By Dana Jacoby
PE in Cardiology: The Trend That is Here to Stay
The recent surge in private equity (PE) investments within the healthcare sector has been evident. In 2020, private equity healthcare deals increased 21% from the previous year. Whilst services such as dermatology and ophthalmology have historically been favored by PE firms, cardiology has emerged as a new and growing area of investment focus.
In this blog, we delve into why Cardiology private equity is garnering considerable attention and what the benefits and skepticism are around this growing relationship.
The Heart of the Matter: Why is Private Equity Flocking to Cardiology?
Private equity interest in the cardiology sector is escalating due to a convergence of critical factors. The aging U.S population, with 16% over 65 years of age as of 2019, foretells an inevitably increasing demand for cardiology care, especially given that 40% of Americans are medically obese.
Alarmingly, heart disease remains the nation’s leading cause of death, affecting over 20 million Americans and costing above $200 billion annually.
Complicating this scenario is an impending shortage of cardiologists; over a quarter are over 61, and the influx of new specialists is insufficient to replace those retiring soon. This presents a fragmented industry with around 3,000 current vacancies, and placing further pressure on demand.
Adding to the allure for private investors is the substantial revenue generated by the cardiology sector; on average, cardiovascular surgeons generate revenues of $3.5 to $3.7 million per physician annually.
Given these factors, cardiology has emerged as a new magnet for private equity investments, inviting substantial private investments amidst increasing demand and practitioner scarcity.
On the Pulse: The Benefits of Private Equity Cardiology Investment
From the perspective of cardiology practices, private equity investment in healthcare provides an infusion of capital that can aid in technological advancements, research, and improving patient care.
The operational expertise that private equity firms bring to the table can also assist in streamlining processes, improving efficiency, and potentially leading to improved patient outcomes.
For the private equity firms, the benefits are also clear. Apart from a stable revenue stream, investing in cardiology allows them to diversify their portfolio in a high-growth sector. Cardiology also provides an opportunity for a shift toward value-based care, which rewards healthcare providers who deliver higher-quality care to patients with incentive payments—creating a synergistic relationship that encourages growth and prioritizes patients.
Taking a Reading on Skepticism
Despite the encouraging trends, some have concerns that PE in cardiology might shift the focus of healthcare practices from patient-centered to profit-oriented.
Additionally, these deals often involve significant debt levels, which may place undue financial strain on the acquired practices, potentially affecting their stability. These concerns, while valid, underline the need for well-structured deals that prioritize patient welfare and uphold the standards of medical care.
PE investment in healthcare is here to stay. With careful planning and structured collaborations, this growing relationship of PE in cardiology holds the potential to redefine the future of heart health care in the United States, encouraging efficiency, innovation, and improved patient outcomes.
- 2020 vision: Healthcare private equity sees record year with disclosed deal values climbing to $78.9 billion
- Vector Medical Group: The Growing Trend of Private Equity Investment in Healthcare
- CDC: Promoting Health for Older Adults
- CDC: Heart Disease Facts
- Cardiology: The New Darling of Private Equity Investment
- Private Equity has a New Love for Cardiology. Should Doctors Take the Deal?