🏥 PE’s Healthcare Power Play: Big Bets, Bigger Exits?

Bain healthcare PE report overview: Valuations, carve-outs, and a $115B record—2025, here's looking at you

PARTNERED WITH Happy Friday, Hospitalogists!   Today's send is an overview of Bain's recent healthcare private equity report (linked below) which always makes for a great read for folks in/around the space.    Also, I'll see you in Austin during SXSW! Get ready for a Healthcare Happy Hour.  Join Lance Armstrong, Ben Freeberg, me, and other industry experts for a night of networking and health tech conversation, and maybe even some spicy takes.   📅 When: Tuesday, March 11 | 5:00 PM - 7:00 PM CDT 📍 Where: Driftwood Downtown, Austin, TX   Register now to save your spot; space is limited: https://lu.ma/6anqugot Was this email forwarded to you? Subscribe Here SPONSORED BY PHRMA Where's the drug dollar actually going? A new analysis reveals that half of every dollar spent on brand medicines goes to entities that don't even make the medicine. So, where exactly is the money going? To middlemen like PBMs and insurers who are aggressively consolidating control over health care, big hospitals in the 340B markup program, and mandatory government fees and rebates. Read the report PE Healthcare Analysis Going deeper on an interesting topic, theme, or trend  Takeaways from the Annual Bain PE Healthcare Report Let's dive into what's been happening in healthcare private equity...or should I say, what's poised to happen since with $75B in dry powder waiting to be deployed, 2025 is shaping up to be a banner year.   According to Bain's latest report, Healthcare Private Equity Market 2024: Year in Review and Outlook, last year closed out with a bang, hitting a record ~$115B in deal value.   Here are a few takeaways that caught my eye:   First, what fueled global healthcare PE to reach ~$115B in 2024, making it the second-highest deal value we've ever seen on record?   Just a few massive transactions—five deals over $5B, compared to just two in 2023 and one in 2022.   After some years of uncertainty, big moves are back, and healthcare PE is poised for some serious growth (although overall U.S. private equity activity is 53% lower than it was this time last year).    So far, startups like Transcarent have announced acquisitions, spaces like RCM are seeing rollup plays (Machinify) and others like Datavant are gearing up for a wave of M&A activity. For those closer to the space, I would love to hear what you're watching in 2025.   For the rest of us, here's a solid overview from Bain.   Sector Highlights in North America:   Provider Services: Major investments were made in provider services, reflecting ongoing consolidation in fragmented markets such as veterinary care, dental services, and primary care.    Healthcare IT: Investments in healthcare IT were driven by a major focus on optimizing providers' efficiency, investments in clinical trial IT infrastructure, and advanced analytics by payers.   Mid-Market Innovation: Mid-market private equity funds demonstrated strong performance, gaining momentum with more carve-outs and a sharp focus on maximizing exit values. Bain attributed exit value accretion primarily to multiple expansion (of course) followed by revenue growth, and then margin expansion. Pretty interesting to see most of the value created in the actual aggregation process - multiple expansion in developing a rolled-up platform - rather than helping the portco operate more efficiently. Biopharma: The biopharma sector also attracted substantial investment, more or less in line with years prior. It'll be interesting to see how the Inflation Reduction Act affects investment over time. Regulatory Environment: The FTC intensified its scrutiny of private equity's role in healthcare transactions. In March 2024, the FTC held a workshop detailing concerns with various private equity investment strategies, and in May 2024, it launched a public inquiry with the DOJ to explore potential anti-competitive risks in PE transactions that may undermine competition.    In the second half of 2024, the U.S. Federal Reserve started cutting interest rates, making borrowing cheaper and showing a vote of confidence in the economy. At the same time, Japan and India had benefited from steady growth and a positive investment environment.    Looking ahead, with more assets piling up in private equity portfolios (see graph below), plus rising pressure from limited partners to cash out, it looks like we're about to see more sponsor exits soon. Plus, as the WSJ has also recently reported, physician practice management (PPM) deals are stirring back to life.   After years of stalled activity (blame labor costs, regulation, and bankruptcies), 2024 saw strategic buyers bridging valuation gaps, with major deals in ophthalmology and gastroenterology. Kristian Werling, a partner at McDermott Will & Emery, expects to see great continued growth ahead for PPMs, especially those in chronic care management and more complex specialties.   So, what's next? Will buyers and sellers finally see eye to eye as valuations level off? And with LPs needing liquidity, will competition heat up or cool down? With biopharma investment ramping up with more early bets and bigger clinical trial spending, will this drive long-term PE growth in the space? Are corporate partnerships the new M&A playbook (i.e. TPG + Cencora, CD&R + Elevance)? And will will PE keep leaning into carve-outs and niche plays, like Astorg's move in assisted reproductive tech (ART)? Read Bain's full report for more, and let me know what you think. 3. COMMUNITY UPDATE The latest from inside my community of healthcare thinkers Members Only: February Roundtable (rescheduled for Tuesday, 3/4) – Join me & Jim Ricciuti for a special edition of the Hospitalogy Roundtable. We'll dive in with some introductions and a discussion about the current regulatory landscape, then open up the conversation to cover other top-of-mind items. Register here. Want to host a Hospitalogy Meetup in your city? – We're looking for members interested in hosting in-person meetups for local Hospitalogists. DM @Emmy Silberstein in the Hospitalogy app or email emelia@workweek.com to learn more!   Join my Hospitalogy Membership! If you're a VP or Director working in strategy or corporate development at a hospital, health system or provider organization, you will get a lot of value out of my community as I purpose-build the content, fireside chats, and conversations for this group. Join for free today. Join my Community SPONSORED BY NEUROFLOW What if better mental health care also meant lower costs? Aurora Mental Health & Recovery put NeuroFlow's measurement-based care tech to the test, and the results speak for themselves: -75% fewer psychiatric inpatient admissions -63% fewer ER visits -28% PMPM cost savings compared to the control group. Aurora improved outcomes and lowered costs, thanks to analyzing clinical and claims data with NeuroFlow. See how tech-enabled behavioral health makes care smarter, more efficient, and more impactful. Read the case study. VENTURE and FUNDING The latest startup and funding news Avandra raised $175M to build out a federated imaging network aimed at enhancing data sharing in medical imaging. harrison.ai doubled down with $112M in Series C funding to enhance its AI-driven healthcare solutions in the U.S. OpenEvidence raised $75M in a Sequoia-led Series A funding round, achieving a $1 billion valuation. The company, which offers AI-driven solutions for healthcare data analysis, claims a quarter of doctors use the service. Frontera launched with $32M in seed funding to support its health initiatives. Keebler Health secured $13M for product development focused on health tech solutions. Millie and Posterity Health both secured $12M, Millie for expanding midwife-led maternity care and Posterity Health for expanding its male fertility platform. VitalChat raised $6M in a Series A round to enhance remote patient monitoring solutions. Epicore Biosystems received $26M to expand its sweat-sensing wearable technology. Keragon secured $7.5M in seed funding for its AI-powered healthcare automation platform. Candid Health raised $5.25M in Series C funding to enhance its GenAI features. Comma raised $2M in a seed round for personalized reproductive health science. MISCELLANEOUS MADDENINGS Had a wonderful time at the Adonis / Fathom AI in RCM Symposium yesterday. Lots of great folks gathered to chat about the future of innovation in the space.   Shout out to the Adonis and Fathom crews and my fellow panelists, it was a hell of an after party. IYKYK. Also, was great to see some Welsh Carson folks - Brady and Evan - during my short stay. Til next time. (Also Jake Knapp with the 59 this week!! Insane stuff, love the guy, smoothest swing/tempo on tour.) Hospitalogy Archive Thanks for the read! Let me know what you thought by replying back to this email.   — Blake   Share Hospitalogy, Earn Rewards Have friends who'd love Hospitalogy too? 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