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With the global healthcare market expected to reach $665.37 billion by 2028, it is no surprise that PE firms are eager to enter this industry. Additionally, this increase in investments is changing how healthcare is delivered and financed, bringing innovation and improvements to the industry.

Here are some key trends we see within the healthcare industry:

Rise of Value-Based Care

Value-based care is becoming the norm in healthcare, encouraging better patient results and efficiency over the traditional fee-for-service system.

Value-based care is a healthcare delivery model that aims to improve patient outcomes while controlling costs by emphasising the value of services provided. This approach focuses on delivering high-quality, efficient care that is personalised to individual patient needs and preferences. Singapore's "Healthier SG" programme is a prime example of the growing emphasis on preventive care and integrated services. 

As a result, private equity firms are ramping up their investments in outpatient care centres, telehealth platforms, and wellness models that prioritise better patient outcomes and cost savings. This shift represents a lucrative opportunity for PE firms to back chronic disease management and efficient healthcare delivery as they bet on the long-term success of value-based care.

Consolidation of Healthcare Partners

PE firms typically raise capital from institutional investors and high-net-worth individuals to acquire companies. They focus on enhancing operational efficiency, driving growth, and restructuring, with the goal of exiting through a profitable sale, often within a 5 to 7-year investment horizon. These acquired companies include hospitals, clinics, pharmaceutical companies, and other healthcare providers within the healthcare industry.

This consolidation trend works because of the fragmented nature of the healthcare industry, especially in areas like hospitals, outpatient care, and biotech. With so many small and mid-sized businesses, PE firms see an opportunity to consolidate these companies, reduce costs, and improve operations. By combining smaller companies, PE firms can streamline processes, increase profitability, and improve care delivery. This trend reshapes the healthcare landscape by creating larger organisations better equipped to compete in an increasingly complex and regulated environment.

When managed well, private equity investments in healthcare can yield significant returns. For instance, KKR, a leading global PE firm committed to investing in innovative healthcare, has invested over $18 billion in the healthcare sector, allowing the firm to establish a strong network of companies in the healthcare ecosystem.

Labour and Staffing Solutions 

One of the greatest challenges currently facing the healthcare industry is a shortage of skilled labor, including nurses, physicians, and administrative staff. According to the World Health Organization, this shortage could reach nearly 18 million health workers globally by 2030, prompting increased salary ranges across various roles in the industry.

To address this issue, private equity firms are investing in solutions for staffing and workforce management that assist healthcare providers in optimising staffing levels and enhancing worker satisfaction through competitive salary packages.

For an overview of salary ranges in the healthcare industry, be sure to check out FP Global’s 2024 Healthcare Salary Guide!

The role of private equity in the healthcare sector is rapidly expanding as investment firms are making waves by driving crucial changes in the industry. PE firms are actively positioning themselves at the forefront of healthcare transformation through investments in value-based care models, provider consolidation strategies, and innovative labour solutions. This surge of investment activity indicates that private equity will play a pivotal role in shaping the future of healthcare in the years ahead.

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