What’s Driving Healthcare PE in 2026? Regulation, Value Creation, and the New Deal Playbook

Stewart Gandolf (Healthcare Success): Welcome to the Healthcare Success podcast. And today I'm speaking with Holly Buckley, who is chair of the healthcare at McGuire Woods. I'm excited to speak to Holly because I'll be attending, like so many others will be in Chicago coming up on April 29th through 30th. First of all, welcome Holly.

Holly Buckley (McGuireWoods): Thank you so much. I'm thrilled to be here.

Stewart Gandolf (Healthcare Success): Yes, it's such an important conference for healthcare and private equity. I've been going now for, I don't know, 12, 14 years or something when I was first invited to speak on a panel back then. And it's always vibrant, always lots of new things going on. So super excited to dive into you today or dive in with you today talking about what's going on in healthcare.

So healthcare and private equity and finance, these things are always changing, as you know, Holly. I'm sure that you're in the midst of still planning and I know you've picked out your panels and your speakers and so forth at this point. Leading the conversations in McGuireWoods, if you had to explain to somebody about the 2026 so far, deal environment to a smart non-lawyer, what would that be meaningfully different than from the last couple of years?

Holly Buckley (McGuireWoods): Yeah, great question. So I mean, I think the macro backdrop has really stabilized, but the playbook is different and is continuing to change. I think with the new administration, many predicted the interest rates were going to decline and there was going to just be a much more vibrant deal market. And I think that what actually happened was a little more nuanced than that.

I think 2025 we had a steady year from a deal volume standpoint, but that was in part characterized by some mega deals that really drove up the aggregate transaction volume. So for example, Sycamore Partners, $10 billion, uh, take private of Walgreens Boots Alliance. But I think the overall deal volume did not necessarily search the way we thought it would. And I think that's continuing this year. We're seeing good solid deal volume, but it's by no means a gangbusters deal environment.

I think further, the regulatory environment has become dramatically more complicated. And that's specifically with respect to state notification filings, which I think we'll probably talk about a fair amount today. Also at the federal level, the FTC has substantially expanded the HSR filing requirements.

So all of this adds time and expense to transactions. And then I think we're continuing to see that hold periods have stretched dramatically. I saw a statistic, I think, from a Bain report that almost 30% of PE-backed healthcare assets are now aged seven plus years, and another 37% are aged four to six years. And so the kind of three- to five-year whole story that we used to think about and consider very routine is no longer the case. So the quick flip and expanding multiples is more or less over.

And so now value creation really depends on organic growth, operational excellence, and disciplined capital deployment rather than rapid acquisitions followed by quick exits.

Stewart Gandolf (Healthcare Success): So that's really intriguing and it's funny the idea of the longer and longer holds is something that we hear as well as a marketing agency, of course, people come to us and tell us sometimes, hey we're in year seven, we want to start making changes.

Are you finding with that kind of attitude is that slowing deal interest in starting new deals? They want to they need to deal with the deals they've got in hand before they start initiating new kinds of projects.

Holly Buckley (McGuireWoods): I don't really think so because I think that so many funds have such a large amount of dry powder. There's so much capital to be deployed. So we're seeing continued heightened interest in new deals, which are continuing to be super competitive.

But at the same time, investors are much more disciplined on the front end with the higher interest rates and the challenges to being successful and having a successful exit, it puts a lot more pressure on appropriate pricing and appropriate investments on the front end.

So the idea of kind of getting something that's not that great on the front end that's maybe a little overpriced is really setting you up for failure. Whereas four or five years ago, there was still a thought that they could make that work. So yeah, we're still seeing very high demand for deals and a lot of capital to be deployed. So definitely no less competitive out there.

Stewart Gandolf (Healthcare Success): That's really interesting. For sure, I've heard a lot about over recent years about the amount of money that's sort of parked on the side. So those are two interesting things happening at the same time.

Let's talk about what's hot this year. This space, in my experience, and I'm sure yours is always, there are some things that tend to be hot. Orthopedics went, derm another year. Behavioral, dental, infusion, digital health, life sciences, home care.

There's so many that just tend to be discussed over and over again. But what are your favorites or not maybe not your favorites, but the most active?

Holly Buckley (McGuireWoods): Yeah. Yeah. I mean, I think it comes down to what are the themes and what are the common threads and then they kind of drive the particular sectors. And so where we are seeing kind of favorable themes, it's the structural shift of care out of really expensive inpatient settings and into lower cost settings. So whether that's hospital to ASC or hospital to home or hospital to clinic.

We're seeing that as a really important trend for a successful platform, favorable reimbursement trends, and then also just defensible demand characteristics. And so what that means is we have a slew of high-momentum sectors or sub-sectors. So things like ambulatory surgery centers, home infusion services, home hospice, behavioral health platforms that really goes to the demand characteristics and reimbursement trends.

Also healthcare IT and tech-enabled services. So PE investors are shifting away from direct reimbursement in some instances where the risk is too high and also the regulatory exposure. And they're looking more at software and services platforms that support care delivery such as AI-based telehealth, revenue cycle management, workforce optimization and utilization management.

So all of those areas, I would say are high momentum or hot sectors. The more challenged areas are things like physician practice management. Overall, we're seeing pressure in that kind of very broad sector. Overall, PPM deal count was down in 2025 and we anticipate it will continue to be down in 2026, albeit some deals are still getting done.

And then also like single-state Medicaid focused businesses where there's just really high payer concentration and the risk is too great due to Medicaid spending cuts. So that's really what we're seeing in terms of the more chilled or cool sectors.

Stewart Gandolf (Healthcare Success): That so makes sense. I just saw the news and I'm sure you have too with Medicaid and ABA, autism therapy. Some big changes there and it's really interesting about the PPMs, the Physician Practice Management companies. Sometimes I hear people are looking to get into healthcare, you know, tech-enabled healthcare companies because they want to be part of healthcare. They just don't want that kind of exposure. Is that the kinds of conversations you're having with clients or seeing out there too?

Holly Buckley (McGuireWoods): Yeah, exactly right. think five, six years ago, everyone was looking at very much direct reimbursement, provider services deals. We're still seeing interest in those deals, but we're seeing funds diversifying and looking at the tech-enabled services to reduce their direct reimbursement risk and regulatory exposure and not totally mitigate it, but reduce it. And then, just looking at also things like life sciences, pharma services and ways to still focus on healthcare but focus more broadly.

Stewart Gandolf (Healthcare Success): You know, Holly, it's so funny. Because of our niche in this world, everything you're telling me just rings so true with what we see because we're seeing people interested in the space. Right now, we're getting tons of interest in things like home infusion, home care, non-direct services, and you're connecting the dots for me, Holly. It's not just me. It's really funny because we really, we truly see, because of our sort of internet presence, people call us when these things are hot. And it's just interesting to see that it's trend, not just us.

So on that note, then, the platforms that are getting premium valuations, what are you seeing is common in terms of ops, compliance, data, provider alignment? There's lots of different things, obviously, that matter when it comes to the valuation. But what kinds of things are you hearing?

Holly Buckley (McGuireWoods): Yeah, I mean, you just hit a number of them. So I think operational maturity and scale. So being able to show that you've actually got an integrated company as opposed to a bunch of cobbled-together assets that really will help push the multiple up. Compliance infrastructure is really important.

And it's not just because once you've got it, you don't have to pay to build it. It's because you've got a lot less risk of having compliance issues embedded within the platform that are going to become costly later. So platforms with create clean, well structured compliance infrastructure around billing, foreign abuse, corporate practice, are tending to come out on top.

You also mentioned technology. So certainly data and technology integration is really important. Platforms that already have AI-based solutions that are differentiating their ability to perform will drive higher multiples.

Alignment is so important and especially in the PPM world. If you don't have a durable aligned strategy with your physicians that are keeping them with the business above and beyond just a non-compete, it's going to be really just critical for the platform.

And so the best platforms really learn from the PPM 1.0 failures and they've got physician owners with equity and with the ability to take home strong compensation packages that are going to keep them close to the business and not just waiting for their opportunity to roll out and do the next thing.

And then the final thing I'd say is revenue diversification. So really important to have strong commercial payer relationships and slurry service lines to support the core business and ideally reduce dependence on government reimbursement really help kind of create those higher valuation businesses.

Stewart Gandolf (Healthcare Success): So in addition to maybe just the opposite of everything you said, are there any particularly, I guess, scary red flags that you see that can just either kill a deal or force a major devaluation?

Holly Buckley (McGuireWoods): Yeah, I mean, I think as funds look at businesses at the outset, they're looking at the things I just mentioned. And then once you kind of get into the deal, there's a handful of things that can come up that kind of show that maybe the things you thought were there were not there, or the risks are kind of more pronounced. And those are things like billing and coding risks.

So in pretty much every healthcare deal, we're going to see a billing and coding audit. And sometimes those come back and they don't look so good. And often it's not that the operators were doing anything deliberately bad. It's more a matter of not having really tight processes that can lead to go-forward risk based on audits that can come about from commercial or government payers.

And so those billing and coding audits are really important, but they can also create real issues during the course of a deal. Obviously QOV issues, so poor earnings quality, inflated seller expectations on the business side.

But then on the legal side, we also see risk around kind of fraud and abuse exposure. So whether it's from joint ventures that haven't been put together well or that have risk from kind of how the OIG reviews them, referral relationships, fee structures, marketing efforts, all of those things can have regulatory risk and they can also be structured in very compliant manners.

And so just being able to kind of ensure that those are really well shored up and that's a great thing to do is prep for a transaction is audit through those.

I think a couple of other areas, key person dependencies. So if it comes to light that the business is really hinging on one or two people's either knowledge or performance or relationships that can be detrimental.

And then finally, and we already talked about this a little a minute or two ago, it's the cybersecurity and data integrity piece. So the technology stack, there's so many bad actors out there that are attempting to infiltrate healthcare providers, technology systems and hold information hostage and for ransom. And so the vulnerable cybersecurity issues can really impact whether maybe a deal closes and certainly valuation.

Stewart Gandolf (Healthcare Success): Really, that's a lot. It's amazing. It's amazing, Holly, thata anything ever gets done.

Holly Buckley (McGuireWoods): Thank you. It keeps me gainfully employed.

Stewart Gandolf (Healthcare Success): I bet, I bet. You mentioned the move away from physician-owned businesses. I'm curious, the physician shortage out there creates opportunity and challenges.

Anything that you're, does that come up often? And this kind of goes back to something you said a minute ago, which is, the earlier deals maybe didn't have any real reason for the doctors to save you on a certain contract, which is really difficult in an era of doctor shortages. Does that come up very often?

Holly Buckley (McGuireWoods): Yeah, I think so. But I mean, I think, as you noted, it also creates a lot of opportunity. So some of the areas that we see opportunity coming from the physician shortage are things like the tech-enabled solutions. So whether it's extending telehealth to rural communities, other workforce shortage solutions that really helps spread the clinicians across more patients.

But then also we see a lot of opportunity with respect to mid-level practitioners. So whether that's mid-level training programs or other ways of staffing up these businesses to allow clinicians to operate at the top of their license, all of that does create opportunity and we're seeing some platforms do things really well there.

Stewart Gandolf (Healthcare Success): Yeah, it's funny again, just some of the stuff we see telehealth is part of it. The mid-level extenders that were the PAs and MPs, AI enablement, all those things. It seems like those are your tools, right?

Holly Buckley (McGuireWoods): That's right. Yeah.

Stewart Gandolf (Healthcare Success): It's your way to work with this. You mentioned regulators earlier, and certainly there's been a shortage of opinions on private equity in healthcare at the federal level and other areas. How's, you know, it's funny though, we hear about this periodically in the news, at least me, it seems to come in waves. How's that impacting deals? Does it feel like it's a real fear or is it maybe much ado about nothing? What's going on with that?

Holly Buckley (McGuireWoods): Yeah, it's probably somewhere in the middle. We've seen a lot of states enact these healthcare transaction review laws. Some examples are California, Indiana, Illinois, Maine, Massachusetts, New Mexico, Rhode Island, Washington. There's a handful of others as well.

And we're seeing many states, including some of the ones that have active laws, propose new laws that are either enhanced or similar to the ones that already exist. For the most part, many of these laws are more in the category of providing notice in advance of a transaction closing. And we're not seeing the laws actually create any impediments to the deal closing. It's more that the states are gathering information so they can better understand what's happening in the state.

But that's kind of the 1.0. The 2.0 are the states that are really looking to require consent before the transaction closes. And also some states are coming out with kind of the anti-corporate practice laws. So Oregon's a great example of that. Washington recently had one on the books. It's now in what's called the X-File, meaning it's not currently active, but it could come back again. California had one that was very highly discussed at the end of last year that didn't end up passing and then passed in a more mild form.

And those CPOM ones are going to be the most impactful if and when they do pass because the Oregon one, for example, makes certain business models just not permissible anymore. And so I think for those, if more of those pass, we'll see significantly decreased investment in those models in the states.

For the notice and consent laws, many of them are antitrust motivated as opposed to kind of non-physician control motivated. And again, we're not seeing many of them actually prevent deals. It's more of a timeline issue. So many of them have very significant lead time requirements before a deal can close. So Indiana is 90 days, but I want to say one of the West Coast states is 180 days, right?

That is a very long time that you have to give a state notice before your deal can close. And also many of these laws, unlike the federal HSR law, don't have a dollar threshold or have a very low dollar threshold for what triggers the law. So you really are forced to report in a whole bunch of states, especially if you're dealing with a company that's either nationwide or operating in a whole bunch of states, you may well have, you know, eight, 10 plus notices that you need to submit on different timelines in order for the deal to close.

So it's really adding a lot of time and expense to deals. And I do think there's going to be an inclination amongst investors to avoid certain states where this is going to create the more sizable delays. And that's on top of the changes on the federal level.

And so there is a new HSR regime that came into play a little over a year ago. That's just a much more paperwork-heavy process, which just, again, isn't going to stop deals getting done, but adds a lot of time and expense. And so overall it's really just adding time and expense to deals. And I think investors are shifting maybe away from just broad rollup strategies to kind of more targeted approaches and certainly looking more organic growth is an important alternative or complement to M&A in order to scale the business while avoiding some of this time and expense that takes a real direct hit on EBITDA.

Stewart Gandolf (Healthcare Success): Wow, that's a lot. didn't realize that it was that deep in terms of like 180 days is a long time to put together a deal. They're hard enough to make anyway, aren't they?

Holly Buckley (Healthcare Success): Right. And generally you've got to get the deal pretty much done before you can even submit. So it's time on the end. It's not even concurrent time.

Stewart Gandolf (Healthcare Success): Yeah, so we talked about risk where we're trying to grow. We're trying to manage risk. We're trying to preserve value at the same time. Any additional thoughts about risk management and value preservation that will be talked about this year?

Holly Buckley (McGuireWoods): Yeah, I mean, I think that in terms of what's going to be talked about is it's going to be around hold periods and what you're doing during the hold period and kind of how you're building that value. And so if you're going to be holding the company for a significant amount of time, it's not that you're just going to be holding the company while it stays flat. You've really got to accelerate the value generation during that time so that you're able to provide the rewards in the form of returns to your investors.

And so I think part of that is how do we recruit and retain excellent C-suites? How do we ensure that our leadership is able to execute on the goals of the investor? And so I think all of the items we talked about earlier about what makes a strong company and a successful company become really important during that hold period. And so it's looking at it as part of the deal thesis kind of pre acquisition, then it's looking at it during the hold period, and then it's looking at being able to execute on that value creation during the exit.

Stewart Gandolf (Healthcare Success): Yeah, makes sense. The sort of medtech space or the idea of digital health data, AI on every conference agenda these days, what do you feel feels like it's really investable, durable in those spaces?

And by the way, there's so much noise on AI, at least from what we see. Just even trying to decide, for example, I'll just tell you, on behalf of our clients, we're trying to find the best AI phone agents to handle calls. It's such an important part of the patient journey and there's dozens of them. So what are you seeing in terms of the most interest, the most obstacles, maybe even key areas within this space?

Holly Buckley (McGuireWoods): Yeah, your comments are so on point and it's really, really tough. I mean, I don't remember the last kind of two-hour time period I went through where someone didn't mention AI. It's just everywhere. And I think it really comes down to does the AI application deliver measurable, repeatable productivity gains that show up in EBITDA or is it just some kind of pilot that sounds impressive in a deck, but it's just kind of not in prime time yet.

And so I think where we see the genuinely investable solutions, it's AI applications that drive operational productivity gains. They're attracting capital today. It's in areas like revenue cycle management automation, clinical documentation tools, workforce optimization.

But I think there's a lot out there that's just...you know, not at the investable stage yet, especially for private equity. There's a lot out there for the VCs, but for private equity, it's just there's a lot that's too soon. And I think in that category are a lot of the, you know, consumer-facing digital health tools that really lack the financial case, the reimbursement pathways. And so, yeah, it's really where AI is built into existing tools that are kind of accelerating those tools’ ability to deliver value is where we're seeing the investment right now.

Stewart Gandolf (Healthcare Success): Yeah, it's really funny because we're seeing tools that are out there that sound really exciting, but then they get disintermediated by somebody else's tool that's broader or more powerful. And this is still, you're right, a lot of them are at the PE stage. They're at the sort of V stage, VC stage or wherever.

But it's happening so fast. It's hard to even predict where that's going to go. But the tech-enabled part, I think, is where the real opportunity is. Actually, I keep thinking about this. Are you seeing deals out there? Are you hearing of where it's sort of premature. They want to go out, but they just don't have it.

So for example, I saw something recently where it felt like a bag of bolts. It didn't feel like a truly integrated platform. And I don't know if there's a sense of, geez, we just need to work on our business before we go out there more this year than other years.

Holly Buckley (McGuireWoods): We've definitely had conversations with folks like that, and they've got what sounds like just a great solution, but you just can tell it's just too early. And so, but it's also just so hard because of the speed at which things are evolving. They have to get out there and they have to try and make it hit.

 But yeah, in our area of the world, people aren't really coming to us at that point. And so it's more a matter of just being out there in the market and chatting with folks, but we're certainly seeing it.

Stewart Gandolf (Healthcare Success): Yeah. So a lot of our listeners are, you we have a pretty broad mix of PE people, we have providers, a lot of multi-location executives, marketers, lenders, a whole bunch of different people that are listening in today. In terms of, I'm curious with regard to investors and lenders, what are they looking for in terms of the growth story, KPIs? I guess what's getting them excited about the go-to-market maturity when they're evaluating a platform?

Holly Buckley (McGuireWoods): Yeah, it's a little bit out of my realm, but I'll give you some high-level thoughts. But you're probably better positioned on this than I am.

But I think it's kind of the growth story and the go to market maturity. So I think investors and lenders are looking at platforms and want to make sure that the story all holds together and that it makes sense.

I think from a KPI perspective, it's really just the back to basics. It's EBITDA scale and trajectory, patient retention, revenue per patient trends, but ensuring that's appropriate and within medically necessary confines. It's making sure that businesses are kind of full service, that ancillary revenue, is kind of complementing the core business and that same-store performance is holding together on an individual basis as well as a group basis.

So I think that it's nothing that you wouldn't expect. It's the basics, but I think that lenders and investors want to make sure the fundamentals all hold together.

Stewart Gandolf (Healthcare Success): Yeah, that totally makes sense. As we're getting close to wrapping up here, any additional insights about what, if I'm a CEO or executive of business, some of the things that will create value to attract capital, to be attractive to partners or set up the next transaction, what kinds of things should we be thinking about now if we're in that sort of phase where we were hoping to exit in a couple of years?

Holly Buckley (McGuireWoods): Yeah, I mean, if you're say two years out from exit, I would say you're at a perfect point to do an internal audit of what will a buyer or the buyer market look at and make sure that your your house is in order. It's kind of a really good time to undertake that exercise.

So it's making sure your compliance infrastructure is shored up. Have you kind of ticked and tied your state licenses, your billing and coding compliance, your OIG compliance program, such that when someone like me comes and starts poking around, they're able to come in and give you a healthy bill of health or a solid bill of health.

I think it's looking at your technology stack and having someone come in and audit your cybersecurity readiness. And it's making sure your executive team is appropriately motivated and aligned and talented and ready to drive towards that exit. Again, none of this is rocket science. It's all consistent with what we've been talking about during our discussion, but it's making sure your fundamentals are in place such that if it was a business you were looking at buying today, you would be excited about it and feel like there weren't material vulnerabilities.

Stewart Gandolf (Healthcare Success): You know, I think it's everything you just said reminds me of going back to the risk, right? It's like, and it's just fascinating to me how I spent most of my career in healthcare, how much complexity there is just in operating the business. So all of these other things are things that you have to worry about in advance.

And I could see that is great advice because if you're a CEO, you've worked on so many different things and obviously want to think about these every day, everything every day. But certainly these last things, those last-minute surprises like, oops, you're coding is all wrong would be a real problem to say the least. So we're going to be seeing each other in April coming up really fast. What are the couple of questions you expect people to be talking about in the hallways or agenda items, either excited and worried or just likely to be the talk of the town?

Holly Buckley (McGuireWoods): Yeah, so I mean, obviously, people will be talking about how much of a great time they are having at the meeting. Hopefully, they will have enjoyed listening in to the Michael Lewis discussion on day one and the general sessions on private equity and lending and investment banking. But I think the key themes are going to be aged inventory, enhanced regulatory framework, Medicaid cliff.

And of course AI, we're all gonna be talking about AI all day, every day. So we're very excited to see everyone and I think it'll be a great opportunity to network and reconnect with some old friends.

Stewart Gandolf (Healthcare Success): Yeah, obviously that whole networking is such a big part of it. And it's funny, you mentioned Michael Lewis, our podcast producer, Holly said she wants to come to see him speak. It's a broad, a broad experience. Hey, Holly, this is our Holly, by the way.

Holly, this has been great. I enjoyed it so much. Looking forward to seeing you and grabbing you for the three seconds you'll probably have between meetings there. But looking forward to seeing you in Chicago and the rest of your team. I again, if you're listening and you haven't been to the McGuireWoods private equity conference, it's dynamic every year. Lots of great ideas, lots of great networking. So I appreciate your time today.

Holly Buckley (McGuireWoods): Thank you. I really appreciate your time as well. Thanks for having me.