Private Equity in Healthcare: Navigating Trends & Partnerships with Greg Koonsman

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Interested in learning more about expected healthcare partnerships and private equity trends in 2024?

In this episode, host Jen Johnson sits down with VMG Health Founder & CEO Greg Koonsman to dive into the evolving landscape of private equity in the healthcare sector.

Greg is a prominent figure in the healthcare services industry with over 30 years of experience. He is recognized for his expertise in transactions, joint ventures, and valuations specific to the healthcare services sector. As the leader of VMG Health, Greg also plays a pivotal role in bridging the gap between private equity firms and healthcare providers, contributing to the evolution of strategic partnerships within the industry.

During this conversation, Greg and Jen discuss the growing capital influx and the trend of strategic partnerships between PE firms and health systems. They also look ahead to 2024 and discuss the expected rise in these innovative partnerships, emphasizing the potential for these collaborations to enhance growth, access to capital, and overall healthcare service quality.

Specific topics covered include:

  • The unique expertise required for transactions, joint ventures, and valuations in healthcare services
  • Factors driving the influx of PE capital into healthcare
  • The need for understanding the objectives and strategies of both health systems and PE firms in partnerships
  • Advice for healthcare organizations and PE firms considering a partnership

This episode provides listeners with a comprehensive understanding of the evolving dynamics between private equity and healthcare, making this episode a must-listen for industry professionals navigating the intersection of finance and healthcare services.

You can also visit for more resources and stay connected with VMG Health's newsletter. Thanks for listening!

Want to learn more about this topic?

Read Greg's recent interview with Becker's Hospital Review about PE investment in healthcare: Partnerships Are the Future: How Health Systems & Private Equity-Backed Platforms Can Fuel Mutual Growth


Rachel Linch 0:06  Welcome to the Healthcare Download with VMG Health. We are the leaders in strategy and transaction advisory dedicated to finding solutions for the healthcare industry. In each episode, we will leverage our expertise to provide trends and timely updates about what is happening on the business side of healthcare so you can move your strategy forward.

Jen Johnson 0:33  Hello, I’m Jen Johnson,  VMG Health’s Chief Commercial Officer, and in this episode of the Healthcare Download with VMG Health, I will be speaking with Greg Koonsman, CEO and founder of VMG Health. Greg and I have been working together for nearly 20 years, and he definitely knows more about the healthcare market than anyone I know. So, we plan to do some digging into some forward-looking private equity trends today. So Greg, hello, it’s nice to have you.

Greg Koonsman 0:55  Hi, Jen.

Jen Johnson 0:57  So, PE has really ramped up for our firm, and it’s become a big part of everything we do these days. And we really need to understand it, and we want to educate the market on it. But before we get into that, I would like to just start and make sure everyone knows a little bit about you and your background. And specifically, what made you decide to build a firm focused exclusively on the business of healthcare way back in 1995?

Greg Koonsman 1:19  Thanks, Jen. You know, I was fortunate to work at EY in the early 90s. EY at the time had a very large customer base of hospitals and health systems. It allowed me to get experience and really gain an understanding that healthcare requires a really unique level of understanding of market verticals, regulatory environment, and just the overall drivers of healthcare in each of these verticals are unique.

Jen Johnson 1:49  Yeah, like no other industry, really.

Greg Koonsman 1:50  No doubt. And so whether I was doing a joint venture development project, an acquisition, or a valuation of any healthcare business, I really became aware that this unique skill set was required to develop the expertise just to do the work that I was doing.

Jen Johnson 2:09  Yeah, lots of specialties, and I know that even what you understand for an ASC, a completely different set of facts for an imaging center and what drives that. So, even within healthcare, there’s a lot, so specialization was almost needed, wasn’t it?

Greg Koonsman 2:22  No doubt. We were fortunate in that in the early 90s, the Stark Laws were being implemented and we were unwinding a lot of partnerships that didn’t meet the Stark requirements. And so looking at all those businesses that ran afoul of Stark, they were designated health services that had been joint ventures with the wrong group of people, we began unwinding those partnerships and restructuring the partnerships. In addition, looking at the consolidation of physician practices, the consolidation of hospitals. At the time, Columbia HCA was a growing business and making a lot of acquisitions, there were over 300 hospitals. So, we really came to recognize that in healthcare services there are so many unique attributes that experts need to understand. And so when I looked out in the market, I didn’t see firms that were specialized in transactions, joint ventures, valuation work, just for healthcare services, I felt like that was needed in the market.

Jen Johnson 3:30  It 100% was. Sounds like that’s all you’re doing, right? So, if you’re knee-deep in it, you’re like, “Might as well just do this by myself?” Well, I’m sure glad you did. Coming from someone who’s worked for you for 18 years, I’m really glad you did what you did. So, I know it’s been a long journey and we really could talk about all sorts of things from compliance to M&A trends, but I really want to focus on PE firms and their healthcare strategy. Now, I do understand, you know, being out in the market that a lot of people are covering this these days, but I want to provide listeners with something new. So, Greg, I thought you’d be the perfect person to interview and address what we expect from these PE firms in 2024. So, here’s my plan. I’d like to first touch on why there’s so much activity, then move on to how strategies have evolved over recent years, and conclude with some points on what you expect to see in 2024, and how these partnerships are going to evolve. So, let’s start by sizing up this part of the market for everyone. You were recently quoted in Becker’s Healthcare stating that PE firms have about $500 billion allocated to healthcare investments. This is obviously an enormous amount of funding. So, why do you think the amount of PE capital has grown so much, and why is healthcare so attractive?

Greg Koonsman 4:42  It’s really simple, Jen, the asset allocation that institutional investors have made over the last 20 years has increased towards private equity. So, whereas in the late 90s, institutional investors like pension funds and university endowments might have allocated, you know, 5% or less to private equity? That number now, more normally, is closer to 20%, or maybe even more than 20%. So the amount of capital that institutions are allocating towards private equity has grown significantly. If you think about growing from 5% to 20%, that’s 4x. In addition, the amount of capital in that market has grown during that time. So, you know, we look at it today, and global private equity represents north of $7 trillion.

Jen Johnson 5:34  Just the growth of PE alone? Firms and funds?

Greg Koonsman 5:37  Yeah, private capital funds have grown from about 3000 up to over 13,000. So, if you think about the growth, how many people in firms exist today that didn’t exist in the year 2000? You have more people, more capital, looking for more investment opportunities.

Jen Johnson 6:00  And they’re moving it to healthcare, right? That’s growing as well. So, let’s talk a little bit about that. How has the healthcare portion of the fund grown? What have you seen in that over the past 20 years?

Greg Koonsman 6:10  It’s been interesting, you know, if you think about what healthcare has done, you know, it’s gone from 13% of the GDP up to around 20% of the GDP. So it’s grown faster than the general economy. And it is a very large percentage of the overall economy. So back in the late 90s, kind of mid-to-late 90s, we saw some firms investing in healthcare services. But I think, to a large degree, it was viewed as highly specialized. That is completely switched at this point. And I think what’s happening is that, you know, all of those private equity firms, and let’s just say there’s 5,000 private equity firms that invest in the United States, I would guess that a majority if not all, have a healthcare services investment thesis. And so, you know, essentially, what you have is many more participants looking, chasing, that market.

Jen Johnson 7:11  Yeah, there’s no two ways about it, and a ton of them are just specialized in healthcare as well. So yeah, a lot of money. And we just, like sitting here from the, you know, working with clients perspective, we’ve definitely seen a spike in our PE client work across the firm. I mean, I remember, it used to be just five years ago, we might get a transaction, maybe an MSO valuation, but now we’re seeing ongoing requests, I mean, weekly, whether it’s financial due diligence requested from a PE firm, even compliance help, operational support, we’re seeing PE firms come to us in trying to navigate their way through healthcare. Which is just, the jump in requests has been insane over the past few years. What I’ve also noticed, which changed with our PE clients, is they used to approach us with very specific deals, dermatology, ophthalmology, maybe an ancillary business, but now we’re seeing them come to us asking questions about how to invest in the entire continuum of care, from physician practices to value-based care to partnering with the health system, just a lot has happened. And I can see that from my CCO lens, just them jumping all around our website, looking at every sector, reading everything we write. So, they are knee-deep in the business right now. So, I’m curious, from your perspective because you do a lot of work with these firms, you bring health systems and PE firms together so you have an interesting lens. So could you maybe talk about a unique strategy or something that’s a recent evolution of how PE firms have partnered with health systems in the recent year or two?

Greg Koonsman 8:43  It’s so interesting, you’re right, back in the late 90s, early 2000s, you know, and really, our whole history has been working with health systems and other healthcare providers, ancillary service providers, physician organizations, health plans, etc. So, in the late 90s, we knew private equity firms were investing in healthcare, it just wasn’t a big part of what we saw on a day-to-day basis. And we really didn’t work with them a whole lot, because, for the most part, they were investing in businesses that were a little bit on the periphery of what we might be involved with. That has completely changed over time. And, you know, what we’ve seen is that with the advent of several key partnerships that have shed the light on the opportunity, more and more private equity firms are considering ways that they might partner with health systems. So, back in 1998, Welsh Carson funded USPI and USPI’s strategy was partnering with health systems. So, they partnered with health systems all across the U.S. That was a great example of a partnership that was really the key component of their strategy was a partnership with health systems. And they were private equity-backed, right? So, I think that was an early example, we’ve seen more recent examples of health systems, not only creating partnerships with private equity-backed platforms but also investing in those platforms. For example, US Radiology, you know, has been a company that’s been in existence for some time, and really built around partnerships between health systems, and really local health systems and radiology organizations to grow the imaging business. I think that’s evolved to be similar to the USPI strategy, where the partnerships are created in many markets at this point, and there’s now investment in US Radiology by some health systems. We’ve seen some more recent news about other imaging partnerships between TPG and Novant, etc. So, I think what we’re gonna see more and more are innovative partnerships that bring together the key positive attributes that a private equity-backed firm can bring, together with the key positive attributes that a health system can bring. Really creating one plus one equals much more than two.

Jen Johnson 11:19  Yep. So, that’s pretty cool. So, the health system is able to take the PE’s expertise, sector, specifics, management, and really focus on growing a certain part of the business. But then they’re also able to step back and even invest in that platform company, huh?

Greg Koonsman 11:35  Absolutely. You know, one of the things we understand well, is that health systems have the ability to grow any of these verticals on their own. They can do this, they have the expertise, they certainly have the scale of services to engage in anything in the healthcare services side, where I think they need help is focus and capital. So, if you think about a health system executive management team, they’re running 100 different verticals or more in their system. And so how do they focus on one vertical and really grow that one vertical, it’s really difficult. And in the same way, their capital is spread across all those verticals. And so what we’ve seen is that health system management teams have said, “Hey, if we really want to focus on growing one particular vertical with speed to market, we might consider partnering with a private equity-backed platform to do that.” Because certainly the private equity platform management team, they get up thinking, every day they get up thinking about one thing, how to grow that company. Their partner, their private equity partner, will provide them all the capital, whether it’s debt or equity, that they need to grow the business. And so it’s really, you know, much like us as a company, our strategic advantage in the market is focus. We focus in healthcare services, so these firms focus in that one vertical, and they have all the tools they need to grow that company. And so I think it serves the health system well, potentially, to partner with that company and get the growth that they want quicker.

Jen Johnson 13:17  I think that you got a great match because you focused on the business expertise, but then you could also even have it as an investment, which is huge as well for the health system. Now, I think if health systems are listening to this, they may say, “That sounds complicated, sounds like there’s a lot I need to do.” So, we want to talk a little bit about things they should think about when they’re working with a PE firm. But also when you look at the anecdotal evidence of how folks talk about these partnerships, I know that PE firms are very excited about partnering with health systems, it’s like top of their list of what they want to do. But if you talk to health systems, partnering with a PE firm might not be on the top of their list. So, there’s obviously some hesitancy there, some complications there. So, with these inevitable PE introductions and new strategies evolving for 2024, what advice would you give healthcare organizations just thinking about partnering with a PE firm? What should they look for in a good PE partner?

Greg Koonsman 14:13  First, I think expertise and involvement in healthcare. So, historical investment in healthcare services, a level of expertise, and understanding of the market is really, really important. I would say that, on the flip side, the private equity firms really need to understand that their partner has very different objectives than they do from a long term perspective. Typically, health systems want to build a partnership that is infinite in time horizon, whereas private equity firms want to build businesses that they can see liquidity in a finite number of years. So just understanding the objectives of each other is very, very important. And I think there’s a great opportunity for there to be a value-added partnership. You know, for example, health systems have all the expertise they need to build ancillary services or to grow ancillary services, they could build an imaging business, they could build an ambulatory surgery business, they could build a cancer treatment business. What they don’t have, because their system is so complex and covers so many verticals, they don’t have the ability to focus executive management in one location or one vertical. In addition, they don’t necessarily have the capital to focus on that one vertical. And so what we see is that, although the expertise is there, and they do have capital, the ability to focus on one vertical is really, really hard for health systems. They can partner with a private equity-backed platform, that 100% of their time, when they wake up every day they think about that one vertical, and they have as much capital as they need to grow that business. And so essentially, what we see is the opportunity for a health system is speed-to-market or growth, speed to growing a vertical. If they really want to grow a vertical, I think a great way to think about it is to partner with a well-capital-backed, well-managed platform that can help them get to their objective quicker.

Jen Johnson 16:32  So ideally, one that’s got experience in a certain vertical, understands the regulatory landscape, proven track record. I mean, any other thing, like to make sure they’re easy to work with, or any other just kind of softer things you would want to check out? If you were sitting in the shoes of a health system saying, “I think I’m going to go into behavioral health with this platform.” Any other questions you think these folks should be asking?

Greg Koonsman 16:53  Well you know, most private equity firms are very good at building management teams. They’re very good at focusing on fundamental business attributes, like how to build sales, how to build M&A teams, how to grow businesses, so they’re typically very good at growing businesses. I think the next level is to say, “Okay, now we’re partnering with a firm that is not only good at growing a business, but they also have a deeper understanding of what’s happening in healthcare.” It is such a complex, ever-changing market, that they really need to find folks that have been around this business for long enough to see and understand why changes happen, or maybe even the direction of change. It’s a very complex issue and I would say, you know, not many people can predict exactly how it’s gonna go, but it’s great to work with folks who have seen change in healthcare services over the last 20 years.

Jen Johnson 17:57  Would you say even having them kind of key in on regulatory changes and compliance? I think that’s something that when they first came to market, folks thought PE weren’t really zooming in on compliance and regulatory challenges, where now that’s come up in the past couple years a few times. So, that might be something else clients would want to talk to them about their history or any tips there.

Greg Koonsman 18:21  Certainly, the regulatory environment makes growing a business in healthcare services more complex. There are certain things you can’t do structurally with the Stark Laws. And then, you know, the big set of laws that are out there, the Anti-Kickback Statutes are criminal laws that are serious, they’re criminal in nature. And so the complexity of building and growing a business within the framework of the Anti-Kickback Statutes and Stark Laws are complex. And so having folks that really have worked in that environment and understand the regulations, I think it’s important. To your point, we saw that in the late 90s and early 2000s, we saw firms come into healthcare services, and not completely appreciate the depth and complexity of the regulatory framework and how it might impact their ability to grow a business.

Jen Johnson 19:15  It’s common with a lot of new participants. One thing I always ask, which is kind of, if you can tell there’s folks that are new to healthcare, I’ll just say, “So, do you have counsel? Are they specialized in healthcare?” If you have counsel that’s got healthcare specialization, I feel way more comfortable, just kind of having that layer of these people have seen this, they understand the laws. So, I think those are some good tips for health systems that are looking at PE firms, who are looking for expertise, experience in the sector. They’re going to have strong management, they’re going to be focused on business, but don’t forget the compliance and the regulatory piece. Of course, it’s got to be a good fit. I think on the flip side, if you’ve got PE listeners on this podcast right now, what advice would you give a PE company wanting to pursue a health system partnership? A. How could they put their best foot forward? And then B. Are there certain health systems or nuances that they should avoid? Or just any advice for those folks?

Greg Koonsman 20:12  I think it’s a good question, Jen, and very, very important one. Private equity firms I think need to go to great lengths to understand the objectives and the strategies of health systems. 80% of all hospitals in the U.S. are tax-exempt, not-for-profit health systems. So, they are there to serve the community, they’re not really there to grow equity value. They’re singular in their desire to provide high-quality healthcare for their community. So, they speak a really different language. So having the private equity firms really understand what health systems are trying to accomplish in their goals and objectives is important. That being said, a successful health system needs to grow, they need to be profitable, in order to reinvest capital back into the community and provide high-quality healthcare. So they are trying to grow and they are trying to grow their market share, build their brand, really approach and grow verticals within the health system. And so there’s a relationship I think that is, you know, one that can be very positive in that a health system identifies an area that they need to grow within, and they go find a great partner that has significant capital, and the ability to build and grow a company by hiring, high-quality management, providing capital, and really providing a lot of oversight to the growth. I think that’s probably the most important thing that a private equity firm can bring a health system is focus, ability to grow, access to capital, access to really high-quality management teams.

Jen Johnson  22:02  So, those PE firms, if they’re looking for a health system that would be a good one to approach for strategy, then, really, they’re looking for folks that are not necessarily innovative, but focused on growth, maybe they have their eye on a specific sector, whether it’s oncology or behavioral health, that would be a good approach is like these guys are systemized in their approach. They’re looking for business expertise, openness, would that be maybe, I don’t think all health systems are completely open to be innovative and grow in certain sectors yet, although I’m seeing a trend, but that might be something that PE firms could look for is folks that talk about their strategy, are excited about becoming an orthopedic Center of Excellence, like those types of folks?

Greg Koonsman 22:43  Historically, health systems have been really successful growing very large businesses. And so it’s not altogether obvious that they need a partner in doing that, and so I think what we see though, is that as time goes on, and there are more and more examples of high-quality partnerships that have been successful, I think when health system management teams and boards think about growth, they think, okay, how can we get there in the most effective way, and build the most high-quality business? And so, more and more, this choice of having a health system, private equity partnership, at a local and maybe even a national level, is a choice on the list, which I think is really important. You know, there was a time where I think a health system would never consider a partnership with a private equity firm or many wouldn’t. I think today they’re seeing that as an alternative. And not that every health system is going to partner with private equity-backed platforms. But I think many of them, if not all of them, are going to consider it.

Jen Johnson 23:54  Yep, things have definitely changed and I think we’re in a new world now. And I want to get some closing remarks from you, but first, I like to recap these episodes each time. So, we’ve got first we know that PE firms are going to continue to invest in healthcare, that they’re not going anywhere, they have become a staple market participant in this space. Second, PE firms are investing throughout the entire continuum of care, and they’re bringing innovative strategies into the market, including ways to invest and new opportunities for health systems. Third, we do expect to see more partnerships between health systems and PE in 2024. So, that kind of sums it up. But before we wrap it up, is there anything else you want listeners to know to kind of just close this out?

Greg Koonsman 24:36  We at VMG Health have been in a really unique position to bridge the gap between private equity firms and health systems. We speak the language of each, and we really understand, you know, goals, objectives of the not-for-profit and for-profit health systems, as well as ancillary service providers and payers. At the same time, with our 25+ year history, we’ve also worked with enough private equity firms and been involved with private equity firms in a way that allows us to understand exactly what they’re trying to accomplish. And I think we’re in that position to bridge the gap between private equity and healthcare providers in a unique way.

Jen Johnson 25:22  100%. And we’ve already done it several times, and I think there’s gonna be a lot more of it in the upcoming year.

Greg Koonsman  25:26  I do see this relationship between private capital and healthcare services, providers, like health systems, growing. It’s just inevitable that that relationship is going to get further developed.

Jen Johnson 25:43  Me too. It’s kind of cool, and kind of complex. So, thank you so much. Always a pleasure. I appreciate your excellent insight. And for listeners, you guys can reach out to either of us anytime, and everybody take care.

Greg Koonsman  25:56 Thank you, Jen.

Outro  26:03 Thank you for listening to the Healthcare Download with VMG Health. Make sure you subscribe to the show wherever you listen to podcasts to receive new episodes when they release the first Wednesday of each month. You can also go to or visit the episode notes to follow VMG Health’s monthly newsletter and to learn more about this conversation.

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