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This article was originally featured in Bezinga and was written by Caroline Ryan.
Health care private equity is attracting billions of dollars from institutional investors even as limited partners become more selective about where they put their money and the industry’s ownership model faces growing regulatory scrutiny.
Health care PE managers raised $16.2 billion across 11 fund closes in the first half of 2026, according to PitchBook’s H1 2026 Healthcare Funds Report. This represents more than 90% of the $17.4 billion raised during all of 2025 and gave health care its largest-ever share of overall private equity fundraising, at 6.1%.
But the headline number masks a growing concentration of capital.
Blackstone Life Sciences VI raised $6.3 billion, while Patient Square Capital II closed with $4.4 billion, meaning the two funds accounted for roughly two-thirds of health care PE capital raised in the first half.
Rob Larson, managing director at Grant Thornton Stax, told Benzinga that slower distributions have left LPs with fewer dollars to recycle into new funds, pushing them toward managers where they have the most conviction.
"When capital is constrained, an LP may prefer to make a larger commitment to a manager it has backed successfully through several cycles rather than spread that capital across lots of unproven managers," Larson said.
The concentration comes as health care PE’s recent performance has become less differentiated from the broader market.
PitchBook found that health care PE funds from the 2021-2023 vintages generated a 10.2% pooled IRR, compared with 12% for broader private equity. Earlier health care vintages had significantly outperformed the broader market.
Larson said health care remains attractive because of an aging population, rising utilization and opportunities to improve productivity, but "health care exposure by itself is no longer an investment thesis."
Bigger Funds, Fewer Easy Deals
The fundraising boom also raises a question about whether large health care managers can find enough attractive assets to deploy the capital they are raising.
Larson said there is not necessarily a shortage of health care businesses, but there is a shortage of large assets available at attractive valuations that can absorb sizable checks while still producing strong returns.
"As a fund gets larger, it gravitates toward larger companies where there are fewer assets and where you’re more often competing with other well-capitalized sponsors and strategic buyers," he said.
That could make deployment discipline increasingly important as fund sizes grow.
Regulatory Risk Enters the Equation
The fundraising strength comes as private equity’s role in health care faces greater political scrutiny.
Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez introduced legislation last month that would seek to prohibit private equity firms, insurers and other for-profit corporations from owning or controlling physician practices. The bill targets management services organizations and "friendly" or "captive" physician arrangements.
More than 82% of physicians were employed by hospitals or corporate entities as of January 2026, while corporate entities owned 33.2% of physician practices, according to research from the Physicians Advocacy Institute and Avalere Health.
Larson said regulatory changes have become a consistent underwriting consideration for investors.
"It has become a consistent underwriting consideration," Larson said. "Investors are asking not only, ‘Is this structure legal today?’ but also, ‘How could the rules change during our ownership period, and if they do would it break the business model?’"
He added that increased scrutiny doesn’t mean private capital will leave physician practices, but that winning models increasingly need to show value creation without compromising clinical independence or simply extracting more economics from the health care system.
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