Healthcare Services Industry Report

The value of the trillion-dollar healthcare services market continues to surge as expenditure on medicine grows significantly year after year. Pharmaceutical companies, long-term care facilities, medical device companies, medical building management, and medical consumables all drive the market forward. As an end-use segment, hospitals hold the most extensive consumer base in the healthcare services industry.

Market Segmentation

The healthcare services market is segmented by type into the following areas:

• Hospitals, Clinics, and Outpatient Care
• Pharmaceutical Companies
• Dental Services
• Nursing and Home Healthcare
• Medical & Diagnostic Laboratory Services
• Residential Substance Abuse
• Telemedicine
• Mental Health Facilities
• Ambulance Services
• Payer Services
• Other

Key Market Trends

Growth in the healthcare services market can be attributed to various factors, including the increase in the elderly population, economic growth, technological advancements, lifestyle changes, and better standards of living.

Among the most significant key trends driving the industry include:

• Increasing assertion of bundled payments
• More use of digital tools
• Increasing cross-industry and cross-company partnerships
• Development of novel drugs
• Sophisticated, hybrid imaging techniques
• Rising affordability and awareness

The expansion of the world’s elderly population is driving demand for long-term care services, including medical devices and equipment. The industry is also seeing a boost from economic growth and lifestyle changes that lead to increases in healthcare spending. Additionally, cross-industry partnerships are making innovation possible in the development of novel drugs and treatments.

Evolutions in testing technology have made it possible for better and earlier disease detection, as well as improvements in treatment research for terminal diseases such as cancer. Various cutting-edge medical centers are a key source of health services innovation and profitability.

The increasing adoption of telemedicine in the healthcare services sector is reshaping patient care, enabling remote monitoring and off-site access to medical services. There is a growing demand for these types of healthcare services, which offer many opportunities and growth potential. To remain competitive, companies must stay on top of evolving trends and keep up with the market landscape.

Generative artificial intelligence (AI) technology has the potential to completely change
how healthcare is administered, which is also changing how private equity firms are looking at investment opportunities in the sector. Dealmakers remain interested in AI-powered and AI-enabled assets due to the large potential upside that the technology can offer when it comes to existing and future healthcare investments regarding improved efficiencies, lower costs, enhanced quality of care, and better patient satisfaction. AI is impacting every aspect of the healthcare industry, but it is especially transformative in streamlining patient consultations, transcribing records, suggesting diagnoses and treatments, and improving patient engagement through personalized messaging. 

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AI is also being used in the life sciences space to aid in new drug discovery to speed up
and improve pipelines, dramatically reducing the timelines for target identification to lead identification, getting new medications to patients more quickly, as well as lowering the costs associated with the processes.

Other ways AI is driving dealmaking include opportunities for automating claims management for insurers, creating AI-powered remote-monitoring devices and surgical robots, as well as enhancing clinical and revenue documentation for providers.

And it’s not just all about AI-specific companies. Buyout investors are also getting in on the various opportunities that exist to use AI in more developed healthcare assets, partnering with tech companies to integrate AI capabilities across existing portfolios and into investment targets. The technology is being adopted on a vast scale across all types of digital and more traditional healthcare companies.

AI offers incredible potential to optimize efficiencies across many areas in the healthcare sector and improve accuracy and patient outcomes. This presents a slew of profitable investment opportunities and makes AI-enabled healthcare assets a huge enticement for
PE managers and investors.

The model of shared medical appointments (SMA) is being used more frequently to
optimize resources and lower costs by having multiple patients seen as a group by a
multi-disciplinary care team and offering counseling and support in a group setting.
More hospitals are adopting this strategy to promote awareness and counsel patients
who share similar medical conditions as a way to supplement traditional physician-patient appointments. Some of the conditions that SMAs address include diabetes, cancer, HIV, asthma, ulcerative colitis, MS, menopause, insomnia, and stress.

M&A

There are positive expectations regarding M&A activity and deal value in the healthcare services sector. There are more positive trends and investment strategies in private equity,
as dealmaking remains ongoing. Dealmakers remain optimistic about the sector’s resilience, despite regulatory uncertainties and broader headwinds. There is also a flourishing asset pipeline coming to market, as well as the availability of serious levels of capital for both corporate and private equity players.

Increased deal activity will likely remain focused on high-quality assets and is expected to occur primarily within pharmaceutical services, healthcare IT, physician practice management groups (PPMs), and non-PPM healthcare services.

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