Federal agencies are increasingly focusing on Private Equity Healthcare Investigation, signaling potential changes that could reshape behavioral health dealmaking. In early March 2025, the Federal Trade Commission (FTC), the Department of Justice’s (DOJ) Antitrust Division, and the U.S. Department of Health and Human Services launched a new Private Equity Healthcare Investigation. Their aim is to assess how private equity and other corporate consolidations impact healthcare quality, patient safety, and affordability.
While this Private Equity Healthcare Investigation may not immediately lead to new regulations or restrictions, the heightened scrutiny is already influencing market dynamics. Industry insiders warn that the “headline risk” — the negative public attention and regulatory scrutiny associated with private equity investments — could cool the recent surge in healthcare mergers and acquisitions (M&A). Behavioral health, which has become a particularly attractive sector for PE investors, could be significantly affected.
Private Equity’s Growing Role in Behavioral Health and Emerging Concerns
Private equity has played a major role in behavioral health dealmaking, accounting for more than 60% of all transactions since 2018. This growing influence has drawn the attention of regulators conducting the Private Equity Healthcare Investigation, who are concerned about how such investments might affect care quality and access.
Rebecca Springer, lead healthcare analyst at Pitchbook, explained that the federal government’s messaging on private equity in healthcare has become more pointed, partly due to this Private Equity Healthcare Investigation. Large generalist PE firms may become more cautious in pursuing healthcare deals, especially those involving vulnerable populations served by behavioral health providers.
The FTC chairperson Lina Khan also referenced the ongoing Private Equity Healthcare Investigation, emphasizing the agency’s focus on scrutinizing practices that could harm patients, such as staffing cuts and “strip-and-flip” financial tactics that enrich executives but degrade care.
Why Now? The Context Behind the Federal Investigation
Though the Private Equity Healthcare Investigation is still in its early stages, investors and healthcare providers should take note. As federal and state regulatory frameworks evolve, the environment for behavioral health M&A could become more complex and challenging.
What Does This Mean for Behavioral Health M&A?
For behavioral health providers, investors, and advisors, the increased scrutiny presents both challenges and opportunities. On one hand, the likelihood of longer deal timelines, higher regulatory hurdles, and potential public relations issues may cool some of the aggressive dealmaking seen in recent years. On the other hand, a more transparent and regulated environment could lead to higher quality acquisitions and more sustainable business models.
The Bigger Picture: Other Factors Impacting Deal Activity
It’s important to note that while regulatory scrutiny is increasing, it is not the sole factor influencing behavioral health M&A activity. Rebecca Springer points out that “the biggest impediment to dealmaking right now remains the cost of capital and resulting buyer/seller price expectation gaps.” Rising interest rates, inflation, and macroeconomic uncertainty continue to put pressure on valuations and deal feasibility.
Preparing for the Future of Behavioral Health Investment
For investors and healthcare providers, staying informed and adaptable is critical. Monitoring regulatory developments, enhancing compliance, preparing for longer timelines, focusing on quality and transparency, and managing headline risk will be key steps in successfully navigating this new environment. Understanding the evolving Healthcare Investigation is essential for anyone involved in healthcare investments.
