Over the past two years, private equity firms have acquired numerous UK healthcare companies, including ambulance fleets, eye-care clinics, and diagnostics businesses. Their motivation stems from the desire to capitalize on the increasing waiting lists in the NHS. LaingBuisson, a consultancy, reported that private equity firms have completed 150 deals for UK healthcare companies since 2021, marking the highest volume in at least seven years. Despite a general slowdown in mergers and acquisitions, investment in the healthcare sector remains steady, with 25 deals already agreed upon this year. Tim Read, the director of research at LaingBuisson, explained that private equity firms are now targeting “organizations that are an integral part of healthcare delivery” due to the value demonstrated by investing in healthcare services during the pandemic.
The surge in private equity investment reveals the increasing influence of financial investors in the UK healthcare sector. While the private equity industry has faced criticism in the past for its lack of transparency and focus on profits over quality healthcare provision, industry executives argue that they can enhance efficiency in companies by investing in advanced technology and playing a vital role in addressing the challenges faced by the NHS. This recent wave of deals is indicative of a long-term trend of the NHS purchasing healthcare services from private providers, which began under the previous Labour government two decades ago. Subsequent governments have expanded the role of non-NHS providers, creating a stable environment that attracts private investment.
The private sector is viewed as an important source of additional capacity for the NHS, particularly in light of staff shortages and the record-breaking waiting list that has emerged during the pandemic, with nearly 7.6 million patients awaiting treatment. For instance, a quarter of mental health beds in England are provided by non-NHS providers, while private hospitals, many of which are owned by private equity firms, have been expanding and carrying out routine operations such as hip and knee replacements and cataract surgery. Private equity firms have also started investing in diagnostics and digital care, capitalizing on the long waiting lists in the NHS, which prompt patients to seek private alternatives and pay fees themselves.
Jasper van Heesch, a director at advisory firm RSM, explained that private equity firms are drawn to the healthcare sector due to the unmet demand experienced by the NHS. He noted the recurring revenue profile and dependable demand associated with healthcare services, making it an attractive business case. Notably, Practice Plus, owned by Bridgepoint, a UK private equity group managing €38 billion, has emerged as one of the primary beneficiaries of private sector involvement in the NHS. Practice Plus derives the majority of its revenues from the public sector and operates services such as NHS walk-in health centers, prison health services, and the NHS 111 telephone advice service. Despite controversies surrounding its provision of prison health services, Practice Plus generated £460 million in revenue last year, with its private equity owner receiving over £50 million in dividends.
Optegra is another company that has thrived due to the UK’s growing reliance on outsourced healthcare. Since opening its first eye hospital in 2008, Optegra has established more than a dozen clinics across the UK, providing eye surgery to over 1 million patients. The NHS turning to the private sector for routine operations like cataract surgery has helped drive Optegra’s growth. Research from The Royal College of Ophthalmologists reveals that nearly half of all NHS-funded cataract procedures in 2021 were carried out by independent providers, a significant increase from 11% five years ago. The pandemic has further accelerated this trend, causing an even stronger need for private healthcare businesses to support the NHS. Optegra’s revenues nearly doubled last year, reaching £67 million. In February, MidEuropa, a €6 billion European private equity firm, acquired Optegra with plans to expand its operations throughout Europe.
The strain from the pandemic has made private companies that provide NHS services even more appealing to potential investors. Tom King, a director and political risk adviser at Lodestone Communications, emphasized that generalist private equity funds are now entering frontline care and elective surgery, previously the domain of specialists with healthcare backgrounds. The increasing competition and popularity of these investments reflect the underlying mega trends in the healthcare sector. Michelle Tempest, an analyst at consultancy Candesic, highlighted the value brought by private providers, including cost discipline, innovation, and specialization, particularly in contrast to the NHS’s outdated infrastructure,legacy technology, and low staff morale.
However, not everyone believes that financial investors are proficient in delivering healthcare services. Private equity has faced scrutiny for loading debt onto acquired companies and a lack of transparency, specifically regarding taxpayer revenues. A recent paper published in the British Medical Journal found that healthcare provided by private equity-backed companies tends to be more expensive and has mixed to harmful impacts on quality. As the UK gears up for a general election next year, where the NHS is a top concern among voters, different political parties have contrasting views on the involvement of private hospitals in reducing NHS waiting lists. Nevertheless, the private sector’s presence in UK healthcare is likely here to stay, as no major party advocates for a different model.
A recent paper published in the British Medical Journal found that healthcare provided by private equity-backed companies was often more expensive and had “mixed to harmful impacts on quality.” Joseph Bruch, an assistant professor at the University of Chicago and co-author of the paper, described this as part of the broader trend of the financialization of healthcare, where a higher proportion of profits from healthcare are diverted to the financial sector. With a general election approaching in the UK, the NHS is a major concern for political parties. The Labour party, expected to win the election, supports using private hospitals to alleviate NHS waiting lists. “I don’t subscribe to the view that public equals good, private equals bad,” said Wes Streeting, shadow health secretary, in an interview with the Financial Times. Regardless of the election outcome, private sector involvement in UK healthcare appears to be a permanent fixture, as no major party advocates for an alternative model.
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