Should Private Equity Run Healthcare?

Balancing investor expectations and patient outcomes in Southeast Asia's healthcare sector.

Private equity (PE) is pouring billions into the healthcare sectors of Southeast Asia (SEA). Supporters argue this capital is modernising broken systems and improving access to healthcare. Critics warn it may cause financial returns to trump patient welfare. The question is - what is actually happening on the ground?

The Deal that Set the Tone

In September 2024, Asian private equity firm Affinity Equity Partners sold Island Hospital in Penang, Malaysia to IHH Healthcare for RM 4.2 billion (approximately US$966 million). It was, at the time, the largest control deal for a single hospital in Asia. Affinity had first acquired a controlling stake in the 600-bed quaternary hospital in 2015. Over the course of its ownership, the hospital's share of Penang's private patient market rose from 25% to 35% and its foreign patient volume more than tripled. Affinity's return was a staggering three times its original investment.

The transaction was celebrated by both sides as a model outcome. IHH got a major foothold in Malaysia's medical tourism market, while Affinity secured their exit. But the question remains: what about patient care? Can financial capital and patient care co-exist in the same landscape in an impactful way?

Why Healthcare, and Why Now

The fundamentals driving PE interest in SEA healthcare are not difficult to understand. The region is home to more than 685 million people undergoing one of the fastest demographic transitions in modern history.  A 2024 report from Old Age Poverty and Active Ageing in ASEAN found that the region's elderly population aged 60 and above will grow from 77.4 million in 2020 to 173.3 million by 2050, rising from 11.5% to 22% of the total population.

Dr Devanathan Raghunathan, CEO and Co-founder of Keeping Labor Safe

Dr Devanathan Raghunathan, CEO and Co-founder of Keeping Labor Safe, explains the basic investment idea. "The region has ageing populations, rising chronic disease, and a growing middle class. Singapore and Thailand are ageing particularly rapidly, with the proportion of elderly residents projected to double in just 19 and 22 years respectively.

"Families are increasingly willing to pay for faster access, better service, privacy, and a trusted doctor. Public healthcare systems cannot carry the full burden of capacity expansion, so private capital naturally sees an opening."

He then elaborates why SEA is particularly attractive: fragmentation. "Many SEA healthcare businesses are still founder-led, family-owned, or built around one strong doctor or one strong clinic. These businesses may have loyal patients and a good reputation clinically, but often lack professional systems, procurement scale, data infrastructure, or succession planning. That is exactly the kind of market PE likes: good, but under-institutionalised assets."

Demand is rising sharply. Across ASEAN, total healthcare expenditure rose 42% between 2016 and 2021, reaching US$ 156.3 billion. Singapore's National Health Expenditure alone is projected to reach US$ 43 billion by 2030, with healthcare spending expected to climb from 5.9% of GDP to as much as 9%. The same pattern, which means more patients, more complex conditions, more spending, is visible across every major SEA economy.

For investors, the structural appeal goes beyond demographics. Healthcare is a defensive sector: demand does not collapse in a recession, earnings tend to be better protected, and the market is able to pass on the cost to consumers and benefit from the increase in demand for health insurance. These are not weaknesses in PE terms, but rather an enticing invitation to a new and possibly lucrative investment opportunity.

The Consolidation Wave

The data confirms that investors have heard the invitation clearly. SEA's PE market deployed US$16 billion across 67 deals in 2024, maintaining the fourth-highest level of deal activity on record despite a broader slowdown across Asia-Pacific (APAC). 

The dominant strategy is not the dramatic acquisition of a flagship hospital, but rather the roll-up. PE firms are acquiring multiple smaller clinics and practices which are often independently owned and founder-led, to integrate them into single managed platforms. This is because centralised procurement reduces costs, shared administration frees up clinical time, and a recognisable brand generates patient volume across markets.

Vietnam has seen particularly active deal flow; Warburg Pincus investing in the Xuyen A hospital group, Government of Singapore Investment Corporation (GIC) backing the Nhi Dong 315-paediatric clinic chain, and KKR & Co acquiring a stake in the Medical Saigon Group eye care network. Each transaction follows a similar logic: identify a fragmented, high-demand subsector, acquire a credible anchor asset, and build a regional platform around it.

The subsectors drawing the most capital are telling. "Fertility, ophthalmology, dermatology, and dental are attractive because patients are often willing to pay directly for quality, speed, and brand," Dr Devanathan notes. "Dialysis, oncology, and chronic disease management have predictable demand. Investors like these because they create long-term patient relationships and recurring revenue."

The logic of the roll-up is straightforward. Smaller clinics are bought at lower valuation multiples; once combined into a larger branded platform, the same earnings command a higher multiple. Dr Devanathan explains the preference for clinics over hospitals simply: "Hospitals come with heavy capital expenditure, emergency obligations, inpatient risk, large workforces, and significant regulatory scrutiny. For many funds, a clinic platform is simply a cleaner operating model."

"However," he warns, "a roll-up may look harmless deal by deal. But after enough small acquisitions, one platform can quietly control a meaningful share of a specialty in a city. That is when pricing power rises, patient choice falls, and clinical culture can start to shift toward corporate throughput."

What Actually Changes

Ask a financial analyst what changes after a PE acquisition and you will hear about EBITDA (short for Earnings Before Interest, Taxes, Depreciation, and Amortisation) margins, headcount rationalisation, and procurement efficiencies.

Ask a doctor, and the answer is more personal.

Dr Ang Yee Gary, a physician and chapter lead for Founder Institute of Singapore

Dr Ang Yee Gary, a physician and chapter lead for Founder Institute of Singapore, observes, “The first things doctors may notice are changes in administrative processes, reporting requirements, appointment templates, procurement systems, electronic medical records (EMR) platforms, and performance dashboards." Doctors who retain meaningful ownership may benefit from the resources of a larger platform while keeping influence over clinical direction, such as better systems, stronger administrative support, improved procurement.

“However, if doctors relinquish ownership and become employees, they may lose autonomy over many decisions that used to be within their control in areas such as staffing, appointment length, pricing, procurement, clinic workflow, referral arrangements, and strategic direction," he cautions.

The tension is sharpest for founders. Dr Ang describes the emotional weight plainly: "For a solo doctor or founder, selling the clinic can feel like letting go of something deeply personal. The clinic may represent decades of professional identity, sacrifice, reputation, and patient trust. Becoming an employee after being an owner can be a major psychological adjustment." Some, he adds, eventually return to independent practice because they miss the autonomy and personal ownership of practice.

Dr Devanathan’s framing from the investor side is complimentary. He says, "When a PE firm acquires a founder-led clinic, it is not just buying the financial asset like revenue, EBITDA, margins, patient volumes. It is also buying the clinical franchise: the founder's name, referral relationships, patient trust built over decades." That intangible is both the prize and the vulnerability.

"In healthcare, goodwill is not just an accounting entry. It is the accumulated trust earned through years of clinical service," he notes.

The Benefits

There are genuine, documented benefits to PE-backed consolidation in healthcare. Access to capital is the most obvious. Independent clinics frequently operate on tight margins with limited ability to invest in equipment, technology, or staff development. A PE-backed network can fund infrastructure upgrades, such as a new imaging suite, a digital records system, a specialist recruitment drive, that a solo practitioner cannot.

Procurement power follows: a network of 40 clinics can negotiate drug and supply costs that an independent practice cannot match. In markets where healthcare is largely self-pay, i.e., borne by patients, that saving can translate into lower patient costs, although whether it does so in practice depends significantly on the priorities of the particular investor.

Technology adoption is another area where PE ownership has accelerated progress. EMR, telehealth platforms, and AI-assisted diagnostics have found faster uptake in PE-backed networks, where capital and the mandate to modernise exist simultaneously. The Bain & Company Global Healthcare Private Equity Report 2025 notes that digital transformation has been a central theme of healthcare PE investment across APAC, not only as an efficiency play but as a platform for cross-border patient management and specialist network expansion.

The Risks

The most persistent concern about PE in healthcare is the investment horizon. A typical PE fund holds an asset for three to eight years before seeking an exit, usually through a trade sale, an initial public offering (IPO), or a secondary buyout. That timeline creates a specific kind of pressure: that value must be created and demonstrated within a fixed window. That pressure does not always align with the slower rhythms of clinical quality improvement, community trust-building, or the management of chronic disease.

Dr Devanathan is candid on this point, drawing on evidence from Western markets. "There is abundant data from the United States that while financially investors have benefitted, it is patients who have suffered." He points to the self-pay dynamics of SEA as an additional complication. "In such markets, price increases land directly on families. Over-treatment is not absorbed by an insurer; it may be paid from household savings.” he admits.

The risk of overtreatment due to the pressure to generate revenue from patients is sometimes raised by clinicians working inside PE-backed networks. In oncology, the Bain report notes that PE-backed platforms have expanded rapidly across APAC, driven in part by the recurring revenue characteristics of cancer treatment.  

Dr Ang adds what clinicians observe from the inside. "The most obvious risk is that profit becomes more important than patients. If the commercial incentives are not well governed, there can be pressure to increase volume, reduce costs, standardise excessively, or prioritise services with higher margins."

A quieter but significant risk, he says, is what happens to morale. "Once clinicians feel that the organisation values financial output more than clinical judgement, morale and professional engagement can suffer."

He asserts, "Doctors should not be placed in a position where doing what is financially rewarded conflicts with doing what is clinically appropriate."

The Real Question

PE is not going to leave healthcare in SEA because it is a highly visible opportunity sophisticated investors cannot ignore. The more useful question is not whether financial capital should participate in healthcare, but how. How do you structure an acquisition so that clinical autonomy is genuinely protected, not merely promised in a term sheet?

Both Dr Devanathan and Dr Ang offer a version of the same answer: governance is everything. Dr Ang says, "If consolidation is well regulated and clinically governed, it may improve access, consistency, and efficiency. If poorly governed, it may increase costs, weaken continuity, and create pressure for volume-driven care."

Dr Devanathan looks to the next wave of investors as the real test, "The capital will keep coming, but regulators, clinicians, and the public will ask harder questions about price, staffing, outcomes, and access. The next wave of investors will not only have to claim they are improving healthcare; they will have to prove it."

Dr Ang's closing message to investors is pointed. "Healthcare can be a stable and meaningful sector for investment, but investors need to understand its constraints. If they treat healthcare only as a financial asset to be optimised, the system may lose what makes good medicine possible." 

Dr Devanathan agrees. "Healthcare is not just an asset class. It is social infrastructure. Investors who forget that may still make money, but societies will pay the bill.”