Health care transactions were relatively active throughout the first half of 2022, although not active when compared to the banner year 2021. year (1,444).
The slowdown in deal activity is a possible response to growing economic uncertainty and continuing headwinds with rising inflation and supply chain issues around the world exacerbated by the war in Ukraine.
Despite the headwind, when comparing 2018 to 2020, total transactions in the first half of 2022 increased by more than 25% from 2020 (830), 47% from 2019 (586), and 52% from 2018 (530). Life sciences continues to lead the way as the most active subsector, followed by healthcare IT, medical devices, and physician services.
Life Sciences
The life sciences and pharmaceuticals subsectors had the strongest second-month deal activity of the year, in line with the thesis that the subsector may be relatively immune to economic headwinds, while also continuing to be a key player in Covid-19. response as the industry recovers from the pandemic and repositions for the future.
Health-Care IT
Although IT and healthcare software had the second-highest deal volume among subsectors during the first half of the year, volume was down from last year, which was very active due to accelerated changes in care delivery during the pandemic. However, the post-pandemic focus on telehealth, and increased patient interest in remote care options, may help to sustain long-term interest in this sector.
Medical Device and Supplies
Compared to 2021, deals for medical devices and supplies have experienced a decrease in deal volume due to supply chain issues and increased economic pressure on health system purchases. Read also : A ‘mental health overhaul’ for Cal State Long Beach. However, the potential continuation of Covid-19 and the rise of new diseases such as Monkeypox, may lead to higher activity in this sector as this problem increases the demand for diagnostics and medical supplies.
Physician Practices and Services
There were 20 doctor practices and service deals in June, but this sector is down year-on-year when compared to 2021. This includes four dermatology practices, and some urgent care and primary deals. This may interest you : The Indiana Black and Minority Health Fair offered health, education and entertainment services. As explained below, however, the second half of this year is expected to be very active with the transactions of the doctor group.
Outlook for Second Half of 2022
Despite the headwinds mentioned above, we remain optimistic about the second half of 2022 due to the current deal activity and ongoing process, as per investment banker-health and merger and acquisition attorneys who are active in this space. This may interest you : Although examined, Health Insurance is already looking to expand Medicare benefits by 2023. As a result, the total volume of health care deals in 2022 may not match the record-setting number of 2021 but may still exceed the general trend from the past few years, despite some macroeconomic challenges.
Although volumes are down from 2021, the higher transaction activity compared to 2018, 2019, and 2020 is the result of several forces, including:
The three factors above are especially true for physician groups, as they have increased challenges due to competition from many large and growing national health care companies—including, for example, Optum, Aetna/CVS, and Amazon, as well as large local health. system and develop a private equity-backed physician-specific platform. The following physician subsectors experienced the most transactions in the first half of 2022: primary care, ophthalmology (including retina), dermatology, and orthopedics/pain.
In addition, we expect an increase in the offer of orthopedic, pain, and neurosurgery practices during the rest of this year and beyond, as there are currently more than 15 private equity-backed platforms in this specialty, all of which are very active in pursuing multiple additions. ounce. Moreover, eye care and dermatology activities remain active, consistent with the past few years. Furthermore, there are many cardiology group deals that are expected to be closed in the second half of 2022. The practice of cardiology is anticipated to be the next “big” specialty that will be pursued by private equity investors (in large part because Medicare now allows many interventional procedures to be performed in ambulatory surgery centers).
In addition to the physician group, home care and hospice and the behavioral health subsector are expected to maintain a stable transaction volume until the end of 2022. Regarding home health and hospice, as the elderly population continues to grow every month, patients want to receive. care at home: (i) avoiding nursing homes and other long-term care facilities that have problems with the spread of Covid-19 and (ii) receiving care in a more desirable and cost-effective setting.
Moreover, we expect stable volumes in behavioral health transactions, including deals related to substance abuse, other addiction disorders, and basic mental health care, as demand for all of the above is growing due to many factors, including burnout caused by the pandemic, isolation . and depression.
Overall, the economic situation will weigh heavily on the industry during the second half of the year; But even so, we expect the deal volume to remain strong, trending higher than historical benchmarks set before 2021.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Gary W. Herschman is a member of Epstein Becker Green in its Newark, N.J., office. Anjana D. Patel is a member of Epstein Becker Green in Newark. Timothy C. McHale is an associate at Epstein Becker Green in Newark. Hector M. Torres is managing director at FocalPoint Partners LLC in Chicago. Larry Kocot is the principal and national leader, Center for Healthcare Regulatory Insight at KPMG LLP in Washington, D.C. Carole Streicher is the US principal partner, advisory and strategy at KPMG LLP in Chicago.
Michael Stotz and Jordan Coley of FocalPoint Partners; and Ross White KPMG contributed to this article.
