Patient Square Capital, a health care-focused private equity firm, has closed its inaugural fund with $3.9 billion in capital, marking the largest fund ever raised by a health care-specific PE firm. The firm is led by Jim Momtazee, a KKR veteran, who serves as managing partner. The milestone reflects both the growing demand for health care investment and the rising interest in behavioral health as a strategic growth sector. Patient Square Capital began investing in June 2021 and has already deployed approximately $3 billion in equity capital. Early investments include Summit BHC, a substance use disorder treatment provider, and Access TeleCare, an acute care provider. Access TeleCare has also expanded its behavioral health offerings after acquiring Forefront Telecare, signaling Patient Square’s commitment to integrating mental health services into traditional health care. This focus aligns with a broader trend in mental health private equity, where investors are increasingly targeting companies addressing behavioral health and substance use disorders.
“We are thrilled to have strong support from wonderful partners around the globe. We feel fortunate, especially in light of such a challenging fundraising environment,” said Jake Cabala, partner and head of fund partnerships at Patient Square. “Our approach to creating value and serving patients really seemed to resonate.”
Patient Square’s portfolio spans development-stage therapeutics, commercial-stage pharmaceuticals, medical devices, diagnostics, and life science tools. With its new fund, the firm plans to continue investing in providers, with a strong focus on mental health services, reflecting the surge in mental health private equity activity across the U.S.
Behavioral Health as a Target for Private Equity
Behavioral health has become a prime target for private equity firms, fueled by increased demand for mental health care, telehealth adoption, and greater recognition of substance use disorder treatment needs. According to The Braff Group, the first three quarters of 2022 saw 151 behavioral health transactions, slightly below 2021’s record year but still well above pre-pandemic levels.
Momtazee’s former firm, KKR, has been particularly active in mental health private equity, investing in Brightline, a pediatric behavioral health startup, and acquiring Therapy Brands, a practice management and electronic health record platform. KKR has also launched BlueSprig, focused on children with autism, and Geode Health, a hybrid mental health provider. BrightSpring Health Services also benefits from KKR backing, highlighting the firm’s commitment to scaling behavioral health services.
“Earlier in my career, mentors of mine would advise that the work starts when a transaction closes. Never has that felt more apt than right now with our fund closing,” Momtazee said. “We have a tremendous amount of work in front of us, but without those that committed to our fund, there would not have been a beginning. We have deep gratitude for the opportunity and are working hard to reward that trust.”
Health Care Private Equity Trends
The health care private equity market has maintained strong momentum despite economic challenges. Bain & Company reports that health care PE deal volume and value continued their record pace in the first half of 2022. While Q3 and Q4 saw a slowdown due to inflation, interest-rate pressures, geopolitical uncertainty, and labor shortages, activity remained robust.
“HCPE investors face greater competition for assets, higher interest rates from several central banks, tighter credit, labor shortages, and rising labor rates,” Bain noted. “But ample dry powder and a track record of returns ensured a strong year for HCPE investing that continues to attract health care-specific funds, and we expect this trend to continue in 2023.”
This trend has significantly benefited mental health private equity, with firms like Patient Square leveraging capital to scale behavioral health providers, telehealth solutions, and substance use treatment services.
Patient Square’s Strategic Vision
Patient Square is uniquely positioned to capitalize on this momentum. By combining traditional acute care with behavioral health services, the firm aims to deliver patient-centered care while driving financial returns. Summit BHC and Access TeleCare are examples of strategic investments targeting both substance use disorder treatment and mental health services, a key area of focus in mental health private equity.
The firm’s approach highlights a broader PE strategy: integrating care delivery with technology and telehealth to improve access and outcomes. The behavioral health sector, in particular, has benefited from increased demand and growing telehealth adoption, creating a fertile ground for mental health private equity investments.
Looking Ahead
With $3.9 billion in fresh capital, Patient Square Capital is well-positioned to accelerate investments across health care, including behavioral health, medical devices, pharmaceuticals, and provider services. By strategically focusing on mental health, the firm is riding a wave of increased private equity interest, a trend reflected in the surge of mental health private equity deals across the industry.
Patient Square’s early success, combined with the growing demand for mental health and substance use disorder services, underscores the resilience and attractiveness of mental health private equity. As the firm deploys its capital, it is likely to play a leading role in shaping the future of behavioral health care delivery in the U.S., blending strategic investment with patient-focused outcomes.
