PE investments in healthcare continued to both expand and mature in 2021, as firms look to position themselves on the right side of change in an industry that accounted for nearly 20% of US GDP in 2020.

The shock waves of the COVID-19 pandemic have both benefited and stymied growth in the healthcare sector. Some locations, especially hospitals and skilled nursing facilities, are still struggling with increased operating costs from COVID-19 safety precautions, lost revenue and staff churn. While other facilities, such as laboratories that pivoted to perform COVID-19 tests, unlocked a significant new revenue stream.

Here's a closer look at four charts from our latest US PE Breakdown that highlight PE's healthcare activity in 2021.
 
 

Healthcare devices, supplies, and services—which include providers such as doctors and dentists—have continued to dominate overall PE deal activity. Other areas such as healthcare IT have also drawn significant PE interest.

Two of the largest areas for healthcare IT are electronic health record (EHR) software and billing/revenue cycle management software. Although a few large players, chiefly Epic and Cerner (the latter of which is currently under agreement to be acquired by Oracle), dominate the hospital EHR market, many firms are seeking growth opportunities with EHR vendors that cater to smaller but less saturated segments of the healthcare provider landscape.

PE firms also made investments in platforms that cater to specific provider types. For instance, Serent Capital recently made a growth investment in Raintree Systems, a provider of EHR and revenue cycle management software to the physical therapy industry, and KKR purchased Therapy Brands, the developer of a practice management and EHR platform for the behavioral health sector, from Lightyear Capital and other investors for a reported $1.2 billion.
 
 

National healthcare expenditure as a share of GDP has essentially doubled since 1980, as deals have continued to amass billions of dollars in value. A deal to highlight is the announced $17 billion buyout of Athenahealth by Hellman & Friedman, Bain Capital and minority investor GIC.

In the life sciences space, 2021 saw the largest-ever buyout of a pharmaceutical company when EQT and Goldman Sachs Asset Management purchased contract research organization Parexel International for $8.5 billion.
 
 

PE-backed exit value skyrocketed in 2021, a year that saw several large firms quietly offload investments in hospitals.

Leonard Green & Partners sold its majority stake in two Rhode Island hospitals amid a public standoff with the state's attorney general, who wanted the firm and the hospitals' holding corporation to commit to further investments to maintain their quality of care, while Apollo Global Management reportedly sold LifePoint Health to its own Fund IX for $2.6 billion, substantially less than the $5.6 billion its Fund VIII paid for the hospital chain in 2018.

Featured image by IronHeart/Getty Images

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