Trends Shaping Private Equity Investment in Healthcare: Deal Outlook for the Remainder of 2025

Although the current sentiment for private equity investment in healthcare may be slightly less optimistic than earlier predicted based on the change in U.S. presidential administrations, there is still reason to be hopeful for the rest of 2025.

Dry powder held by PE firms continues to accumulate, and PE firms face pressure to deploy capital as limited partners demand to see returns. This increased pressure, coupled with the eventual stabilization of macroeconomic factors, supports our prediction that there will be a gradual and accelerating increase in healthcare deal activity for the latter half of 2025.

Below, we highlight several sub-sectors within healthcare primed for M&A investment this year.

Infusion Services

Several tailwinds continue to fuel opportunities in infusion services in 2025. The market is still highly fragmented, faces relatively light regulation and can create business synergies with other platforms (e.g., physician practice management or PPM). There also is appetite from both buyers and sellers in the market, which has seen elevated valuations.

PE interest is driven primarily by the increasing specialized IV-based drug products and treatment programs. Additionally, low-to-medium acuity services are generally provided at lower rates outside of inpatient settings. There has been a clear market shift toward outpatient services across healthcare and the home, and ambulatory and physician office infusion services are catching up.

The first quarter saw both the announcement and completion of Optum’s acquisition of FlexCare Infusion, a portfolio of several companies focused primarily on ambulatory infusion, from RC Capital and other investors. Additionally, Revelstoke Capital Partners announced its recapitalization of AOM Infusion, a specialty infusion provider focused on chronic therapy management, in April.

Healthcare Technology

As healthcare becomes increasingly digital, technology investments continue to be one of the primary areas of interest for PE in healthcare. In the first quarter this sector was busy, with 77 reported transactions involving patient engagement, telehealth and medical practice management technologies.

A survey by Deloitte of 80 top executives from U.S. health systems and health plans found that one-third of executives identified technology investments as a priority for 2025.  This still fragmented sector presents opportunities for PE firms to consolidate to create value through economies of scale. PE firms are increasingly investing in assets that improve operational efficiencies for providers, such as technology that optimizes revenue cycle management (RCM), software that enhances workforce management and AI automation technology.

This trend is demonstrated by New Mountain Capital’s recent $1.5 billion investment in Access Healthcare, a leading technology-enabled platform for RCM services; Oak HC/FT-backed Reveleer’s recent acquisition of Novillus to strengthen its AI-powered clinical intelligence and quality solutions platform; and Lone View Capital-backed Smartlinx’s recent acquisition of StafferLink, a staffing management software provider for the healthcare industry.

Home-Based Care

Home-based care was another top area for PE deal activity in healthcare during the first quarter with 18 deals announced, according to PitchBook.

Given the popularity of at-home care, its ability to reduce costs and the bipartisan support during the 2024 presidential campaign, we expect momentum in this sector to continue through 2025 and beyond.

Investment by several national players in 2025 demonstrates the ongoing PE interest in the home health space, including, for example, Pennant Group’s acquisition of Signature Healthcare at Home’s Oregon assets and the acquisition of one of the largest providers of at-home care, BrightStar Care, by an affiliate of Peak Rock Capital.

PPMs

Although the PPM sector dominated the first quarter by volume, there was an 18% drop in activity compared to first quarter 2024 based on data from LevinPro. Some attribute the decline in activity to increased interest in other sectors—particularly in the face of increasing regulatory pressure on traditional PPM investment structures.

According to the same report, dental practice-related acquisitions were responsible for 45% of the PPM activity in the first quarter with 50 transactions. Internal medicine and orthopedics were the next busiest with 10 acquisitions each. Despite the continued “cool-down” trends, there is still appetite for expanding existing specialty verticals, particularly in fragmented specialties (e.g., dental and orthopedics) and where there are unique assets (e.g., technology, ancillary service lines or value-based care). Interest also remains in primary care models and behavioral health. Other PE investors are encroaching upon their platform exit horizons and used 2024 to test the market and/or get the house in order as they look to trade platforms in 2025 or beyond.

While cautious optimism remains, investors should continue to monitor recent regulatory trends targeting PE investment in the PPM space and may consider deploying capital sooner rather than later with additional new legislation looming. For example, a growing number of states have enacted and/or proposed legislation requiring notice and/or approval of certain healthcare transactions.

The first quarter also saw a wave of legislative proposals that put the traditional management services organization (MSO) structure and PE investment in healthcare as a whole under fire. For example, Connecticut SB 1507 would prevent any PE company acquiring or expanding any direct or indirect ownership interest in physician group practices. Connecticut HB 6873 also would apply Connecticut’s current transaction notice requirements to some MSO investments.

Other examples include California’s SB 351 (codifying limitations on control over medical and dental practices managed by MSOs) and AB 1415 (expanding existing notice requirements to cover MSO transactions). Oregon’s SB 951, which strongly resembles last year’s HB 4130,  attempts to limit or prohibit the structures investors typically rely on to ensure long-term relationships with their managed practices. Meanwhile, bills introduced in Minnesota would place reporting requirements on ownership and control of healthcare providers (HF 2779 / SF 2939) and a moratorium on PE and REIT ownership or operational control of providers (SF 3354).

For a comprehensive overview and real time updates to state health care transaction notice and approval requirements, visit Bass Berry & Sims, PLC’s interactive map.

Angela Humphreys and Ryan D. Thomas are members at law firm Bass, Berry & Sims. Delaney Durst and Ben Kelly are associates at Bass, Berry & Sims. 

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