PE's pivot into cash-pay healthcare
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Before Fazeela Abdul Rashid decided to invest in Aligned Modern Health, she took some blood tests.
“There’s no better way to perform diligence on a company than being a patient,” she said. Her firm, Arcventis Health Partners, was sizing up the Chicago functional-medicine practice this year. She booked an appointment, as did several close friends and relatives.
Arcventis closed its majority investment in Aligned Modern Health on Sept. 18, its first deal from its inaugural fund. The Chicago-based provider, which serves 90% of its patients through commercial insurance, is expanding into cash-pay services including hormone therapy and weight management.
The PE industry spent a decade rolling up dentists, eye doctors and addiction clinics, businesses that depend on reimbursement to pay the bills. Many of those deals have ended in lender takeovers and carveouts rather than exits.
“There has been a lot of distress and fragmentation,” said Jennifer Hutchens, a partner at Dechert who advises on healthcare restructurings.
In 2026, insured patients are paying more of the bill themselves. The average employer family plan now costs $28,303 a year, up 5% year-over-year, while workers’ share of that jumped 9% to $7,471, according to KFF’s annual employer survey released Oct. 22.
As a consequence, PE firms pivoted toward healthcare offerings such as Botox, weight-loss shots, hormones, peptides and concierge physicians, which are less reliant on reimbursement.
Jeremy Hirsch, head of franchise and multi-unit services at Houlihan Lokey, counts 15 to 25 medical-spa platforms at or on the way to $20 million of EBITDA.
“I think ’27 and ’28 are going to be some of the biggest years in the med-spa category,” he said.
At the same time, as alluring as it is to go directly to the customer, these investments still carry risks, some familiar, some completely new.
For years, the playbook was straightforward: keep on rolling up and bolting on. But the pitch wore thin, as every medical specialty acquired its own dozen consolidators.
“Many of these roll-ups are just aggregating for the sake of aggregating rather than for the sake of providing incremental value to providers or patients,” said T.J. Carella, head of healthcare at Warburg Pincus. “Those businesses have found it very hard to find a home in a higher-interest-rate environment.”
“We can sell a bolt-on with a million dollars of EBITDA for an eight multiple,” said Tommy Newton, a principal at Xite, a Texas-based adviser that sells medical and dental practices. “When you have a [dental service organization] that has $20 million of EBITDA, they may only be a 10. There’s only two turns on that arbitrage—why would you do the deal?”
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Valuations for inference chip startups are soaring, with VC deals in the sector on pace for a record year. Agentic AI adoption has accelerated demand for inference chips, which serve a different role in how AI models operate than GPUs. What is the difference between an inference chip and a GPU?
A) Inference chips are only used to train and develop LLMs
B) GPUs are only used to answer queries from users
C) Inference chips are designed specifically to answer questions from users
D) Inference chips are only used for computer vision tasks
ICYMI
Travis Pearson was also head of private equity at the $49 billion San Francisco-based investment manager.
Leveraged loans are a natural asset class to provide the collateral that lenders are now demanding in deals.
With the acquisition of Atlanta-based Infinity, Ares is investing in a sector marked by rising cargo volumes and an aging fleet of railcars to move them.
“I think that’s a false narrative. The secondary market is operating and growing on a trajectory that’s quite independent from market conditions and the exit environment.”
—Amyn Hassanally, partner and global head of PE secondaries at Pantheon, on suggestions that IPOs and an M&A recovery are eating into the continuation fund market. He noted that the secondary market grew significantly in 2021, during a record year for traditional exits. Read how secondary buyers dispute the notion that continuation funds are a fad.
Answer: C
Inference chips are specifically built to help an AI model answer user questions, while GPUs are general-purpose chips used to train and run models. Inference chips are designed to be faster and cheaper, a reason why inference startups have a median pre-money valuation of $1.77 billion so far this year, compared to $194 million in 2024. Read more on funding for inference chip startups and how surging valuations could limit their exit potential.
This edition of The Weekend Pitch was written by Esther Luz and Nadine Manske. It was edited by Laura Schinagle and Nadine Manske.
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