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Healthcare – Major Merger & Acquisition Focus

By Kim Levin | Feb 23, 2016

Healthcare - Major Merger & Acquisition FocusHealthcare – Major Merger & Acquisition Focus

Recent reports shine a spotlight on mergers and acquisitions in the healthcare industry.  2015 was a banner year for M&A in this sector and reports suggest that healthcare will still be a major M&A focus in 2016, lagging only behind the technology and biotechnology/pharmaceutical industries

Three driving forces behind the continued activity in the healthcare sector include large cash reserves on corporate balance sheets, improving consumer confidence and readily available credit. With the Affordable Care Act’s emphasis on improving patient outcomes while at the same time lowering costs, healthcare companies are looking for competitive advantages.  During the second half of 2015 healthcare insurers made headlines with mega-merger announcements and if the deals pass regulatory muster, we could see just three major insurance players by 2017.  Smaller insurers may benefit from the fallout of such deals should mandatory divestitures spin off acquisition targets for other plans.

2016 will see patients becoming more “brand” conscious when selecting their healthcare providers, seeking the best care their money can buy. For health systems, this attention to brand will be critical as they seek to differentiate themselves to attract consumers. Affiliations, partnerships and joint ventures with well-known entities may be a growth strategy that makes more sense than a traditional merger from a branding standpoint.

Independent hospitals, clinics and medical groups may have a difficult time competing on their own and find it necessary to acquire complimentary groups.

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M&A News From the Healthcare Industry

By Peter Heydenrych | Nov 19, 2015

healthcare industryMedical practices across the US began adding new medical codes after the new ICD-10 medical coding system finally took effect October 2015. The new system of diagnostic and procedural codes is more complex and represents a significant increase in the number of codes used by physicians to get paid by insurers. Codes now number about 70,000 compared to about 14,000 codes used in the old ICD-9 system, which was established in 1979. Hospital codes also increased from 4,000 to 72,000. Healthcare industry experts worry that claims denials could double in number as providers and payers adjust to the more specific codes, according to the Wall Street Journal.

Health insurers struggle to attract millennials, some of whom believe they are too young and too healthy to need insurance. Marketing departments are working to create communications geared to these younger consumers, people who often research health conditions online and may be equipped with inaccurate information, according to Modern Medicine. Experts recommend focusing on young families experiencing life transitions such as relocation, employment, or childbirth. Social media campaigns, wellness webinars, and website videos can be effective, as can straightforward, easy-to-find information on billing, covered services, and physician networks. Although baby boomers are currently the largest target audience for health insurers and providers, millennials are poised to surpass boomers as the largest US generation.

Posted by Peter Heydenrych.

Read the Entire Healthcare 4th Quarter Newsletter Here


Healthcare Industry M&A Update

By Peter Heydenrych | Sep 10, 2015

HEIPG-Doctor and xraysWhile transaction volume has slowed a bit as the year has progressed, healthcare industry M&A is still a primary sector for M&A as big pharma looks to expand by acquiring small competitors with potential blockbuster drugs. In addition, big pharma companies are actively funding drug development companies with minority equity positions and the option for greater ownership should the drugs take off. Deals in the sector are also expected to be driven by healthcare IT innovation and hospital consolidation in the wake of the Affordable Care Act and declining reimbursements.

As patients are required to pay more and make more medical decisions, they likely will demand better information from providers. Despite being responsible for paying an increasing portion of their medical bills, most US consumers are not shopping around for the best deal. Fewer than 15% of Americans viewed comparative quality and pricing data for hospitals and physicians, and less than 10% actually used the data over a recent 12-month period, according to a survey by Kaiser Family Foundation. Reasons include lack of time to research competitors and difficulty find information and understanding technical terms. Consumers also struggled with inaccurate practitioner estimates and unexpected bills, according to Kaiser Health News. Some consumers with high deductibles end up forgoing care. Government health care officials are calling for greater pricing transparency to improve consumer access to comparative data.

Posted by Peter Heydenrych.

Read the Entire Healthcare 3rd Quarter Newsletter Here


Healthcare M&A Industry Update

By Peter Heydenrych | May 08, 2015

stethoscopeHealthcare M&A activity for the sector for Q1 2015 included 167 closed deals according to data published by industry data tracker FactSet, with an average enterprise value of $236 million. Favorable credit markets and cash-rich balance sheets are spurring continued strategic activity in the healthcare sector and M&A in general. Private equity buyers are also increasingly active with interest rates remaining at or near record lows. Healthcare services represented more than half of Q1’s transaction total. Other sectors, such as behavioral healthcare and managed care, also had significant activity. Biotechnology and pharmaceuticals were also active sectors driven by investment from venture capital firms.

The Centers for Medicare and Medicaid Services (CMS) is proposing revisions to its accountable care organization (ACO) guidelines to increase incentives and reduce penalties for participating health care providers. About 330 Medicare ACOs have been formed since 2012 under rules established in the Affordable Care Act (ACA). ACOs can earn bonuses for lowering the cost of care and improving quality, but they were scheduled to begin facing penalties in 2015 for exceeding cost benchmarks. The CMS has determined that many ACOs are not ready to assume financial risks associated with the program. To maintain participation, officials have proposed an option where some providers can avoid penalties but earn smaller bonuses for another three years, according to Modern Healthcare.

US consumer prices for medical care commodities, an indicator of healthcare costs, increased 4.2 percent in March 2015 compared to the same period in 2014. US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 1.9 percent in March 2015 compared to the same month in 2014. Total US revenue for healthcare and social assistance rose 5.4 percent in the fourth quarter of 2014 compared to the previous year.

Read the Entire Healthcare 2nd Quarter Newsletter Here


News From the Healthcare Industry

By Peter Heydenrych | Feb 20, 2015

HealthcareHealthcare M&A activity for North American based target companies in the  sector for Q4 2014 included 94 closed deals (more than 300 announced), with an average enterprise value of $228 million. Full-year totals for 2014 broke previous records for the number of deals and the dollars spent. More than 1,200 healthcare industry transactions were announced last year, an increase of 26% over 2013’s total of 1,035 transactions. The previous record for most transactions in a year was set in 1997, at 1,287. Total deal value reached $387.4 billion in 2014, and an increase of 137% over 2013’s total of $163.7 billion. The pharmaceutical sector accounted for 55% of the year’s total spending ($213 billion) and 14% of the deal volume (188 transactions).

As for the 2015 M&A outlook in the sector, activity is likely to keep booming in the first half of 2015 as Americans continue to enroll in healthcare plans through the exchanges.

Total revenue for the US healthcare sector is forecast to grow at an annual compounded rate of 5 percent between 2014 and 2018. US consumer prices for medical care commodities, an indicator of healthcare costs, increased 4.8 percent in December 2014 compared to the same period in 2013. US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 2.4 percent in December 2014 compared to the same month in 2013. Total US revenue for healthcare and social assistance rose 5.3 percent in the third quarter of 2014 compared to the previous year.

Posted by Peter Heydenrych.

Read the Entire Healthcare 1st Quarter Newsletter Here


Q4 Healthcare M&A Update

By Kim Levin | Nov 07, 2014

HEIPG-PipetteM&A activity for North American based target companies in the healthcare sector for Q3 2014 included 299 closed deals and total deal value of approximately over $14 billion, according to data provided by S&P Capital IQ. M&A Activity in the quarter was down by 11% versus Q2 2014 from 333 to 299 deals closed. The average total deal value also fell by nearly 200% from $379 million to $165 million. 

New data from Frost & Sullivan’s, an industry research group, “Analysis of Mergers and Acquisitions Trends in the United States Healthcare Provider Industry” reveals that M&A deals in the post-acute care, surgical and emergency center segments are expected to drive M&A activity in the U.S. healthcare provider industry. According to the report, the upward trend is also being driven by other factors having a negative impact on healthcare providers’ bottom line. This includes the charges levied on hospitals that get admissions due to hospital-acquired conditions, the Hospital Readmissions Reduction Program that imposes penalties on hospitals with high readmission rates, and value-based purchasing that ties hospitals’ performance to reimbursement rates for Medicare patients.

Read the Entire Healthcare 4th Quarter Newsletter Here

 


Q3 Healthcare Mergers & Acquisitions Update

By Kim Levin | Aug 29, 2014

HEIPG-Heart RateM&A activity in the Healthcare sector for North American based target companies in Q2 2014 included 288 closed deals according to data provided by S&P Capital IQ.  According to a report from, Health Care M&A News, an industry news group, healthcare M&A activity in the second quarter was up 171% compared with the first quarter and was up 152% versus the same period in 2013.  Deal volume surged on the healthcare technology side to 143 deals, an increase of 31% compared with the previous quarter. The US healthcare sector, a sector that includes physicians, dentists, hospitals, home healthcare, nursing homes, and daycare services, is forecast to grow at an annual compounded rate of 5% between 2014 and 2018.

Read the Entire Healthcare 3rd Quarter Newsletter Here


Q2 Healthcare Mergers & Acquisitions Update

By Kim Levin | Jun 06, 2014

HEIPG-Doctor and xraysM&A activity in the Healthcare sector for North American based target companies in Q1 2014 included 313 closed deals according to data provided by S&P Capital IQ. According to a report from PriceWaterhouseCoopers, an international consulting firm, deal activity in the first quarter of 2014 was relatively consistent with the same period in 2013. However, the value of announced deals showed a sharp uptick indicating growth in multiples and demand for health-related companies as technology evolves and the Boomer Generation ages.

Read the Entire Healthcare 2nd Quarter Newsletter Here


Healthcare Q1 M&A Update

By Kim Levin | Mar 14, 2014

HEIPG-Heart RateM&A activity in the North American Healthcare sector for Q4 2013 through February 24, 2014 included 469 deals closed according to data provided by S&P Capital IQ.  According to a report from industry firm Healthcare Financial Management Association, 2013 was sparked by a heavy wave of consolidation in the healthcare space led by regulatory changes and the implementation of the Affordable Care Act (“Obamacare”).  Looking forward to 2014, strong M&A activity is expected to continue as many targets view transactions as the only opportunity to mitigate risk in an ever-evolving environment. This sentiment should be felt throughout the sector with payers, hospitals and other providers looking to join forces as larger biotech giants continue to have an appetite for small operations with significant intellectual property and novel products. Many in the healthcare subsectors will see M&A as an avenue to increase value by offering superior products and services.

Read the Entire Healthcare 1st Quarter Newsletter Here


Healthcare M&A Activity Update

By Kim Levin | Jan 10, 2014

HEIPG-Pipette ReservoirM&A activity in the North American healthcare sector for Q3 2013 was down 24% from last quarter, with 409 deals announced or closed in the period according to data provided by S&P Capital IQ. Deal count however, remained on the uptick, adding 26 deals quarter over quarter. The pharmaceutical sector continued to see the biggest deals with Amgen’s $10.4 billion purchase of Onyx Pharmaceuticals leading the pack as the quarter’s largest deal. Vendors racked up the most deals. Two of the five largest vendor deals involved private equity investors purchasing electronic medical record companies.

Read the Entire Healthcare 4th Quarter Newsletter Here