How private equity healthcare organizations are different

How Private Equity Healthcare Organizations Are Different


Healthcare’s unique identity as a recession-proof industry at the forefront of innovation makes it a natural fit for private equity (PE) firms. It’s no surprise that private equity’s presence in healthcare has exploded in the last two decades, having invested nearly $1 trillion in the industry since 2006.

However, what stands out even more than the volume of private equity deals in the healthcare industry is how PE-backed healthcare organizations differ from traditional health organizations. One of their dominant characteristics is speed.

Here, we’ll synthesize the insights that Kirby Bates Associates Vice President of Executive Search, Troy Keach, recently shared with webinar attendees. We’ll explore three critical ways PE’s speed makes it stand out and how having the right leadership can help private equity-backed healthcare organizations meet their goals.

1. Private Equity Healthcare Organizations Hire Fast

In the traditional healthcare system, the process of hiring an executive is slow. Non-profit health systems, in particular, have arduous recruiting processes. The reverse is true in PE-backed healthcare. By the time a private equity firm reaches out to a retained executive recruiting firm like Kirby Bates, they’ve already tried to fill the role on their own. And to PE companies, time is money. “They want the position filled yesterday,” Keach stated. 

To expedite the process, interviews are often done virtually for the first 2-3 rounds. After that, the final candidate or candidates travel to the site for a final round of interviews. Remote work opportunities for executive leadership are increasingly common in the private equity healthcare space, which also requires speed when hiring. Firms can access a larger pool of candidates when remote work is on the table.

The agility and expertise of specialized healthcare executive recruiting firms like Kirby Bates are vital in a recruiting environment where time equates to money. Kirby Bates’ recruiters can accelerate the hiring process by identifying and presenting a polished slate of candidates for a PE firm’s review within days by leveraging their deep networks and understanding of the sector’s unique demands. 

2. PE-Backed Healthcare Organizations Move Fast

Private equity healthcare groups seek to drive their return on investment (ROI). They rapidly create change within the platforms they acquire to accomplish that. One key area for focus is increasing operational efficiency. Some ways PE groups will improve efficiency are:

  • Consolidation: PE groups focus on standardizing successful processes from one group or entity across the broader organization. Consolidating call centers, revenue cycle departments, and business offices are prime examples. 
  • Digitization: When PE firms acquire practices with 2-3 physicians, they may still be operating on paper. Integrating these practices into leading-edge tech platforms standardizes practices further and reduces the time needed for corrections.
  • Integration: One of the first things a PE firm does when acquiring a healthcare organization is to control as much of it as possible. This means bringing in processes such as supply chain management, which may have been outsourced to other providers. PE-backed healthcare groups can reduce dependence on external groups and increase efficiency by bringing operations in-house. 

The speed at which PE-backed healthcare organizations move is also reflected by what they look for in candidates. They seek candidates who can drive turnarounds, get underperforming areas back up to speed, and quickly integrate separate groups into a new culture.

In these organizations, executive leaders are pivotal in orchestrating the rapid organizational transformations that ultimately drive ROI. With the ambitious goal of enhancing operational efficiency through consolidation, digitization, and integration, the success of these initiatives largely hinges on executive leaders’ vision, decisiveness, and adaptability.

Related read: 6 Key Candidate Attributes for Private Equity Healthcare Organizations

3. Private Equity Sells Fast

In most cases, private equity firms with healthcare acquisitions have a holding period of approximately 5-7 years. During that time, rapid changes are made to drive quality improvements and operational efficiencies that increase an organization’s profitability and, thus, the PE firm’s ROI. However, while a 5-7 year timeline is most common, it’s not always the case, as Keach explained. 

“We were ready to exit at year eight, but a medical group I was working with just wasn’t ready to sell,” Keach recalled. “We decided to wait almost two additional years to acquire the group before the private-equity group sold.”

Private equity’s exit strategy similarly informs their recruitment strategy. “We’re seeing a lot more fractional leadership roles coming up,” Keach explained. “I’ve seen a COO come in and work on a year-long contract to help stage and prop up a company to prepare it for a sale.”

The leadership needs of private equity (PE) groups in the healthcare sector are dynamic and evolve significantly throughout their holding period. That fluid landscape demands a strategic approach to leadership recruitment, often requiring new leaders to address specific phases of the investment cycle or to prepare for pivotal events like an exit. 

Kirby Bate’s team of executive recruiters can identify exemplary leadership for every stage of a PE-backed healthcare organization’s holding period. Whether it’s someone who can come in after an acquisition and drive a significant turnaround or provide unshakeable stability as the organization prepares to sell, leadership enormously impacts ROI.

Kirby Bates Knows Private Equity

Kirby Bates Associates’ team of executive recruiters has an exclusive focus on the healthcare industry. Our executive recruiting leaders like Troy Keach have first-hand experience leading private equity healthcare organizations and driving changes that improve outcomes and boost their bottom lines.

Not only does our team’s lived experience in organizations like yours let us understand the challenges your organization faces, but it also means we have the connections to help you overcome them. Our executive search team can connect you with leaders who are ready and able to create change and drive ROI.

To quickly get exemplary leadership on board, contact Kirby Bates Associates today.