charge per inpatient day, and an increase of $0.31 in total charge to cost ratio.

On the quality side, JAMA found that the aggregate quality score for acute myocardial infarction increased 3.3%, while the aggregate score for pneumonia increased 2.9%.

Chuck Salvo is managing director at ToneyKorf Partners, a New Yorkâbased healthcare management advisory firm. Prior to joining ToneyKorf, Salvo served as senior vice president of physician services at Brookdale University Hospital Medical Center, a Brooklyn-based nonprofit facility.

Salvo says within the PE industry, there are a lot of talented individuals who can bend the cost curve and fund beneficial initiatives like telehealth, and companies like One Medical and Oak Street Health, which cater to underserved patient populations.

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McHenry Lee, TeamHealth’s spokesman, said the company’s “organizational structure is fully compliant with long established laws and precedents.” Referring to the American Academy of Emergency Medicine, Lee said the company has prevailed while facing judicial scrutiny “initiated or funded by AAEM, where Dr. McNamara has made identical charges.”

In a typical emergency room, McNamara said, the usual physician group charges three to four times the Medicare rate. TeamHealth is charging six times, he said.

Last fall, United Healthcare, the giant insurer, canceled coverage at 500 hospitals with TeamHealth-run emergency rooms, largely because of high costs, a company spokeswoman said.

“A small number of providers are driving up the cost of care for the people and customers we serve,” she said. “This is particularly evident with private equity-backed physician staffing companies like TeamHealth.”

United Healthcare provided NBC News with examples of TeamHealth costs far exceeding median charges for specific emergency department procedures. A patient visiting an emergency department with chest pains, for example, would face a median charge of $340, United Healthcare said, versus a TeamHealth bill for $976. Stitches on a minor cut would be $200 at the median rate, compared with $888 from TeamHealth. And the median rate for a broken arm is $665, while TeamHealth’s charge is $2,947.

Lee of TeamHealth declined to comment on the figures.

House Hearing Slams Private Equitys Troubling Expansion Into Health Care

Members of Congress took aim at private equitys expanded role in the U.S. health care system on Thursday, addressing the topic during a special hearing held by the House Ways and Means Subcommittee on Oversight.

Much of the hearing focused on PEs increasingly prominent role in nursing homes, as the COVID-19 pandemic has triggered heated debates about perceived differences in care between for-profit and nonprofit facilities. The discussion came just over a week after Sen. Elizabeth Warren promised to launch an investigation into for-profit and PE-backed nursing homes in light of the recently announced Genesis HealthCare restructuring.

Its past time for a bright light to be shined on how private equity ownership in our health care system affects patient safety, costs and jobs, Rep. Bill Pascrell , chairman of the House Ways and Means Subcommittee on Oversight, said at the start of the afternoon hearing. Private equitys influence stretches like an octopus.

While nursing homes captured nearly all of the spotlight, hearing participants likewise raised concerns about private equitys broader influence across the continuum of care.

PE firms took part in a record number of deals in 2020, despite an economic recession and other challenges related to the coronavirus. Through mid-November alone, PE investors announced nearly 4,100 deals, up 5% from all of 2019, according to PricewaterhouseCoopers data.

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Private Equity Is Buying Up Us Healthcare: 4 Things To Know

  • Medium
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Private equity firms are purchasing medical practices and hospitals across the nation. Why? Because there’s a lot of money in healthcare and they’re expecting large returns, Blue Ridge Public Radio reported Sept. 28.

Here are four things to know:

1. It’s made care more efficient, some say. Kenneth Gregg, OD, president and medical director of Eyecarecenter in North Carolina, said after FFL Partners purchased the business, it rapidly added new practices but condensed the human resources, accounting and billing departments. It also brought in new technology and hired more technicians who are paid less than physicians.

2. The goal of the private equity firms is to grow the business and then sell it for a profit. When FFL Partners announced it was selling Eyecarecenter in 2019, it said it grew the parent company, EyeCare Partners, from 63 locations to over 450 in five years. It increased revenues by 65 percent every year.

3. Since 2006, private equity firms have invested $921 billion in U.S. healthcare, according to the American Investment Council. The Medicare Payment Advisory Council says private equity firms own 4 percent of U.S. hospitals and 11 percent of nursing homes.

Alvarez & Marsal Capital

Healthcare And Private Equity Investment in India by ...

Founded in 2011, AMC pursues control investments or significant minority investments in middle market companies in healthcare and several other sectors. Based in Greenwich, Conn., the firm prefers to make more substantial investments from a dollars perspective in companies with EBITDA of $10 million to $75 million. Companies in its healthcare portfolio include PatientCare Logistics Solutions, a national provider of ground-based ambulance services, and CNSI, a provider of health information technology enterprise solutions and customizable products to federal and state agencies. Read more about AMC at

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Private Equity Sees Ripe Opportunity In Healthcare This Year

Private equity investment in healthcare has ballooned over the past decade, and experts say 2019 is poised to be another robust year, with potential ripe targets in orthopaedics and mental health and addiction treatment.

Private equity deals in healthcare in the U.S. more than doubled over the past 10 years, according to financial data firm Pitchbook. In 2008 there were 325 deals and in 2018 that number swelled to 788, a record number of deals representing more than $100 billion in total value.

One of the largest recent deals was private-equity firm KKR’s nearly $10 billion purchase of Envision Healthcare last year, according to Preqin. Envision provides physician services to hospitals and operates hundreds of surgery centers across the country. Another big deal was the public-to-private takeover of athenahealth by Evergreen Coast Capital and Veritas Capital for $5.7 billion in 2018.

“It looks as though 2018 was a record year for the industry, and overall the trend in deal-making has been one of strong growth this would suggest that 2019 could be another record year unless we see a change in the underlying conditions,” Preqin spokesman William Clarke told Healthcare Dive.

The Envision deal was among the biggest leveraged buyouts ever at more than $4 billion in debt, according to Pitchbook. The practice is criticized in several respects, including that many are financed by loading a company up with mounds of debt.

Firms’ Investments In Healthcare Continue To Expand At What Cost

byKara Grant, Enterprise & Investigative Writer, MedPage Today October 14, 2021

This story is part of a series examining how trends in healthcare ownership are impacting physician practice. for the main story on employment trends, and here for a sidebar on how physicians are finding ways to maintain autonomy in an increasingly corporate environment.

About 4 months after emergency medicine physician Jessica joined a Michigan hospital in 2014, the department’s staffing group was bought out by TeamHealth, a staffing firm backed by the private-equity behemoth Blackstone.

Ever since Emergency Medicine Specialists — which touts itself as one of the oldest emergency physician groups in Michigan — was acquired by TeamHealth, “it’s been pretty much a disaster,” Jessica told MedPage Today.

Over the past 10 years, private equity firms like Blackstone and KKR — which acquired physician staffing group Envision Healthcare in 2018 — have racked up billions in revenue by investing in staffing companies like TeamHealth. Envision and TeamHealth alone account for 30% of the national outsourcing market of emergency specialists.

As of 2019, for instance, nearly 200 dermatology practices were acquired by private equity-backed management groups, according to a study in JAMA Dermatology. Procedure-heavy practices that require expensive technology, like dermatology, are ripe for private equity buyouts.

Impact on Emergency Medicine

A Generational Divide

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Pe And Healthcare: Do They Really Match

The wasteful, siloed and fragmented nature of health delivery are a natural match for the traditional PE skills of enhancing value by eliminating inefficiencies, improving operating models and consolidating markets. And future opportunity will likely be strong. Health care is poised to continue not only as a significant economic force, but one subject to ongoing disruption.

However, PE and health care can make for an uncomfortable pairing. Concerns have been expressed about possible implications of PE investments, including the potential for conflicts of interest. PE is often viewed as a force that will, at best, have limited impact on clinician behaviors, clinical outcomes and patient satisfaction.

To gauge the markets perceptions, a survey was conducted with more than 80 health care company founders and executives with direct experience of PE investment in their physician practice management companies. The good news: 90% of them said PE involvement with their company has been positive overall.

Not only is PE perceived to have a beneficial overall impact on health care businesses, it is also considered to positively influence the focus on quality and clinical services. As well as providing greater access to capital, PE investors are credited with introducing leading practices from companies in their investment portfolios, especially with respect to improved management, clinical metrics and compliance systems.

Is Risk A Two

Key Considerations for Private Equity Investment in Health Care – Susan Berson

Both sides need to do due diligence, in commercial, operational, IT, human capital and cyber areas. In addition to the traditional financial, operational and tax diligence, environmental, social and governance diligence should be covered. Bringing partners along is vital, including:

  • Aligning expectations and requirements for risk and reward
  • Paying attention to the often-invisible cultural factors and organizational alignment that are vital for establishing a firm foundation for any business relationship
  • Managing business continuity and risk and accurately assessing the complexity of scaling a business across multiple geographic areas or market segments

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Rising Star: Sam Major

Firm: Susquehanna Growth EquityTitle: Tech Investor

Sam Major joined Susquehanna in 2015. He primarily focuses on growth investments in healthcare, including those serving payers, providers, and pharmaceutical manufacturers. He played a large role in Susquehannas investments in iContracts, Evive, PerkSpot, RLDatix, and ProviderTrust and has also supported M& A activity at MMIT and HMP Global. Prior to joining Susquehanna, Sam graduated with a degree in history from Princeton University.


Copyright: The Top 25 Healthcare Investors of 2021 publication is copyrighted material, produced and published by GrowthCap, LLC. For information pertaining to content permissions, please refer to GrowthCaps award usage regulations.

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Congress Hears About Studies On Detrimental Effects For Patients

Health care is too large a part of the economy for private equity investors to ignore, but a burning spotlight on how managers run some hospitals and nursing homes is prompting a few asset owners that generally prefer to quietly engage with general partners to speak up.

Demand for health care is rising: In the U.S., health-care spending grew 4.6% to $3.8 trillion in 2019, amounting to 17.7% of gross domestic product, according to the Centers for Medicare & Medicaid Services.

In an attempt to ride the wave of this growth, private equity investment in health care has grown, to $120.1 billion in 874 deals in 2019 and $95.6 billion in 938 transactions in 2020, from $58.2 billion in 2007, according to PitchBook Data Inc.

At the end of the first quarter, private equity firms had invested $20.2 billion in 182 deals.

Private equity health-care funds outperformed the internal rate of return of all private equity for funds raised between 2006 and 2017, PitchBook data shows. The median IRR for health-care fund vintages 2006 through 2008 was 10.3% compared with a 9% IRR for all funds of the same vintages. Health-care funds raised from 2015 to 2017 earned a 16.8% median IRR, out- performing the median IRR for the same vintages of all private equity funds of 13.1%.

Patients cannot accurately assess health-care provider quality, they typically do not pay for services directly and government agencies act as both payers and regulators, Ms. Howell said.

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What Will Unlock Value For Both Parties

Value creation brings the promise of transforming the company and creating long-term viability by making the business better. Pathways to value differ through digital transformation, reconfiguration of assets or repositioning to enter new markets.

The litmus test is whether a potential investor partner will bring the right entrepreneurial and management talent to complement the owners domain expertise to reinvigorate the company to achieve its full potential. Alignment includes:

  • Agreeing on validated business fundamentals that will release value
  • Sustaining relationships and governance including an openness to collaborate on a journey of constant reinvention to remain relevant to the future
  • Understanding that in health care, value creation will likely have a long-term investment horizon. Market segments and new technologies will grow at differing rates, so where should bets be placed that capture optimal alignment among market, product and timing?

How Private Equity Is Raising Health Care Costs For Americans

Private equity investment in health care is killing us ...

Every American deserves high-quality, affordable health care, and yet health care is becoming unaffordable for far too many families. One driver behind the rising costs is the surge in physician practice acquisitions by private equity firms. The increased private equity purchases are driving up health care costs for Americans.

By 2018 private equity represented 45% of all health care mergers and acquisitions. Private equity firms borrow heavily from banks and others, using the funds to acquire private entities with the goal of turning a profit in a relatively short time. Initial private equity acquisitions targeted specialties like orthopedics, dermatology, urology, and gastroenterology, where potential profits were highest, but the firms are now expanding their targets.

Raising prices has been a common strategy after a private equity acquisition. A study found that hospitals have increased their prices after being acquired by private equity firms.

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Jeff Haywood & Steve Lesieur

Firm: Spectrum EquityTitle: Managing Directors

Jeff Haywood and Steve LeSieur lead Spectrum Equitys investment activity in healthcare, focusing on high growth Internet-enabled software and information services companies serving all parts of the healthcare market. Steve joined Spectrum in 2005 and currently serves on the following healthcare company boards including GoodRx and Payer Compass and was previously involved with Definitive Healthcare, MedHOK , HealthMEDX , Passport Health Communications and QTC Management . Jeff joined the firm in 2007 and currently serves on the following healthcare company boards including Definitive Healthcare, Payer Compass, RxVantage and Verisys. He also led Spectrums recent investment in PWNHealth and subsequent sale to Everlywell, where he continues as a board observer. Jeff was previously involved with GoodRx , MedHOK , Net Health , and Passport Health Communications .

Spectrum Equity is committed to fostering long-standing partnerships with the founders and entrepreneurs building todays market leading digital health companies. It is incredibly rewarding to support the efforts of management teams addressing the highly complex issues that exist, and are often unique, in healthcare. We believe the ongoing evolution of connected software, data and analytics will continue to have a massive impact on healthcare both in terms of increasing access to care and improving outcomes. Steve LeSieur & Jeff Haywood.

What Are Examples Of Private Equity

Institutional investors, such as mutual funds, insurance companies, and pension funds, as well as high-net-worth individuals, contribute to these firms. Blackstone, Kohlberg Kravis Roberts & Co., and others are examples of private equity firms. The Carlyle Group, KKR, and KKR are among the companies.

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Private Equity Firms And The American Healthcare

But with this rush of activity has come sharp criticism. In May 2020, Bloomberg Businessweek published an article on How Private Equity is Ruining American Health Care. The article focuses on California Skin Institute, which took out a loan from Goldman Sachs Group Inc. that eventually could convert to an equity stake. According to the article, this made perfect sense within the logic of the U.S. health-care system, which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as if they were little different from grocery store. At the center of this story are private equity firms.

ExodusPoint, the hedge fund founded by Michael Gelband, who was once seen as the next in line to run Millennium Management after Izzy Englander, returned 1.25% in November, according to a copy of the firms November business update, which ValueWalk has been able to review. Q3 2021 hedge fund letters, conferences and more The $13.5 Read More


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