A Saner M&A Market
Nashville may not be on the same level as cities like New York or San Diego when it comes to hosting healthcare conferences, but my home city has its share of drawing power. Case in point: I attended a very interesting conference last week on healthcare business and never left town.
Strategic Research Institute's 5th Annual Healthcare M&A conference was enlightening, if only because the event provided a window into the inner workings of buying and selling for-profit healthcare companies. And let me tell you, thanks to the credit crunch--at least for the near term--there's sand in that well-oiled machine.
SRI's diligent about making media members sign a form agreeing not to attribute quotes to anyone from the show without obtaining their permission. Normally, I just wouldn't attend something like that. With this event happening so close to home, however, I couldn't resist. Even without attribution, some of what I saw and heard over those two days was illuminating, and I thought you might get something out of reading some quotes.
So without further adieu, some interesting words from the conference (without attribution, of course) along with a few observations of mine:
On mergers and acquisitions in healthcare (and every other business, it seems)
The day of the big deal is dead for the time being.Acquirers can't raise enough debt, so companies will get cheaper. If you're looking to acquire, stand on the sidelines for three to four months, at least. Private equity money will be going for stakes in larger companies, not to fund outright acquisitions. There will be a shift in acquirer profile from financial acquirers to strategic ones. (In other words, companies will be buying other companies, while private equity takeouts and management-led LBOs become much rarer.)
The investing environment is becoming much more fundamentally focused. (It's about time!) Those investors who have been less rational are going to be leaving the market, leaving opportunities.
Like housing, healthcare acquisitions are likely to stall out for several months, as buyers won't offer anywhere close to the multiples they have in the recent past, while sellers' expectations about their companies' values haven't yet adjusted. The scale has shifted a multiple or half a multiple (of revenues). So if Healthsouth wanted to sell its surgery centers now instead of last March, it would get less. (Good timing, Mr. Grinney.)
On the transformation of health plans through disease management/population health management
Healthcare might finally be "next" in the wave of transformations that have changed other industries dramatically, in that health plans are already shifting their emphasis away from the group market and toward the individual.
The big opportunities in the future are toward health management, not just disease management, in an effort to trim the runaway healthcare cost inflation problem. Health management will require the active participation of the physician and the patient, with appropriate incentives for both to help move away from a procedure-based economy to a maintenance-based one.
Consumerism in healthcare is silly. "Managed consumerism," whereby consumers have help from various sources, such as health coaches and data mining, has a chance.
There you have it. It's not comprehensive by any means, but those are the salient points, in 600 words or less.
Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at email@example.com.
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