Why Healthcare Is A Boon For Private Equity

Here’s why: first, there is no real linkage between demand and supply with healthcare. In ordinary market economics, demand and supply tend to have an inverse relationship  with each other. Not so with health care; since nobody can really predict the need for a certain health service. And when you do need it, there isn’t really the time to shop around. So the demand and supply can’t really be moderated based on each other.

Second, and equally important, is the fact that there is a huge information asymmetry between the provider and the consumer of the service. As a result, the not only is the consumer not able to shop around for healthcare when he needs it, he has no idea about making an estimate about the quality of the same. Think about haggling around for a cardiac cath when  you have a heart attack. Or for that matter, think about trying to second guess your doctor when she says you need a certain procedure.

That puts the doctor at a rather unusual predicament for a service provider; he is not only the provider but also oftentimes the person who determines when there is a need for a certain service. In an idealized situation, the doctor is expected to not only provide services to his consumers, but also be a vanguard the interests of his patients and the society at large...