Please enable JavaScript to view this website.

How Private Equity Can Hedge Their Bet with ObamaCare

The Affordable Care Act, also known as ObamaCare, came into effect earlier this year. Not surprisingly, ObamaCare has proven to be an extremely controversial and divisive issue. Many opponents of ObamaCare argue that the law will prove to be extremely detrimental to the economy by burdening companies with increased costs and regulations.1  The relevant topic for this paper is the less talked about subject of how private equity and venture capital firms can capitalize on ObamaCare.

ObamaCare has been criticized for a number of reasons.  One of the consequences of ObamaCare is an increase in people frequenting less costly outpatient care such as retail clinics and urgent care centers.2  ObamaCare will make family physicians much busier leading to more people seeking medical treatment at retail clinics and urgent care centers.3 Retail clinics are clinics staffed by nurse practitioners that offer fast and affordable treatment for routine medical procedures.4  Retail clinics are often located in major retail chains such as Target, Wal-Mart, or Walgreens.5  Urgent care centers are similar to retail clinics, however, they also offer a board-certified physician and other services such as on-site X-rays.6

Private equity firms could take advantage of this proliferation in retail clinics and urgent care centers by acquiring some of these companies.  There would be quite a bit of variety for firms to choose from in deciding which clinics to invest in.  If a firm is looking for an established company, Walgreens or CVS may be an option.  However, if a company is looking to invest in more of a growth company, there may be opportunity as well.  As urgent care centers become more popular, chains of them may become popular, much like retail clinics.

Although many argue that ObamaCare is bad for small businesses, many start-ups are surprisingly in favor of ObamaCare.7  Start-ups unlike larger firms of 50 plus employees will not be penalized for not offering health insurance.8  In addition, the start-up may qualify for a federal subsidy if it does offer health benefits.9  For companies with fewer than 25 employees that on average make less than $50,000, they are eligible under ObamaCare to receive a refund up to 50% of their expenditures on health insurance.10  This means that it may be much more likely for start-ups to offer health insurance to their employees, thereby attracting more qualified candidates.11  Not to mention, productivity may increase by having a healthier group of employees.12

Although many small business owners dislike ObamaCare, many entrepreneurs are looking at ObamaCare as an opportunity to profit. CEO of start-up Practice Fusion, Ryan Howard, believes that ObamaCare is a “huge catalyst” and that “the industry is “innovating at a level not seen before.”13  His company provides consumers the opportunity to search for physicians and read reviews.  Practice Fusion recently raised $149 million and is looking towards an IPO.14

Howard is not the only one crediting ObamaCare with innovative opportunities. Other analysts also believe that there are quite a few opportunities to profit from health care.15  Annie Lamont, a managing partner at Oak Investment Partners, believes that ObamaCare will offer a number of investment opportunities.16  She believes that there will be opportunities in insurance reform, payment reform, and delivery system reform.17

While it seems that most economists and businessmen claim that ObamaCare is bad for the economy, it appears that there is a vast number of opportunities to take advantage of ObamaCare or at the very least, hedge their bet against ObamaCare. The companies can profit off of the innovation from ObamaCare and also keep their employees healthy and productive. All of which may provide an opportunity for private equity to profit.


  1. Private Equity and ObamaCare: How Will ObamaCare Affect Private Equity Portfolio Companies, Habif, Arogeti & Wynne, LLP, http://www.hawcpa.com/industries/private-equity-venture-capital/private-equity-and-ObamaCare-the-aca’s-impact-on-pe-portfolio-companies

  2. Rick Ruggles, Urgent Care Centers Likely to See More Traffic Under ObamaCare, Livewell Nebraska, October 6, 2013, http://www.omaha.com/article/20131006/LIVEWELL01/131009135

  3. Id. 

  4. Genevieve M. Clavreul, Retail Health Clinics: A Boon to Nurse Practitioners?, Working Nurse, http://www.workingnurse.com/articles/Retail-Health-Clinics-A-Boon-to-Nurse-Practitioners

  5. Id. 

  6. Bruce Japsen, The Forbes Healthcare Summit 2013: The Walk-In Clinic Revolution and ObamaCare, Forbes, October 4, 2013, http://www.forbes.com/sites/brucejapsen/2013/10/04/the-forbes-healthcare-summit-2013-the-walk-in-clinic-revolution-and-ObamaCare/

  7. See Jeremy Quittner, Why Start-ups May Just Love ObamaCare, Inc., http://www.inc.com/magazine/201312/jeremy-quittner/ObamaCare-benefits-start-ups.html

  8. Id. 

  9. Id. 

  10. Id. 

  11. Id. 

  12. Id. 

  13. Gabrielle Karol, Entrepreneur: ObamaCare is Good for Innovation, Fox Business, December 23, 2013, http://smallbusiness.foxbusiness.com/entrepreneurs/2013/12/23/entrepreneur-obamacare-is-good-for-innovation/

  14. Id. 

  15. See ObamaCare Offers New Ways to Invest, NPR, November 23, 2013, http://www.npr.org/templates/story/story.php?storyId=246872423

  16. Id. 

  17. Id. 

The following two tabs change content below.

Bryan Card

Vol. 3 Associate Editor