Selling your healthcare practice or facility to private equity? Not so fast! Over the past few decades, if a private independent physician practice was looking to be acquired, the most typical suitor was a hospital or healthcare system in the same geographic region. However, the “price” paid by healthcare networks has dwindled significantly due, in part, to federal regulatory oversight requiring that any purchase price must be calculated at fair market value (FMV). Those same independent practices have found a new partner in the form of private equity investment firms. Learn more about today’s private equity healthcare situation and how the federal government is investigating potential consequences.
Private healthcare on the rise
Private equity or PE firms now have a huge presence in the healthcare industry and private equity has acquired scores of outpatient clinics, senior living facilities and physician and dental practices. Given the exponential growth of the healthcare industry, it is not a surprise that PE firms have focused on that sector.
Growth is exactly what “fuels” the private equity model. Unlike healthcare networks, private equity firms are proposing prices which are often a significant multiple of earnings. This has created an offer that many private healthcare practitioners simply cannot resist. 
Why the federal government opened an inquiry into private equity healthcare
In March 2024, the Federal Trade Commission, the Department of Justice’s (DOJ) Antitrust Division, and the U.S. Department of Health and Human Services (HHS) jointly launched a cross-government public inquiry into corporate and PE healthcare acquisitions.
“A common theme…is that growing financialization in the healthcare industry can force medical professionals to subordinate their medical judgment to corporate decision-makers’ profit motives, at the expense of patient health,” noted the Chair of the Federal Trade Commission (FTC).
The most suspect acquisitions are those transactions in which a single private equity firm acquires a significant market share in a geographic region. Under those circumstances, federal regulators have raised a concern that the lack of competition increases the cost of healthcare without any real benefit, and perhaps some negative consequences to patient care.
While many private equity transactions can still create benefits to both the selling entity and patients given the infusion of capital, there is certainly reason for additional consideration and evaluation of any particular proposed transaction.
Update: Legislation has now been proposed requiring further scrutiny of the involvement of private equity firms in the healthcare industry. The legislation is captioned the “Health Over Wealth Act” and it would potentially address investment by for-profits in “healthcare entities, including hospital, nursing homes and mental or behavioral health facilities.”
Considering a private equity healthcare transaction?
For now, the message to healthcare practices is relatively simple – while there may not be a compelling reason to turn down a private equity offer, both parties should certainly consider the impact of regulatory review.
Our healthcare attorneys in Allentown, PA remain current on laws impacting your practice and facilities. Please reach out to us with questions and compliance concerns you may have regarding PE healthcare.
