COVID-19 Vaccination Mandate Cuts Hospital Staff
Recent mandates for hospital staff to be fully vaccinated have left some hospitals expecting staff losses of up to 30%. The mandate, put into effect January 4, makes reimbursement for care through the Center for Medicaid & Medicare (CMS) contingent on the positive vaccination status of all eligible hospital staff. This federal mandate combines with applicable state vaccination mandates, such as New York’s legislation, to ensure compliance of all hospitals across the country.
The legislation contributes to an already acute staffing shortage that has seen hospitals scrambling to find enough healthcare workers to handle COVID spikes. In rural communities with low vaccination rates and high reliance on CMS reimbursement, the vaccination mandate exacerbates existing tensions and has left some hospitals uncertain if they can continue to stay open in the spring.
The reaction of legislators and Hospitals alike has been to take the issue to the courts. Recent litigation in New York and Federal Courts have placed the mandate on hold and temporarily lifted the pressure off care providers. The legal outlook is questionable as the debates between civil liberties and care providers’ responsibilities play out. 1
U.S. Announces $400M for Global COVID Vaccine Distribution
The U.S has moved to bolster distribution and related infrastructure amid growing concern over American vaccination status and the emergence of the COVID-19 Omicron variant. The $400 million commitment funnels money into key aspects of the vaccine logistics network, and provides funding for USAID’s Rapid Response Surge Support to increase the availability of oxygen delivery systems in COVID-19 hotspots.
The push for funding comes when tensions around the new variant are at all-time highs. As the country moves into flu season in earnest, the confluence of COVID and the flu into a “dual pandemic” is particularly concerning. The funding package is intended to mitigate the potentially dangerous outcome by building more robust logistics networks that will enable booster vaccinations and standard 2-shot regimen to be rapidly scaled and adjusted as surges emerge. 2
Multiple Healthcare Blockbuster Deals Announced
Investment in the healthcare space has remained high in recent months as blockbuster M&A deals have been announced ahead of the year's close. In California, City of Hope, a not-for-profit, has acquired Cancer Treatment Centers of America for $390 million. The deal cements City of Hope as a national player in cancer treatment and expands the company’s offerings from research to clinical treatment. The move also transitions the acquired Cancer Treatment Centers of America hospitals to not-for-profits and thus exempts them from a large portion of tax liabilities.
The acquisition came at a time when hospitals across the country have struggled to provide the amount of care that is normally dispensed. Cancer Treatment Centers of America was negatively impacted but remained ahead of the overall market, with over 600 days of cash on hand at the time of acquisition and steady patient volumes throughout the pandemic.
Meanwhile, Cigna has invested in a competitor business, Bright Health, to expand coverage and increase the insurance company’s integration within healthcare. Bright House is a national health insurer who owns 131 clinics and care centers. Bright Health is among a new class of insurance startups whose objectives are to streamline the care cycle for patients and integrate insurance and providers. Cigna’s $750 million investment in the business is aimed to expand the company’s existing Evernorth business, a drug and health services division of the insurance company.
Lastly, Novo Nordisk, one of the nation's largest pharmaceutical companies, agreed to acquire Dicerna Pharmaceuticals, an industry leader in pharmaceutical and gene editing technologies. The $3.3 billion merger adds Dicerna’s RNAi technologies to Novo’s existing line of pharmaceutical products, with early treatments focused on liver cell targets. 3 4
2022 Health Services Deal outlook, Physician Practices Top the Chart for
Deal volumes in November 2021 increased 56% over the same period in 2020 and continue to show no signs of slowing down. Fueled by increased capital availability and regulatory pressures, the healthcare services industry had nine deals valued at over $5 billion and recorded a sector-wide EBITDA multiple of 15.2x. The emergence of two health services IPOs in 2020 and eight in 2021 underscores the breakneck performance of the sector. Within the industry, the standout performer has by far been physician medical groups, with over 400 deals in the trailing twelve months ending in November 2021, up from 250 in the period prior.
A number of pressures will likely contribute to consistently high deal volumes and valuations in 2022. Among these, regulatory changes that are set to decrease CMS reimbursement for providers and high levels of dry powder in private and corporate reserves will combine to maintain or increase deal activity in the space. 5
Doctor Burnout Hurts Some, helps CVS, Walgreens Care Provider Strategy
Recent increases in care provider burnout have contributed to Walgreens Boots Alliance’s successes and CVS’s ongoing expansions of its primary care centers. The drugstore giants have shifted focus in recent years as cash balances have accrued, and the company has sought to expand past its traditional focus. The recently announced commitment of $5.2 billion by Walgreens in the primary care provider VillageMD, follows an initial $1 billion in funding earlier last year, and aims to expand VillageMD to 600 centers in 2025 and 1,000 in 2027. With the investment, they now owns a 63% stake in the company, with the company representing a significant portion of the overall “Walgreens Health” business segment.
To complement the expansion of VillageMD, Walgreens has also invested a further $330 million in CareCentrix, in post-acute home care provider, that contributes to the company’s growing demand for primary care providers.
Ultimately, Walgreens & CVS aim to expand the “new” business segment to provide everything that patients expect from a traditional doctor’s office, while also maintaining the company’s existing footprint in pharmaceutical and preventative medicine.6
Fauci: Omicron Specific Booster Unnecessary
NIAID Director Anthony Fauci has indicated that there is “no need for a variant-specific booster” at this time, as current research indicates existing booster regimen are effective against the new strain. The news comes as investment and concern regarding a response to the variant has grown. Currently, the variant has been detected in 33 states and is expected to continue to spread throughout the country.
The announcement advocates that all citizens, and particularly those at risk of the virus, get vaccinated with existing booster shots and that “If you are unvaccinated, get vaccinated, and particularly in the arena of Omicron, if you are fully vaccinated, get your booster shot”.7
Largest Transactions Closed
- PPD, Inc.
- Thermo Fisher Scientific Inc.
- Hill-Rom Holdings, Inc.
- Baxter International Inc.
- PAREXEL International Corporation
- EQT Partners AB; Goldman Sachs Asset Management, L.P.
- Inovalon Holdings, Inc.
- Insight Venture Management, LLC; Nordic Capital; 22C Capital LLC
- Dicerna Pharmaceuticals, Inc.
- Novo Nordisk A/S
- TeneoBio, Inc.
- Amgen Inc.
- Harvest Health & Recreation Inc.
- Trulieve Cannabis Corp.
- Trillium Therapeutics Inc.
- Pfizer Inc.
- Kadmon Holdings, Inc.
- PeproTech, Inc.
- Thermo Fisher Scientific Inc.
Other Financial Buyer Transactions Closed
- Springstone, Inc.
- Medical Properties Trust, Inc.
- Medical Office Portfolio in Eight States
- Physicians Realty L.P.
- Eight Skilled Nursing facilities in Georgia
- Summit Healthcare REIT, Inc.
Other Strategic Buyer Transactions Closed
- TransUnion Healthcare, Inc.
- nThrive, Inc.
- Generate Life Sciences Co.
- CooperSurgical, Inc.
- BK Medical Holding Company, Inc.
- GE Healthcare Inc.
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes