As we rang in the new year and gathered in San Francisco for the 44th Annual J.P. Morgan Healthcare Conference, one theme consistently emerged: healthcare investing remains a market defined by contradiction. As we noted heading into the conference, the industry reflects cautious optimism; record levels of dry powder and pent-up exit pressure set against persistent regulatory, reimbursement, and political uncertainty. Read our 2026 Healthcare Private Equity Outlook here.
While most investment bankers and some investors predictably conveyed confidence that deal activity will accelerate, most private equity investors struck a more measured tone. Compared to this time in 2025, where predictions generally centered on phrases like “sudden surge” and “breaking dam,” the theme for this year is a steady, incremental pace through the early part of the year.
That said, there was a clear consensus on one point: there is a market for high-quality healthcare assets. Against that backdrop, the traffic signals from JPM varied by sector, structure, and risk profile.
GREEN LIGHT: Where Investors Are Leaning In
Behavioral Health
Behavioral health remains a top area of investor interest. Applied behavior analysis (ABA) therapy, in particular, is seeing renewed momentum as reimbursement challenges have largely worked their way through the payer landscape and the negative impacts of COVID-19 are further in the rearview mirror. More broadly, outpatient behavioral health platforms with scale, clinical rigor, and disciplined growth strategies continue to attract strong attention.
Pharma Services
Pharma services remain a consistently “hot” sector, building on notable deal activity over the past year ranging from several notable contract development and manufacturing organization (CDMO) investments, such as PCI Pharma Services and Catalent and more traditional hub transactions with the Frazier Healthcare Partners acquisition of J. Knipper Health and the Mercalis and Pharmacord merger. Investors noted increasing buzz around pharmacy-related services, including traditional hub services, the various component parts of hub services, and services targeting varied and novel intersection points in the drug channel, such as prescriber or payor.
HCIT & Tech-Enabled Services
Interest remains strong in healthcare information technology (HCIT) and technology-enabled services that support payors and providers, including revenue cycle management, case management, group purchasing organizations (GPOs), and other infrastructure-focused platforms, particularly those without direct reimbursement exposure.
These themes were reinforced at our annual Women in Healthcare Private Equity event, which we hosted during JPM at the iconic Gump’s Department Store, alongside our co-hosts Consonance Capital and Frazier Healthcare. Our featured speaker, Ainsley MacLean, MD, FACR, former Chief AI Officer at Kaiser Permanente and current General Partner of Ainsley & Born Capital, emphasized that artificial intelligence (AI) and technology are no longer separate categories. AI is now fully intertwined within healthcare technology platforms rather than standing alone as an independent investment thesis. As she noted, technology’s real power lies in its ability to drive impact at scale, an insight that resonated throughout the week.
Home Care, Infusion, & Labs
Home care continues to draw interest, particularly adult personal care and pediatric skilled nursing, as compared to skilled home health, which continues to have low horsepower as a result of rate cuts and clawback overhang. In the fast lane, infusion services supported by diversified reimbursement models continue to command significant interest and attention. For the first time in several years, we also heard renewed interest in the lab space and lab-adjacent sectors, particularly smaller platforms with high-growth potential.
YELLOW LIGHT: Selectivity Required
Physician Practice Management (PPMs)
Broad enthusiasm for pure-play PPM roll-ups has cooled, though interest persists in sectors with a PPM component, including value-based care and women’s health. Bankers also noted active founder-owned sell-side processes in more traditional PPM sectors such as urgent care and orthopedics. Still, many investors expressed increased caution or a broader shift away from provider services as a whole.
AI in Healthcare
AI was ubiquitous in conversation but rarely central to investment theses. While most companies are now leveraging AI in some form, investors emphasized the need to sift through significant “noise” to identify applications that meaningfully drive revenue, efficiency, and scalability—reinforcing the view that AI must be embedded within durable platforms to create long-term value.
RED LIGHT: Ongoing Headwinds
Reimbursement Pressure & Demographic Shifts
Although concerns around Medicaid exposure have softened, reimbursement pressure remains a key diligence focus. Investors continue to evaluate how platforms are positioned to navigate declining reimbursement, an aging population, and the continued migration of care out of hospitals and into the home. Behavioral health remains a consistent point of focus amid these shifts.
Large-Scale Transactions
The prevailing view is that 2026 will continue to be driven by tuck-in and lower middle market activity rather than mega-deals, with intense competition for A-quality assets and a limited number of scaled platforms coming to market. Anecdotally, this mirrors our experience in 2025, which was the most robust M&A deal volume year since 2021, driven by tuck-in and middle market activity.
FINAL SIGNAL: Disciplined Optimism
The prevailing mood at JPM was neither exuberant nor defensive, but deliberately selective. Investors expressed confidence in the healthcare market while acknowledging the challenges of putting capital to work amid a limited supply of top-tier assets. Still, many pointed to improved momentum since Labor Day and signs that the deal environment is gradually gaining traction.
In short, the traffic lights are working, but not all signals are green at once. For those who know when to slow down and when to accelerate, 2026 presents a meaningful opportunity.
If you would like to be added to our list to receive updates regarding the Bass, Berry & Sims Connect meeting space during the 2027 J.P. Morgan Healthcare Conference and our other events hosted throughout the year, please contact BBSconnect@bassberry.com.