TLDR:
- Private Equity in health care is facing negative perceptions, but the involvement may be misinformed
- PE activity in health care has actually decreased in recent years
In a recent report, PitchBook revealed that PE-backed providers represent less than 4% of the U.S. healthcare provider ecosystem by revenue. The negative perception of PE in healthcare may be misinformed, as recent data shows a decrease in PE and venture capital investments in the healthcare services sector. Interest rates and inflation have been on the rise, making investment and dealmaking tricky for everyone, not just private equity. While total healthcare deal volumes have declined, PE investment in behavioral health care has remained robust.
PE ownership is concentrated in some states, with private equity-owned mental health practices constituting a significant portion of mental health and substance use disorder facilities. Recent acquisitions in the behavioral health space include Tenex Capital Management acquiring Behavioral Innovations and GTCR near a deal for Caravel Autism Health. The future of PE in behavioral health may be influenced by emerging anti-PE legislation at the state level.
Despite potential regulatory challenges, the value of behavioral health care is increasingly recognized by payers, which may lead to more PE activity in the future. While state-level actions and federal scrutiny pose some complications, the overall outlook for private equity investment in behavioral health remains positive.
