Studies

Study Takeaways

• From 2017 to 2023, the cumulative enterprise value of private-equity-backed healthcare providers increased by $97.5B, reaching $215.5B.
• Private equity activity has historically concentrated in high-margin, fragmented sectors such as home-based care, dental, mental health and musculoskeletal services.
• In 2024, private equity investment interest shifted toward emerging sectors like specialty pharmacy, cardiovascular care, clinical trials and infusion therapy, even as deal activity in previously high-volume sectors declined.
• Private equity has invested significantly in home health, with skilled home health transactions peaking at 137 in 2021.

Scrutiny of the role of private equity (PE) firms in healthcare has increased in parallel with their investments in healthcare services, which have focused primarily on high-margin specialties and fragmented care delivery markets. PE’s typical “buy-and-build” approach, financed with a mix of equity and debt, seeks short- to mid-term returns – three to seven years – by streamlining operations, increasing market share and exiting via recapitalization or sale. PE’s role in healthcare continues to be controversial, with advocates touting improved infrastructure and managerial efficiency while critics cite concerns over increased utilization, pricing pressure and potential misalignment with clinical outcomes.

Background

PE investment in healthcare has expanded over the past two decades, with total deal value growing more than twentyfold, from less than $5B in 2000 to over $100B in 2018.¹ This growth has spanned nearly all segments of healthcare delivery, including physician practices, hospitals and health systems, home-based care, fertility services and digital health platforms. Increasing PE activity in the healthcare sector reflects broader investor confidence as an industry that is “recession-proof” and has favorable demand characteristics. At the same time, that activity has raised growing concern among policymakers, regulators and providers that PE-backed firms will prioritize operational changes that deliver near-term returns over investments in improved clinical outcomes.²

In provider markets, PE firms typically pursue roll-up strategies that combine smaller practices into larger platform companies – an approach that can increase valuations but may reduce the number of local operators and level of market competition. A 2021 Medicare Payment Advisory Commission (MedPAC) report highlighted the rise in PE ownership of hospitals, physician groups and nursing homes as a structural trend warranting greater oversight.³ In December 2023, the Biden Administration directed the Department of Justice (DOJ), Department of Health and Human Services (HHS) and Federal Trade Commission (FTC) to evaluate PE’s impact on care quality and costs, citing concerns about short-term profit motives and aggressive cost-cutting – resulting in a 2025 HHS report.^4,5 At the same time, some industry stakeholders have found that PE ownership can drive efficiency and innovation in fragmented provider markets.⁶

While recent research has begun to examine PE’s impact on specific provider types – such as nursing homes, physician practices and acute care hospitals – systematic analysis of PE’s broader footprint in care delivery is lacking. As regulatory attention intensifies and health systems assess the implications of PE consolidation, understanding the scope and structure of PE-backed provider ownership is important. This analysis seeks to quantify PE’s presence in healthcare delivery by provider category, track deal activity over time and assess patterns of platform growth and investment strategy.

Analytic Approach

We analyzed publicly available deal data, regulatory filings and market research to examine enterprise value for PE-backed providers, spending on PE-backed providers and market penetration by healthcare provider type. The Centers for Medicare and Medicaid Services (CMS) Home Health Healthcare Provider Cost Reporting Information System was leveraged to analyze ownership and revenue trends for nonprofit, for-profit, government and PE-backed home health providers.

Findings

From 2017 to 2023, the estimated cumulative enterprise value (EV) of PE-backed healthcare providers increased from $118.0B to $215.5B (Figure 1). Year-over-year growth was observed in each year through 2022, with the largest absolute increase occurring between 2021 and 2022, when EV rose from $180.3B to $215.5B. The EV stagnated at $215.5B between 2022 and 2023. Over the full period, the cumulative EV increased by $97.5B.

From 2017 to 2023, the share of total hospital and provider spending associated with PE-backed healthcare providers increased from 6.2% to 8.4% (Figure 2). This share rose steadily from 2017 through 2020, reaching 8.0%, and peaked at 9.2% in 2022. In 2023, despite continued growth in overall hospital and provider spending, the PE-backed share declined slightly to 8.4%. Overall, the six-year period saw a 2.2 percentage point increase in PE’s share of healthcare provider-related spending.

In 2024, PE-backed provider companies were most heavily concentrated in sectors such as home-based care, dental, mental health and musculoskeletal services, each reporting the highest relative inventory of active portfolio companies (Figure 3). Dermatology, applied behavior analysis (ABA) and pediatric therapy, veterinary care and clinical staffing also represented sectors with substantial PE presence. In contrast, sectors such as specialty pharmacy, clinical trial sites, infusion and cardiovascular care reported the highest relative deal growth, despite a relatively smaller existing company inventory.

As noted above, PE has made significant investments in home health. From 2019 to 2023, skilled home health transactions peaked at 137 in 2021 before dropping to 41 in 2023, while non-skilled deals steadily increased from 36 to 51 (Figure 4). In terms of financial performance, nonprofit home health providers reported the highest average net patient revenue in 2022 at $13.4M, though median revenue was substantially lower at $4.8M, suggesting a concentration of revenue among a few large operators. For-profit home health providers, by contrast, averaged $3.7M with a median of $1.8M, and government-owned providers trailed with an average of $2.2M and a median of $1.1M. Select PE-backed home health companies outperformed the broader for-profit segment, with average revenues ranging from $4.8M to $11.5M. These findings suggest PE-backed firms operate at a greater revenue scale than the typical for-profit provider, though they fall short of nonprofit averages at the upper end.

Conclusion

While PE ownership in healthcare has expanded steadily over the past decade, as of 2023, PE-backed providers still represented a relatively modest share, 8.4%, of total hospital and provider spending, and the cumulative EV of PE-backed healthcare services companies plateaued year-over-year.

As PE has expanded its role in healthcare services, regulatory scrutiny from HHS, FTC and DOJ has increased. In November 2023, CMS finalized a rule requiring skilled nursing facilities (SNFs) participating in Medicare or Medicaid to disclose additional ownership and management details, including whether they are backed by PE or real estate investment trusts (REITs). This requirement aligns with the broader focus on transparency and addressing care quality, reflecting a larger Federal effort to evaluate the implications of PE ownership in different healthcare settings.

Sectors like home health will likely continue to represent an attractive sector for PE investment due to its fragmented provider landscape, relatively low capital requirements and limited regulatory barriers to market entry. Many home health agencies are small, independently operated entities, which create opportunities for consolidation and operational scale through roll-up strategies. These characteristics align well with PE’s preferred investment thesis – entering markets with low integration, scaling platforms to increase margins and valuation and exiting within a defined time horizon. Moreover, the lower-acuity, non-facility-based nature of services delivered in home health often makes it less resource-intensive than acute or inpatient care, further enhancing its appeal to investors seeking predictable cash flow and reduced overhead.

Assessing PE’s role in healthcare services will require more than transaction counts or ideological positions. Policymakers, providers and payers must ask where PE ownership demonstrably improves or detracts from care quality, access, efficiency or innovation. In which specialties or geographies has PE ownership led to measurable changes in cost, quality or access? Does PE make capital investments that other providers will not or cannot? Are patient outcomes or care delivery practices meaningfully affected by PE’s investment timelines or operational models? How do PE-owned providers compare to other ownership types in terms of efficiency, innovation and value creation?

As PE strategies evolve and Federal oversight intensifies, rigorous and non-partisan evaluation will be critical to informing balanced policy responses, requiring sector-specific, outcomes-based research that evaluates the actual impact of PE ownership on healthcare delivery and system performance. Until then, scrutiny, while warranted, should remain proportionate to PE’s current market share and grounded in empirical evidence.