The public scrutiny around private equity’s push into the healthcare industry is continuing to intensify, putting even more pressure on communicators to justify these investments by better explaining the value that they provide.

Healthcare was the most favored industry for private equity firms in a recent KPMG study, drawing interest from 64% of respondents. North America continues to claim the highest aggregate deal value at $29 billion in 2023, according to Bain & Company. At the same time, deal size is shrinking, raising concerns from regulators that private equity is consolidating market power and stifling competition by combining smaller companies.

Supporters of private equity contend that these transactions bring capital, scale, and other expertise to healthcare organizations, allowing them to operate more effectively than traditional providers. Detractors say that private equity firms are only interested in profits and are therefore quick to slash staff, pull back on important investments, and close facilities without regard to patient care – all to maximize returns for their investors.

As private equity doubles down on healthcare, the US government is taking more notice. In December, the Biden administration created a taskforce that includes the Department of Justice, the Federal Trade Commission, and Department of Health & Human Services to examine “corporate greed in health care.” The task force has issued a request for public input into private equity’s impact on healthcare. Regulators are also assessing potential antitrust implications from these transactions.

This all calls for a fresh approach to communications – for both private equity firms and their healthcare portfolio companies. Gone are the days when staying quiet was considered an effective communications strategy. Instead, private equity firms and portfolio companies must publicly demonstrate positive outcomes that result from their investments.

Here are some approaches worth considering:

Pick your battles 

If you are facing accusations or attacks from regulators, academics, or the media, it may be tempting to push back as quickly as possible with an on-the-record defense. While this is sometimes a viable option, consider the consequences of pursuing a highly visible and defensive position. What are the advantages and disadvantages of a proactive – or even aggressive – approach? Assess the risk appetite of your executives. Can your CEO and other members of the leadership team toggle between pugnacity and restraint? Will your LPs or other stakeholders support an aggressive approach? Are you in active litigation that could be hindered by a public stance? Will engaging in debate draw even more unwanted attention to your firm?

Showcase your data 

While regulatory scrutiny is primarily focused on anti-competitive behavior, detractors also argue that private equity ownership negatively impacts quality of care. Nearly every healthcare portfolio company or private equity firm invested in healthcare includes quality-of-care messaging somewhere in its corporate narrative to hedge against this argument, but few incorporate the data to back it up.

Irrespective of your communications strategy, general or vague messaging will not move the needle under such a bright regulatory spotlight; data-supported storytelling is crucial. Consider showcasing quality improvement data in annual reports, similar to CSR (corporate social responsibility) or ESG (environmental, social and governance) reports. These reports not only document specific initiatives and statistics that demonstrate quality improvement but weave them into a compelling narrative that includes case studies.

Own your narrative 

Your risk appetite and communications plan will dictate the appropriate proportions of owned, paid and earned tactics, but consider controlling your narrative by emphasizing owned and paid media over earned media. Earned media cedes a certain amount of narrative control to reporters. Op-eds and owned content, as well as quality improvement data and other statistics illustrating the benefits of private equity investment, give you greater control of your reputation. And don’t forget to disseminate owned content on both your corporate and executive social channels.

That said, don’t completely rule out an earned strategy when facing scrutiny or crisis. This is when the relationships that you have developed with reporters can bear fruit. Identify a few journalists and invest time with them to explain the details and facts you want to convey regarding the issue at hand. You can also invite a reporter for an all-day session with subject-matter experts or take them on a tour of a new facility that promotes your core narrative.

Also consider earned media strategies that offer more control over the story, including a written Q&A, talking points for journalists and setting clear rules for engagement (such as off-limits topics) and when conversations should occur on background or off the record.   

As healthcare private equity and portfolio companies manage what is sure to be increasing scrutiny, it is imperative to revisit and sharpen stakeholder communications strategies. It isn’t an easy task and often requires multiple updates to communications strategy, but the enhanced level of scrutiny isn’t going away. The sooner you reframe your communications approach, the better.   

--Anthony Feldman, Vice President (anthony.feldman@edelmansmithfield.com)