Understanding Private Equity’s Role in Healthcare’s Evolving Business Model

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Healthcare organizations need to think about their partnerships — whether with private equity or other types of entities — through a strategic lens.

Jim Hinton  and  Adam Harpool

Across healthcare, organizations are forging new partnerships and exploring different investment strategies aimed at driving more value to consumers, says Jim Hinton, an operating partner with Welsh, Carson, Anderson, and Stowe.

Having spent more than three decades leading two of the nation’s most prominent health systems — Presbyterian Healthcare Services in New Mexico and Baylor Scott & White in Texas — Hinton brings a unique perspective to his relatively new role at the private equity firm. Rather than viewing private equity as inherently bad, he says it needs to be put in the broader context of how organizations can support the rapid changes that are taking place in healthcare. Importantly, he adds, healthcare organizations need to think about their partnerships — whether with private equity or other types of entities — through a strategic lens. “Drive this through your strategy process, but do it in a very objective way,” he says. “And if you're in a fast-growing part of the country, do you have the capital and leadership expertise to do it on your own?”

Hinton joined Adam Harpool, a principal in Oliver Wyman’s Health and Life Sciences practice, for an engaging conversation around partnerships that are evolving in healthcare and the drive to a more value-oriented system.

Show highlights:

“The broad (belief) that private equity is bad is really ill informed. It's not in informed by the facts. And, and we need to, I think as a society, accept that there are different types of capital building models to support businesses and that's part of why we call ourselves a capitalistic economy. We have a lot of different options there. Private equity is but one.”

“When you get to the question of value creation, it's really about going to some of the basics — having a beginner's mindset about the business that you're in, where it is today and where it needs to go in the future.”

“Look at probably the biggest issue facing healthcare, and maybe all industries today, is the lack of a qualified labor pool. And if these investments in technology can lessen the impact of the current labor shortages, then by all means, that is an area where a health system or an imaging center or whatever the services are should be investing in.”

“I'm hoping in 10 years that we look back and say, ‘This society of ours has been spending a lot of money on healthcare for a lot of years, and they are finally getting the value they deserve. And they're getting it in the application of technology, in the new insights that this amazing scientific community in America can bring to the table.’”