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PE pulls back and strategic buyers step up

2.20.24_Physician consolidation trends in 2024
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Because we can't help ourselves, we're including two slides in this week's Slide[s] of the Week. Today we're looking at private equity's apparent pullback in physician practice investment in 2023--and the ramp-up from strategic investors. If you tuned in to our webinar on financial performance across the healthcare industry last week, you'll remember that PE has somewhat turned its gaze away from physician groups for a number of reasons: increasing backlash to PE's role in healthcare generally, challenging reimbursement trends, and a simple lack of unaligned practices in many markets—or at least those suited to the PE playbook. But take a look at where deal interest is still high: it's NOT the usual suspects, at least not really. Behavioral health is hardly a reimbursement juggernaut, and yet here it sits at #1 for investment in physician practices. But it's here where we see that while PE may have pulled back, strategic buyers (i.e., non-financial institutions) have ramped up their efforts.

In particular, retailers and insurers have amplified their investments in non-traditional medical groups. It can be easy to miss the trend for the headlines, but in the second slide, it's abundantly clear that the groups focused on consumer-directed care, population-specific care, or value-based care—all of whom have received outsized attention in recent years—are targets of the smart money in recent months. And I think this means the era of segmented, targeted care is here. The economics of primary care favor it, and the long-term goals of the retailers and insurers require it. Still, it's by no means clear that these investments will pay off, given the decidedly mixed track record that plans and retailers have racked up in running care-delivery sites.

Members can access last week's slide deck on investment trends, or watch the webinar on-demand. If you'd like to learn more about becoming a Union Healthcare Insight member, check out our membership overview page. And even if you're not a member, you can register for our upcoming Board Briefing series, available to everyone.


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