Private equity (PE) investment in US healthcare has ballooned over the past decade—2018 and 2019 saw record numbers of deals, representing more than $100 billion in total value. As we show below, in 2018 just under a fifth of these transactions were in the physician practice space, with the largest number of deals in dermatology and ophthalmology.
While these two specialties remain active areas of PE investment, a growing number of recent deals have focused on women’s health, gastroenterology, and urology practices.
Across all these areas, PE firms see an opportunity to grow revenue from high-margin ancillary services, cash procedures, and retail products.
Physician groups are pursuing PE investment as an alternative to joining health systems or large payer-owned physician organizations to access capital and fund buyouts of legacy partners. Doctors’ heads are increasingly being turned by the current sky-high multiples PE firms are offering, often up to 10 or even 12 times EBITA.
Private equity roll-ups of physician practices are far from over. Recent activity suggests that the behavioral health market is heating up, as it remains very fragmented in a time of increasing consumer demand.
And we predict a rush for further investment in cardiology and orthopedic practices, as investors look to profit from the shift of lucrative joint and heart valve replacement procedures to outpatient facilities.