Private equity investors in healthcare are currently facing increased scrutiny from regulatory bodies such as the Department of Justice (DOJ), the Department of Health and Human Services (HHS), and the Federal Trade Commission (FTC) regarding their rollup strategies. This heightened oversight comes in the wake of a Texas court dismissing the FTC's case against Welsh Carson Anderson & Stowe in September 2023, which had been accused of anticompetitive practices alongside US Anesthesia Partners. The FTC and DOJ have since extended the public comment period to September 20, 2024, to gather more information on serial acquisitions in the healthcare sector [5aa8c6ab].
Despite the scrutiny, private equity firms currently own only 3.3% of the healthcare market by revenue. The growth of new healthcare organizations backed by private equity has slowed, with an increase of less than 1% reported in the first quarter of 2024. The American Investment Council (AIC) argues that private equity investments are crucial for driving innovation within the healthcare industry [5aa8c6ab].
In addition to federal scrutiny, enhanced regulatory oversight at the state level is contributing to longer deal closure times for private equity transactions. The Hart-Scott-Rodino (HSR) Act mandates premerger notifications for healthcare transactions exceeding $119.5 million, further complicating the landscape for private equity investors [5aa8c6ab].
As the private equity landscape evolves, concerns about the impact of these investments on patient care and healthcare facilities remain prominent. The Private Equity Stakeholder Project (PESP) has previously raised alarms about the risks associated with private equity in cardiology and other specialties, highlighting states like New Mexico and North Carolina as facing significant risks. PESP's risk score aims to estimate the potential negative effects on patient care, medical costs, and the viability of healthcare facilities [723b16ff].
Senator Elizabeth Warren has also voiced her support for PESP's initiatives, emphasizing the need for transparency and accountability in private equity investments in healthcare. The ongoing dialogue around these issues reflects a broader concern about the balance between investment and patient care, as well as the sustainability of healthcare facilities in the face of aggressive acquisition strategies [723b16ff].
As 2023 draws to a close, the private equity industry is confronted with both challenges and opportunities. The low-interest rate environment that has previously fueled growth is shifting, raising questions about over-inflated valuations and potential losses. Investors and regulators alike are calling for increased scrutiny and regulation, particularly in light of recent developments regarding Key Person Events in private equity funds, which can significantly impact fund management and investor confidence [7db49009].