Hyperspecialisation in healthcare — an area for PE investors to watch
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I recently read an article on LinkedIn titled ‘The Double-Edged Sword of Hyperspecialisation in Medicine: Challenges of Choosing the Right Doctor’. This article prompted me to reflect on how hyperspecialisation impacts patient care and its implications for healthcare investors, especially given the surge in private equity (PE) interest in European healthcare in recent years.
Smriti Tandon, co-founder of the India-based rural health-tech start-up Online Chikitsa Mitra and author of the said article, defines hyperspecialisation in medicine as the “increasing focus of medical professionals on narrower fields of study and practice”.
The article provides an example of this trend by highlighting the rise of paediatric neurosurgeons who exclusively focus on brain and spinal surgeries for children — areas that demand extensive specialised training and experience.
During my research on hyperspecialisation for this blog, I came across two contrasting perspectives: some articles suggest that patients favour specialists with deep expertise in specific organs, while others argue that effective treatment demands a holistic understanding of the entire body, emphasising that no treatment occurs in isolation.
This raises an important question: with the surge in PE interest in healthcare in Europe, where should investors put their money? General hospitals that offer a wide range of medical services for various conditions, or specialised hospitals that concentrate on specific types of care, oncology for instance.
Smriti Tandon, speaking to HBI, said that hyperspecialisation is increasingly attracting investors as more patients today prefer being treated by specialists rather than general physicians.
“Patients trust specialists and favour them because they want every aspect of their condition explained in detail.”
European PE investment in healthcare has surged in 2024, reaching ~€9 billion across 154 deals by August 2024, recovering from a sharp decline in 2023. This increase shows that PE interest in the healthcare sector is gaining momentum.
Talking about investors, while generalist funds have traditionally dominated Europe, specialist funds are lately showing superior returns due to their deeper market expertise. For context, generalist funds invest broadly across the healthcare sector, while specialist funds focus their investments on particular niches.
Between 2003 and 2022, there was a significant increase in PE-backed acquisitions and consolidations of oncology practices; 724 oncology clinics were affiliated with PE companies. This data is for the United States. While the trend is less pronounced, a similar pattern has also been observed in Europe. Click here for latest updates on deals and insights in European healthcare.
Tandon pointed out that hyperspecialisation is gaining more interest from private equity investors because of its high return potential. She noted that niche areas like liver treatment and bile duct care are particularly appealing because their specialised expertise keeps patients coming back and increases confidence in the care provided.
So then what makes hyperspecialisation a double-edged sword? While specialised practices are expanding due to profitability and reduced competition, they also face challenges like higher operational costs and smaller patient bases.
How can investors navigate this challenge?
Private equity firms can adapt by hiring and training specialists in these niche areas. These experts can guide investments into specific care providers with a deep understanding of both demand and potential returns.
As hyperspecialisation meets rising demand, the private healthcare sector in Europe and globally is poised for growth. Investors must embrace innovative strategies to stay in the competition — otherwise, they risk being left behind.
We would welcome your thoughts on this story. Email your views to Rakshitha Narasimhan or call 0207 183 3779.
