Healthcare M&A Deal Value Up 152% in Q1 2014
Flat or declining deal volume doesn't indicate that the M&A market is cooling, but increasing deal values indicate that larger deals are in the works, says a PwC analyst. At the same time, hospitals and health systems are slowing their pace of physician practice acquisitions.
The volume of deals in health services mergers and acquisitions for everything from physician practices to health plans in the first quarter of 2014 held pace with the same period in 2013, even as the total deal value rose 152% to $12.3 billion, according to PwC's Q1 2014 US health services deals insights report.
Brett Hickman, partner and PwC's U.S. healthcare deals leader, says he expects healthcare services M&A's to continue at a strong clip in the near term as the sector adjusts to value-based reimbursements, lower inpatient volumes, and federal mandates.
"The biggest issue is sustainability, especially as payers and providers look at how they can compete in a population health world, whether it is a high-deductible plan that is impacting utilization, or appropriate medical management being done on a medical home model. All of those things have large implications on utilization of traditional settings of healthcare," Hickman says.
"Organizations realize that not only do they need to invest significant capital to make the journey to a new model, one that is less acute but provides better and more frequent access at a much lower cost. They realize they are going to have significantly larger population to take that risk. To do that they have to be in an environment where the economics are totally different to be able to take on that risk."