Becker Business Podcast: Private Equity in Healthcare – Current Trends & Issues (12-13-25)

Host: Scott Becker
Date: December 13, 2025

Episode Overview

Scott Becker dives deep into the evolving landscape of private equity (PE) in healthcare. He examines both the benefits and pitfalls of PE investment, highlighting high-profile failures, core operational concerns, and key considerations for stakeholders in these transactions. The episode delivers candid insights and pragmatic advice, making it essential listening for anyone interested in the intersection of finance and healthcare delivery.

Key Discussion Points & Insights

1. The State of Private Equity in Healthcare

• Over recent years, private equity’s role in healthcare has garnered significant attention—both positive and negative.
• The sector includes investments in:
  • Hospitals and health systems
  • Physician practices
  • Outpatient services and facilities
  • Healthcare technology, dental, revenue cycle, AI companies, digital health, medical devices, pharmaceutical services, and biotech firms

Quote:

"Private equity health care invests in a broad array of different areas…a lot of it goes right, a lot of it goes wrong."
(Scott Becker, 02:05)

2. The Stewart Healthcare Debacle (00:38–01:56)

• The highly-publicized failure of Steward Healthcare (a PE-funded expansion to 34 hospitals, ending in bankruptcy) serves as a cautionary tale.
• The Steward case is used to illustrate risks—namely, overleveraging and low-margin investments.

Quote:

"The Stewart Healthcare situation is really helpful in understanding where private equity investing in healthcare can go really wrong…The Stewart debacle was a debacle."
(Scott Becker, 00:54)

3. Distinction: Private Equity vs. Venture Capital (02:15–03:18)

• Venture capital targets early-stage, often unprofitable startups, backing "a founder and an idea."
• Private equity typically invests in established, profitable companies, using significant leverage (debt).

Quote:

"Venture capital funds invest in earlier stage companies...versus an ongoing business. In contrast, private equity funds largely invest in companies that have profits and have cash flow."
(Scott Becker, 02:24)

4. The Role—and Risks—of Debt (03:25–05:30)

• PE purchases frequently involve substantial debt, which increases financial risk—especially for lower-margin businesses.
• Excessive debt makes companies "more fragile," increasing vulnerability to market downturns or operational hiccups.
• Lower margins + high debt = recipe for disaster.

Quote:

"When a private equity fund uses a lot of debt or places a lot of debt on a company, this can make the company a lot more fragile, that is more vulnerable to softening growth, unexpected challenges or market headwinds."
(Scott Becker, 04:26)

• Caution is especially needed in low-margin sectors (like primary care and certain specialties).

5. Current Market Penetration and Performance (05:35–06:30)

• About 8% of hospitals and 7% of physicians are tied to PE ownership.
• Most PE-backed entities perform well, but problems often occur in low-margin, high-debt sectors.

Quote:

"Currently, about 8% of all hospitals are funded or owned by a company which has a private equity investor. Similarly, nearly 7% of all physicians are part of a group that has a private equity investor."
(Scott Becker, 05:38)

• Example: Dooley Health Care cited as a successful PE-backed case.

6. Market Challenges and Regulatory Trends (06:35–07:13)

• Valuations for hospitals and practices have remained flat, making expected PE returns harder to achieve ("harder…to buy into these assets and then sell them to another buyer").
• Increasing state-based regulation and reporting requirements around PE healthcare deals.

7. Why Partner or Sell to Private Equity? (07:18–08:15)

Three core reasons:

1. Cash infusion: Practice/system needs liquidity/exit.
2. Management expertise: Seller seeks operational improvement.
3. Distress: Entity is in financial or operational trouble.

Quote:

"First, the private equity funded firm may provide a cash exit or cash infusion... Second, the practice or health system may need management expertise... Third, the seller may need to sell due to difficult circumstances."
(Scott Becker, 07:22)

• Importance of due diligence and alignment of expectations emphasized.

8. Best Practices & Final Takeaways (08:20–09:13)

• Outcomes hinge on specifics—neither universally good nor bad.
• Essential due diligence for sellers is stressed:
  • Understanding operational impacts, debt load, and post-deal flexibility.
  • Good advisors are necessary for successful deals.

Quote:

"It's critical that the hospital, health system or whoever doing a deal with private equity fund really understands what they're getting out of it and what the deal is likely to look like after the deal."
(Scott Becker, 08:42)

• Collaborative approaches (e.g., JV between PE and health systems) are increasing.

Memorable Moments & Quotes

• On Steward Healthcare:
  "The Stewart debacle was a debacle." (00:54)

• On debt’s riskiness:
  "I am one that generally hates debt, but that doesn't mean all debt is bad." (03:39)

• On PE outcomes:
  "Some private equity funds are great investors. Some are horrific—all over the board." (08:18)

• On essential buyer caution:
  "You probably need good advisors too." (09:06)

Timestamps for Noteworthy Segments

• 00:38 Steward Healthcare collapse as cautionary tale
• 02:15 Distinction: Private equity vs. venture capital in healthcare
• 03:25 Use of debt and fragility in PE deals
• 05:35 Current PE penetration in hospitals and physician groups
• 06:35 Flat valuations and regulatory trends
• 07:18 Core motivations for selling to PE
• 08:20 Best practices and advice for engaging with private equity

Conclusion

Scott Becker's episode presents a balanced, pragmatic assessment of private equity's role in healthcare. While acknowledging high-profile failures, he emphasizes case-by-case analysis, advocates for careful due diligence, and provides actionable guidance for healthcare organizations considering or navigating PE partnerships. The tone is candid, down-to-earth, and geared toward both industry insiders and general business listeners.