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Private equity investments into healthcare services plummeted in the first quarter, according to analysts who follow deals.
The market data research firm PitchBook analysis found just 158 deals in Q1, down almost a third from the fourth quarter of last year.
Driving the news: Several factors are preventing high PE investment in healthcare.
- According to PitchBook, there are discrepancies in the prices buyers are willing to offer and what sellers are asking for.
- Higher interest rates from the Federal Reserve are also impacting the availability of financing.
- And deals are facing heightened antitrust scrutiny from both federal and state regulators.
Zoom in: California passed a new healthcare deal review process that took effect on April 1, 2024. The California Health Care Quality and Affordability Act requires that healthcare entities give the state 90 days’ notice of certain mergers, acquisitions, or other transactions.
The California law will slow down merger timelines, and companies involved could see their once-private financial and operational information publicized.
PitchBook says nine other states, including Washington, Oregon, and Nevada, have followed California’s lead in enacting deal reporting thresholds.
Welcome news: Patient advocates will likely be pleased by the PE slowdown. Concerns remain that PE takeovers raise costs and worsen the quality of care, and some research bears that out.
A 2023 review of existing research found that PE investment was closely associated with higher costs for payers and patients and harmful effects on healthcare quality.
What’s next: PitchBook says that despite the current slowdown, firms have deals in the pipeline and expect activity to accelerate in 2025.
Read more about the PE investment slowdown at healthcaredive.com.
