Investment trends to watch in health care subsectors

ARTICLE | April 20, 2022

Authored by RSM US LLP

What’s trending in acquisitions, investing and more?

At a health care private equity and finance conference co-hosted by McGuireWoods and RSM US LLP earlier this year, panelists and speakers shared insights on the investment climate in various health care subsectors and related topics. From dental to dermatology, what’s trending in 2022 in terms of challenges, impact, acquisitions, investing and more? Here is a snapshot of key takeaways.

Behavioral health

  • Digital and telehealth access can be a powerful tool for behavioral health services, but some subsectors—such as speech pathology and intellectual disability—may not benefit.
  • Value-based care is more difficult to achieve in behavioral health due to the complexity of determining outcomes and provider compensation.
  • Because of its impact on patient care and loyalty, organizational culture may play an increased role in the pricing of some transactions.
  • In geographic areas with a limited pool of professionals, the only way to grow is to acquire an existing practice rather than establish a new, or de novo, operation.
  • Due to its broad spectrum of services, the behavioral health space needs more refined evaluation of investments and metrics than do other subsectors.

De novo expansion

  • De novo expansion in any health care subsector should include the development of a playbook that outlines roles, budget, timelines, risk profile, ability to scale and more.
  • The playbook and other growth strategies should be continually assessed and updated.


  • Dental services operations will likely continue to multiply and consolidate, driven partly by the increased number of dentistry graduates. However, given the amount of debt these graduates are accruing, it may be harder for them to start their own practices.
  • Organizational culture and fit are extremely important when looking at acquisitions. Finding the right dentist is key, too. Identifying dentists’ strengths and weaknesses outside of dentistry will help in determining how to best utilize them within the organization.


  • Privatization is still big in this subsector, presenting significant opportunity for consolidation. Multiples are ticking up and the number of megadeals is growing.
  • Stable reimbursement rates make the area ripe for increased investment from outside firms. For example, currently telemedicine reimbursement rates are often the same as in-person visit rates; however, it’s unclear how long this will continue.
  • Outside firms can help implement technology to make founder-owned practices more efficient and increase revenues.
  • Downsides include the low number of dermatology residents, creating a provider shortage. In addition, private equity firms are relatively new to the subsector, limiting the historical data available to potential investors.


  • Investors are incentivized to create value for future generations by establishing a practice model as attractive for a new doctor as it was for an original doctor. As the key owners in this subsector, physicians require a flexible model.
  • A major focus for investments in GI and ancillary practices is planning for long-term sustainability. Prior to investment, it is important to ensure an appropriate fit, confirm a target practice’s desire for a long-term partnership, and have a clearly defined path to partnership for doctors. This approach makes it easier to bring additional doctors into the practice in the future.
  • Strong communication and transparency around expectations both during and after deal execution are key to establishing a successful relationship with physicians. Their word-of-mouth references to peers are the most effective resource for driving future investments.

Hospice and home health

  • The subsector is sensitive to regulatory payment reforms.
  • One of the biggest opportunities in the space is transportation of patients to ancillary follow-up services.
  • Workforce supply is a constraint within this subsector, which is fundamentally dependent on clinicians and support staff to drive growth, quality and clinical efficacy.
  • Housing is a key factor, with senior-housing retrofitting accounting for the highest level of real estate activity in the country. Generally, there is not enough housing to serve the aging population.

Physical therapy/occupational therapy

  • New sponsors will be aggressive in acquisitions in this space.
  • Mergers and acquisitions are potential sources of material growth, but require industry eminence and sufficient qualified personnel to deliver services. Weakness in leadership and lack of resources and infrastructure drive down value.
  • Platform assessment needs to focus on quality of patient outcomes. Partnering with an organization that maintains a strong clinical focus can drive quality, retention and earnings.
  • Return on investment in physical therapy is attractive. Future growth potential can be demonstrated by having a repeatable playbook for the operating clinic and delivering quality services to patients.
  • A rising number of new therapy graduates is creating a surplus of physical therapists, which may drive rightsizing in the market.
  • Telehealth is important for flexibility and as a tool during potential future pandemics; however, it will not replace in-person treatment. Virtual screening and triage points are a good fit for this subsector.

Representations and warranties insurance (RWI)

  • RWI helps protect both the buyer and the seller in an M&A transaction in the event of a breach of representation or warranty in the purchase or sale agreement.
  • Proposal packaging is key to moving beyond a prospective insurer’s initial review, when the insurer is looking for reasons to reject it. Transactions with reputable buyers who know what they are doing are perceived as less risky. It is important to speak to the target practice’s insurance team regarding cybersecurity.
  • Insurance carriers sometimes require practices to have stand-alone coverage for cyber breaches apart from RWI. Whichever approach is taken, insurers will look for a robust cybersecurity compliance program.

Women’s health

  • This subsector is still seeing very high multiples, which appear to be inflated. Investors need to understand the cash flows and return on investment for new or ancillary services. In the fertility space higher multiples are realistic since the supply of providers is limited.
  • Value-based care is top of mind for ob-gyn practices. Bundling services into a model similar to Medicare is key.
  • Vertical rather than horizontal integration characterizes this subsector.
  • Nursing shortages across the board need to be addressed through traditional and alternative educational avenues.


Conference panelists and RSM health care senior analysts, Matt Wolf, director, and Rick Kes, partner, shared their parting thoughts about the industry investment climate.

“Health care is a $4 trillion cottage industry with a lot of white space for investment,” said Wolf. “New funds continue to raise record amounts of capital as investors seek to consolidate and innovate throughout the continuum of care. As the ecosystem faces new challenges, such as digital disruption and labor market challenges, sophisticated sponsors will be well-positioned to create value.”

“Health care continues to be a very attractive industry for private equity investment,” Kes added. “With concepts like value-based care and the continued emergence of Medicare Advantage, the strategy and sophistication needed to achieve success will only increase.”

Get additional private equity insights by reading our latest outlook.

RSM contributors: Brenda Beck, Shelby Burghardt, Dan Donahue, Charlie Duval, Mike Mendez, Sara Neff, Michael Palarz, Parr Thomson, Toby Zimmerer

Let's Talk!

Call us at +1 213.873.1700, email us at or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by RSM US LLP and originally appeared on 2022-04-20.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

​Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how ​Vasquez & Company LLP can assist you, please call +1 213.873.1700.

Subscribe to receive important updates from our Insights and Resources.

  • Should be Empty: