The world of healthcare is always evolving and changing. Like any industry, healthcare sees its fair share of mergers and acquisitions every year. Consolidation of smaller hospitals and the growth of mega healthcare organizations has been a sustained trend in the last few years. Mergers and acquisition (M&A) activity is also the prime ingredient for growth in healthcare. Is the mega-hospital the future of healthcare? Or, will M&A cool off a bit in 2019? Let’s explore the opportunities for 2019 M&A.
Data Points to Mergers & Acquisitions Activity Remaining Flat or Decreased
A survey conducted by Capital One Healthcare reported that 48 percent of respondents predict that M&A will remain stagnant, with 10 percent stating it would be less than 2018. Per the findings, this response may be due to the current state of geopolitical uncertainty and the fact that M&A activity is at an extremely high mark, leaving some to wonder how it could possibly increase.
The survey also indicated that value-based care models, which most hospitals have or are transitioning to, don’t seem like profit generators. Investors don’t see the profitability of the model, and until there are strong results proving it, this may also slow M&A.
Other data points to a slow in M&A due to lack of attractive options. A survey from West Monroe Partners found that 25 percent of investors find the lack of those lucrative targets as the top challenge to M&A.
AHA Calling for FTC System to Evaluate Its Merger Assessment System
How the Federal Trade Commission (FTC) assesses healthcare M&A is also a focus for 2019. The American Hospital Association (AHA) believes that the FTC’s strategy gets a lot wrong, arguing that it’s “overbroad, does not properly credit the many pro-consumer benefits of hospital transactions, and ignores key realities of the marketplace.”
The AHA has urged the FTC to revise its approach, which currently involves a demand and supply evaluation. The AHA sees both sides as flawed. It argues that the FTC’s current methodology does a “poor job” of predicting supply and demand, delivering flawed conclusions.
The FTC isn’t something that can be sidestepped in M&A. Its current model appears to do a disservice to all parts of the healthcare landscape.
Healthcare Mergers & Acquisitions Deals Finalized in 2019
Even though the New Year has just begun, several M&A deals have closed, creating organizations with more capabilities, locations, and employees.
New Mergers & Acquisitions Trend — Insurance Companies Acquire Care Providers
One new trend on the M&A landscape is insurance companies acquiring care providers in a move to get closer to the delivery of care. UnitedHealthcare is one such insurer. It is still waiting to finalize its deal to purchase the DaVita Medical Group unit from DaVita, which operates 300 clinics in six states. UnitedHealthcare also purchased the Seattle-based Polyclinic.
How will this new trend in M&A impact the landscape? It means there are more players than ever in the field, and that traditional M&A roles are being disrupted.
2019 Healthcare Mergers & Acquisitions Outlook
With so much uncertainty in the market, the forecast for 2019 isn’t quite grim for M&A activity. There will still be expected movement across the board, including consolidations and other large brands expanding their reach.
To get a glimpse at what might happen in the next year, a report from Morgan Stanley analysts has some possible answers, looking at healthcare companies most likely to be acquired in 2019. Here are some of their predictions:
There are many factors that may impact merger and acquisition activity for the healthcare industry. There’s the possibility of a slowed economy, which many experts have agreed is all but certain. There is also the continued fight over the ACA and if it will be repealed, improved, or determined unconstitutional.
These dynamics are, of course, outside of the control of the industry, but they could be a catalyst for either increased or decreased M&A activity. In the world of healthcare, the only thing that is for certain is that there will continue to be movement as hospitals strive to be both profitable and providers of quality care. To stay up-to-date on the latest industry developments, click the button below and subscribe to the Carevoyance blog.
About the Author
Carevoyance contributor Beth Osborne is a professional writer and content marketer with multiple years of experience in healthcare IT marketing. Learn more about her by visiting her website.