A record amount of private equity flooded into the healthcare sector in 2021. This year, investors seem to be proceeding with a little more caution, reports Managed Healthcare Executive. Even so, the investment is a major development in how healthcare gets financed and the makeup of the sector’s ownership interest. Some are thumbs-up on the healthcare push by private equity firms, arguing that the surge in investment will improve management and operations. Others see the entry of the profit-seeking enterprises as driving up healthcare costs and, especially in the United States, further fracturing an already fragmented healthcare system.
After declining in 2020 as the COVID-19 pandemic swept the world, the total disclosed value of private equity investment in healthcare more than doubled globally last year. It reached $151 billion in 2021 compared with $66 billion in 2020 and $79 billion in pre-pandemic 2019, according to Bain & Company, a Boston management consulting company. At the same time, the number of healthcare deals involving private equity surged from 380 in 2020 to 515 in 2021, Bain reported.
Last year, private equity investment in telehealth, digital health and health information technology “gained a lot of interest, accelerated by COVID-19,” says Jerry Sokol, leader of the private equity practice of law firm McDermott Will & Emery. The focus is now on how technology “could help improve the healthcare sector.”
Some of the investment is motivated by “the opportunity to aggregate fragmented providers,” such as physician practices, Sokol says. Investment from private equity firms, he says, can help lead to more sophisticated management of physician practices, cost savings that come from group purchasing and more power when it comes to negotiating managed care contracts. Read more.
