THE SET-UP: It’s never a good thing when “private equity” and “gobbling” appear in the same headline. But, like two dateless, dysfunctional partygoers, they do seem destined to be together. Over the last couple years private equity has been gobbling-up “parking firms” and “registered investment advisors” and “life Insurance and annuity companies” and “professional sports” and, apparently, the “entire economy of Canada.”
We know money never sleeps, but who knew it was so damn hungry?
To be fair, sleeplessness and a healthy appetite don’t generally go together, but, I digress….
…then again, Private Equity is kinda acting like an addict … and the high it’s chasing is profit. And, as evidenced by the insane array of small businesses they’ve been buying and “rolling up,” they’ll break anything and everything to score another fix. As you will read below, P/E has hurt a lot of people along the way. They are destined to hurt many more, too … just look at their foray into healthcare for the intellectually disabled.
Their behavior will only be encouraged by a new Presidency with its own addiction problems. With Lina Khan out of the way and the regulatory agencies fleeing like teenagers from a B-Movie chainsaw killer, the Federal government is unlikely to organize a long-overdue intervention. Then again, that’s been true since Reagan established this particular addiction back in the 80s. The last couple times they went on a bender we didn’t even demand they go to rehab. After 2008, the Fed actually fronted them trillions of dollars.
That’s why I don’t expect them to ever reach the Fourth of the Twelve Steps. Or the first step, for that matter. As you’ll see from a consulting firm’s analysis of the road ahead for M&A (mergers and acquisitions), the kind of self-reflection an alcoholic needs to make a “searching and fearless moral inventory of ourselves” is nowhere to be found in the M&A outlook for 2025. - jp
TITLE: Private equity ‘gobbling’ up care facilities for people with disabilities
https://www.statnews.com/2025/03/18/private-equity-ownership-care-homes-intellectual-developmental-disabilities/
EXCERPTS: Private equity firms are acquiring facilities that care for people with intellectual or developmental disabilities at an alarming rate, according to a new report released Tuesday.
The care industry for this population has been historically owned and operated by nonprofits and faith-based institutions. However, between 2013 and 2023, private equity firms made over 1,000 acquisitions of disability and elder care providers — a likely undercount, according to the report published by the Private Equity Stakeholder Project, a nonprofit watchdog focused on the growing impact of the private equity industry.
While private equity ownership of nursing homes and autism care centers have been well scrutinized, their influence on care for people with disabilities has so far not attracted critical attention from the media. The report details the abuse, neglect and even deaths of people with IDD under the care of private equity-owned providers — and how their influence upon this population’s health care is growing.
A confluence of factors that played out over the last decade has made the care industry for people with IDD particularly attractive for private equity firms. In recent decades, the disability community has pushed for their care to be located in integrated community settings, rather than in institutions such as intermediate care facilities. Home care has boomed, which led to scores of small-scale and regionally based facilities and nonprofits. As care has improved, there has been an increased demand for services as life expectancy jumped for people with IDD. More than 710,000 individuals were on the wait list for Medicaid home- and community-based care in 2024, according to a KFF study.
However, the industry has struggled in recent years to attract enough workers to meet this demand. This “highly-fragmented landscape” made it easy for private equity firms such as Alpine Investors and Centerbridge Partners to swoop in. “As private equity-owned platforms have gobbled up small regional providers and consolidated them, a number of large private equity-owned companies have emerged with tens of thousands of employees at numerous locations across the United States,” the report noted. Alpine owns Team Services Group, which employs about 100,000 people across 11 states while Centerbridge has ownership in Help at Home and Sevita Health, which together employ a similar number of people across nearly 40 states.
The resulting care and services have started to resemble the harms and struggles of institutional care that the disability community worked hard to distance itself from. Staffing has been reduced, employees are underpaid, services such as therapy are being cut, and many living conditions are unsafe or unsanitary, according to the new report.
The problems are not limited to a single company or state. In 2020, U.S. senators published two investigative reports regarding Sevita, a national provider of home care, which found routine neglect and a pattern of substandard care in Iowa and Oregon. Sevita also owns a smaller provider called NeuroRestorative, which almost lost its license to operate in Florida in 2024 due to a failure to “protect the rights of its clients to be free from physical abuse by initiating inappropriate and excessive restraints.”
A 2022 investigation by the Austin American-Statesman found that the state’s Medicaid waiver system was so poorly regulated that it led to “horrific” incidents that resulted in the injury or death of many disabled Texans. Half of the employees who had endangered the lives of their clients were employed by four private equity-owned employees, according to the report.
In North Carolina, more than half of the beds caring for people with IDD are private-equity owned. RHA Health Services, which was acquired by Blue Wolf Capital Partners in 2019, oversees 42% of the total beds, while BrightSpring — owned by private equity firm KKR — oversees 11% of the beds.
States have some recourse for preventing such tragedies — monetary penalties or revoking a license to provide care — but the nature of private equity ownership means they can slough off their system in one state without the rebuke affecting their system in other states or regions. The report’s author recommends that states revise their penalties to ensure that private equity-owned providers prioritize care for their patients over profits.
TITLE: Plunder, sell, repeat: How wealthy investors keep bankrupting needy hospitals.
https://www.businessinsider.com/american-hospitals-bankrupt-closing-wealthy-investors-looting-reselling-private-equity-2025-3
EXCERPTS: When Steward Health Care — once America's largest private for-profit hospital system — declared bankruptcy last year, it seemed to mark the end of a long and catastrophic decline. Over the previous decade, eight of Steward's hospitals had been shuttered, some of them in communities with few other medical providers. The loss of critical care was devastating. "It's a public health hazard," a patient advocate told reporters when Steward closed its medical center in Phoenix.
As I reported before the collapse, Steward's demise was precipitated by a deal it had cut with a company called Medical Properties Trust. The hospital chain agreed to sell its facilities to MPT — and then to lease them back at exorbitant rates. The sales left Steward saddled with some $350 million in annual rent for its own hospitals, forcing it to close facilities and cut corners on care. Upon its bankruptcy, Steward still owed MPT a stunning $6.6 billion.
Meanwhile, as patients and providers suffered, the deals enriched top officers at Steward, who are now the focus of a federal corruption investigation. And they enabled the company to pay dividends of $800 million to its owner, the private equity firm Cerberus, even while its hospitals were being starved of the resources needed to treat patients.
Today, as Steward sells off its remaining 31 hospitals, underserved communities are hoping the new owners will focus less on extracting profits from the facilities and more on elevating the quality of care. But even under new ownership, it doesn't look as though much will change. For starters, MPT will still be collecting rent on at least 15 of the hospitals, most of which are already losing money. And 12 of the facilities have ended up in the hands of operators with track records of running hospitals into the ground — often through deals with none other than MPT. All of which means that, barring a financial miracle, it's likely the hospitals will soon be bankrupt again. "I do not think these hospitals can maintain any reasonable level of operation for more than nine to 12 months without permanent financial support," says Justin Simon, the managing director of the hedge fund Jaspar Capital, who has studied the industry for years.
Even more disturbing, the fate of Steward's facilities reveals a deeper flaw in America's healthcare infrastructure. Many distressed hospitals, it appears, are now locked in a self-perpetuating cycle of looting: Facilities that have already been plundered can only be sold to others who will continue the plundering. "The only people who will buy them are people who are using them as an asset to be bought and sold and stripped," says Rosemary Batt, a professor in the Industrial and Labor Relations School at Cornell University. Steward's hospitals are in such dire financial straits, in fact, that MPT is supplying the new owners with nearly $100 million in loans, along with temporary rent relief, to purchase the facilities that MPT itself helped decimate — and that MPT will continue to collect rent on. As America's dying hospitals struggle to survive, the treatment being prescribed is often more of what's killing them.
Eight of Steward's hospitals — more than a fourth of those it was still operating — have ended up in the hands of a company called American Healthcare Systems. AHS and a related company, Healthcare Systems of America, are run by Michael Sarian, whose career echoes the approach to hospital management employed by Steward — including deals with MPT.
Before founding AHS, Sarian served for eight years as president of another hospital company, Prime Healthcare Services. Prime touts itself as being in the business of shoring up distressed community hospitals — "saving hospitals, saving jobs, saving lives," as it declared on its website. But the Justice Department has accused the system of a different motivation: inflating its profit through fraud. In 2018, Prime and its CEO agreed to pay $65 million to settle allegations that it had knowingly submitted false claims to Medicare, including for care that patients didn't need. Like Steward, the company has a history of extracting money from its hospitals: In 2007, Prime's financial statements disclosed that a family trust run by its founder received a distribution of over $35 million — almost all of it from MPT. And as with Steward, critics say the profits have come at the expense of patients. Last October, the National Nurses United, America's largest organization of registered nurses, blasted the company for closing maternity wards across the country. "Prime's focus on boosting profits," the group said, had resulted in "drastic cuts" to care, "particularly impacting some of the most vulnerable communities."
In a statement to Business Insider, Prime defended the quality of its care and said it settled the Medicare charges "with no findings of fault" and completed a government-mandated "corporate integrity agreement." It also said it had allocated more than $1.4 billion to buy back its real estate from MPT, which it said would result in "even greater stability and security for its community hospitals and the vulnerable populations they are honored to serve." But Prime has also issued $1.5 billion in new debt, meaning its hospitals are still taking on obligations that they'll have to repay.
The pattern of plundering continued at American Healthcare Systems, which Sarian created in 2021 after purchasing a bankrupt hospital in North Carolina. Lawsuits from vendors began to pile up almost immediately, along with reports from employees of short staffing. Regulators slapped AHS hospitals with notices of "immediate jeopardy" — meaning its services were so shoddy that they could result in serious harm to patients. Before long, the company closed one of its hospitals and shuttered one of its emergency rooms. When AHS sought a waiver on a state loan it had used to buy the hospital in North Carolina, regulators learned that the company had transferred some $11 million out of the facility.
AHS also siphoned money out of Vista Medical Center East, another hospital it operates. Vista, which serves a low-income community in Illinois, recently furloughed 8.6% of its workforce because of financial difficulties. At the same time, care at the facility has suffered: On January 23, a patient with hypothermia died after being found on the hospital's roof wearing only a hospital gown. Meanwhile, according to bankruptcy filings, Vista — which has applied for government support — has extracted millions of dollars from the hospital. "Money should not be given to private equity entities at the taxpayer's expense," a local coroner said after the patient's death, "especially to a company with such a poor track record." Some of the money AHS took from Vista has gone to support another of its hospitals — one of which owes rent to MPT. (Neither MPT nor AHS responded to requests for comment.)
Yet none of this — the lawsuits from vendors, the substandard care, the sketchy deals — has prevented AHS from being permitted to take over eight of Steward's hospitals.
TITLE: Healthcare M&A for 2025: Key Trends and Strategic Considerations
https://www.fticonsulting.com/insights/articles/healthcare-ma-2025-key-trends-strategic-considerations
EXCERPTS: Private equity (“PE”) investment in the healthcare sector is projected to maintain levels similar to those observed in 2024, with potential for increased activity in the second half of 2025. In 2024, Healthcare PE deal value reached $61.3 billion in 2024. While declines in interest rates have long been anticipated and may encourage investment in 2025, recent tariff developments and concerns over inflation suggest that rates may not decrease as expected.
This article outlines key trends shaping the healthcare M&A landscape in 2025, offering insights into how PE firms can position themselves for sustainable growth in this dynamic market. The trends are mainly driven by these key factors:
· Interest Rate Environment: While declining interest rates are expected to stimulate market activity, we anticipate that deal-making will accelerate even if rates remain steady. Investors and businesses, having exercised patience for an extended period, are likely to move forward with their strategic plans. However, recent tariff implementations are introducing complexities that could increase costs for medical supplies and pharmaceuticals, potentially heightening inflation. These factors may, in turn, affect interest rate trajectories and add further uncertainty to the market.
· Regulatory Landscape: Proposed legislation in several states coupled with federal initiatives to monitor quality of care under PE ownership, is poised to introduce new hurdles for deal-making in the healthcare sector. This intensification is underscored by recent developments, including two bankruptcy filings over the past year involving large, multi-state for-profit health systems, the bankruptcy of one of the country’s largest operators of skilled nursing facilities, and the passage of “An Act Enhancing the Health Care Market Review Process” in Massachusetts.
· Market Dynamics: The surge in available capital, combined with the need to achieve returns, is anticipated to stimulate market activity. Investments in strategic M&A, encompassing service line rationalization and resource optimization, are expected to enhance operational efficiencies and boost EBITDA [earnings before interest, taxes, depreciation and amortization]. Additionally, potential threats to Medicaid cannot be overlooked, as they pose significant risks to market stability.
The focus on value creation post-acquisition is intensifying as PE investors face pressure to deliver higher returns in a challenging macroeconomic environment. In healthcare, this translates to optimizing workflows, focusing on integrated teams, breaking down silos, reducing operational redundancies, and addressing workforce challenges such as staffing shortages and burnout through a comprehensive workforce strategy. In 2025, we expect to see an increased reliance on tech-driven operational improvements and optimized integrations, such as automation in revenue cycle management, enhanced revenue recognition models and optimized organizational structures, including service-line rationalization, site consolidation and provider alignment.
An FTI Consulting team recently supported an organization through a comprehensive turnaround strategy, which included closing underperforming locations, consolidating and streamlining key positions, restructuring clinical staffing and provider compensation models, and accelerating the cash collection cycle. As a result of the successful execution of these initiatives, the organization achieved a significant improvement in performance, increasing its Adjusted TTM EBITDA from $4 million to $10 million.
PE firms continue to invest in provider businesses and are increasingly concentrating on specialized services such as fertility clinics, behavioral health and outpatient infusion centers due to their fragmented markets and potential for consolidation. Rising costs and declining reimbursements are intensifying pressure on specialty providers.
Specialty services are expected to pique interest from PE because of their positive reimbursement trends as payors and the government look to incentivize lower cost settings and providing access for vulnerable populations. Specific programs provide them with the potential for higher, predictable reimbursement rates, such as the CMS Merit-Based Incentive Payment System (“MIPS”). Since 2024, CMS [Centers for Medicare & Medicaid Services] has expanded MIPS Value Pathways (“MVP”) to include more specialties, such as gastroenterology, urology, and women’s health. This expansion increases opportunities for quality care improvements and revenue growth.
Central to achieving meaningful growth, firms must identify opportunities for efficiency gains, adopt a long-term view into their value creation strategy, and remain flexible to the changing demands and opportunities within the industry. By focusing on scalability, integrating innovative care models and aligning services with market demands, investors can drive measurable outcomes that not only improve financial performance but also deliver long-term value in these high-growth sectors.