2016 produced a record setting number of healthcare deals.
This trend is expected to continue as the healthcare industry shifts towards a pay for value over volume system serving patients, a hallmark of the ACA. With increased interest in wellness, healthcare organizations are adjusting their strategies to add new capabilities to stay competitive.
Daily, the sale or merger of a company involved in a service industry grabs the headlines. Whether a service provider to the healthcare, insurance or other industry, it feels like all companies and industries are in “play”. The announcements of these sales or mergers are normally accompanied with assurances from management that the ownership change will not adversely affect employees or the level of service to customers.
Global M&A deals across all industries exceeded $1.0 trillion during the second quarter of 2014, the highest level since 2007, according to Thompson Reuters. Private equity groups and corporations, sitting on stockpiles of cash coupled with the ability to borrow at record low rates, are helping drive the acquisition spree. The healthcare industry appears to be riding the coattails of the overall market activity. Through the first half of 2014 the healthcare sectors tracked by the PCE Industry Update – Healthcare show that 729 M&A transaction deals were announced or closed compared to only 631 in the same period in 2013.
The compounding pharmacy industry is ripe for consolidation and many anticipate a pickup in M&A activity. As compounding pharmacist head to Washington, DC to attend the industry insiders “IACP’s 20th Compounders on Capitol Hill 2014” summit later this month, it is worthwhile to provide insight on this subsector.
The President, Congress and supporters originally called the new healthcare legislation the Patient Protection and Affordable Care Act (PPACA). It was then shortened or referred to as the Affordable Care Act (ACA), and is now lovingly or perhaps disparagingly referred to as Obamacare by supporters and naysayers. Whatever you call the law, whatever you think about it, or whatever the final outcome, one thing is for certain, ACA has permanently changed the healthcare industry. The law is driving consolidation among healthcare payers and has spurred change and consolidation among the healthcare supplier and service provider industries.
For a variety of reasons, the acquisition of medical practices by hospitals has become more attractive in recent years. The volume of acquisitions is increasing steadily and therefore physicians and their advisors need to understand the valuation process which drives the purchase price. Almost all hospitals hire a valuation firm that “represents” their interests. We believe that in order to level the playing field, each party should retain their own valuation experts.
The long-awaited opinion issued in late June by the U.S. Supreme Court clarified the constitutionality of the Patient Protection and Affordable Care Act of 2010 (“PPACA”). The Court ruled that the requirement that every American carry health insurance is a tax and as a result, is constitutional. The ruling permits the federal government to pursue a broad expansion of the Medicaid health program for the poor.