Healthcare PE activity in Q1 2024 remained subdued, marking a continuation of the downturn seen in 2023. PE sponsors announced or closed an estimated 158 deals in the quarter, maintaining the sluggish pace of 2023. Despite a somewhat more optimistic narrative around deal mechanics and slightly easier financing conditions compared to mid-2023, the persistence of the bid-ask gap, negative regulatory environment, and macroeconomic signs pointing to the Federal Reserve holding rates higher for longer have tempered expectations.

The healthcare services market is challenged by the current economic environment and restrictive regulatory conditions. Various external factors, such as the Change Healthcare cybersecurity breach and increased regulatory scrutiny, have added headwinds. Despite these challenges, there are signs of gradual adaptation in deal structuring and capital deployment, indicating a potential rebound in activity by 2025.

Bright spots within healthcare services include cardiovascular care and clinical trial sites, which have managed to attract investments despite the broader slowdown. Clinical trial sites benefited from ongoing demand for innovative medical research.

In addition, the continuous glucose monitor (CGM) distribution sector is experiencing renewed interest following a landmark Medicare coverage expansion. This expansion has significantly increased the number of CGM-covered Medicare patients, driving market growth. However, investors must navigate complex reimbursement and market dynamics, with major players leading the consolidation in this space.

In conclusion, while Q1 2024 was tough for healthcare PE, the sector is poised for a slow recovery as it adapts to ongoing economic pressures and regulatory challenges. The landscape remains complex, with certain segments showing potential for growth and innovation amidst widespread caution.

This recap is based on the Pitchbook Q1 2024 Healthcare Services Report.


Garrett Lipus is a Partner of McDermott + Bull and a member of the firm’s Healthcare and Life Sciences Practice. His national practice focuses on serving clients in healthcare services, medical devices, and healthcare technology and his clients range from privately held organizations to public companies and private equity firms that have an investment focus in healthcare or life sciences. Garrett received his BA in business administration from the University of San Diego and was a member of the school’s Division I Golf team.