Private Equity & Healthcare Investments

In 2021, there was significant activity by Private Equity firms investing in healthcare companies alongside major industry activity and distributions. We saw an upward spike starting in 2019 in the national healthcare expenditure as a percentage of Gross Domestic Product that topped 20% as of December 31, 2020. There are a few factors shaping the upward trends in the healthcare industry with one of the major factors being the COVID-19 pandemic. The pandemic’s effect on the industry has been both positive and negative. The negative being that at the beginning of the pandemic, hospitals were struggling and costs for COVID-19 safety precautions were rising which made hospitals lose investors and revenue. As a whole, it was estimated that hospitals in the United States were losing $50 billion dollars a month due to COVID-19. Along with the hospitals losing $50 billion dollars a month, inflation took charge on prescriptions and vital over-the-counter medications. There were also minute clinics, primary care, and specialty care institutions that saw loss of revenue due to the patient’s fear of the virus itself. However, the good news was that once vaccines were created in early 2021, we saw an upward revenue trend in hospitals but also the mental health industry, veterinary services, and home care started on that trend as well. Once individuals received vaccinations and felt more comfortable leaving their residences in early 2021, revenues for hospitals increased close to pre-pandemic revenue along with other facets of healthcare increasing theirs.
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In Private Equity, the number of deals in healthcare has nearly doubled since 2012 from approximately 500 to 1000 per year. COVID-19 was a factor in deal activity in 2021 within Healthcare IT, but through the past decade of deal activity 60% of the deals have been in Healthcare Services. Others sub-sectors include biotech & pharma, healthcare IT, healthcare devices, supplies, and business services. Deal activity in IT and Biotech in healthcare has increased in the past decade as new technology and innovation has taken place. Though it does not match the deal activity of healthcare services, they have remained strong in the past few years. With healthcare devices, we have seen low activity and steady investing within that space. Healthcare Biotech, IT, and devices are going to continue to grow in years to come with more innovative technologies on the horizon.
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​​With the pandemic still present for the foreseeable future along with the rising costs of healthcare and aging population requiring more services and technology, PE firms have strategically invested into the healthcare sector with view of what is needed to prosper in a future healthcare disaster. With hospitals investing in better services, supplies, devices, and technology, firms can have an ease of mind when investing. 
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It will be interesting to see where the healthcare industry goes in 2022. We know that PE firms have an interest in this sector because of the large share it has in the economy, but the industry will need to continue to grow and create better outcomes for patients and providers for firms for future success.

By:  Ryan Peterson, Treya Partners Business Development Manager