A survey of healthcare and life science professionals and investors suggests healthcare M&A activity will surge past 2013 levels when there were 394 deals valued at $97 billion. The report by Bass Berry & Sims and Mergermarket indicates that market disruption, brought on by the Affordable Care Act, will lead to more consolidation deals across healthcare facilities, life science and healthcare IT companies.
The Affordable Care Act and HITECH Act are etched into the heart of most of these deals. That’s apparent from the facilities trying to figure out ways to cope with reduced Medicare reimbursements to the technology hospitals will need to adopt to fit in with change in payment models in the future. They also need to comply with electronic medical record requirements. Here are six trends that illustrate and factor in to the survey’s outlook.
Long-term care facilities will feel the brunt of Medicare reimbursement cuts so they will make up a sizable portion of the consolidation trend, according to 52 percent of respondents. It stands to reason since these facilities have the greatest dependence on government funding.
Retail clinics will take center stage in M&A deals: The interest in clinics that can provide some primary care services will increase as insured patients with high deductibles look for cheaper options than visiting a doctor’s office.
Physician practices with a cardiology or dermatology specialty will be the most sought after for M&A deals in this area. Private equity companies favor cardiology but healthcare industry professionals said dermatology would be the preference.
Diversify, diversify, diversify: Hospitals are diversifying, but so are ambulatory services centers. In the case of hospitals, they’re experiencing the biggest slowdown in year-on-year admissions growth in 10 years and that’s by the ACA’s design. Hospitals will try to acquire their way into different markets or strategic alliances. They’ll add services like urgent care, home health and hospice care. Large ambulatory surgery centers will expand into anesthesia, physician practice management, outsourced hospital services, pharmacy, laboratory and other ancillary services, according to the report.
Healthcare IT tools that can improve clinical workflows and make quick work of billing continue to be sought after by IT vendors. Business intelligence and data analytics are popular areas because they will help hospitals comply with the ACA to shift their payment model and comply with best-practice guidance. Healthcare IT software that can help hospitals and practices share patient information also continues to fuel these deals.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Private equity buyers will play a bigger role than strategic buyers in healthcare transactions, according to 84 percent of respondents. About 66 percent anticipate this will happen in the life science sector.
[Photo Credit: Flickr user s_falkow]
