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M&A and Private Equity Drive Activity in Health Care Provider Space

Dec 6, 2021

In the article “From Many, One,” published in the September/October 2021 issue of Group Practice Journal, Bert Orlov and Ayesha Medina discuss the future of provider acquisitions with the upturn in private equity (“PE”) activity.

Following the temporary slowdown of PE in 2020 due to COVID-19, a turnaround for the market is expected in 2021. Many providers are looking for a post-COVID-19 exit, which could result in an increase in activity for provider acquisitions in areas such as hospitals, physician practices, homecare and telehealth. Overall, there is opportunity here within the strong market for buyers and sellers. Additional PE trends discussed in the article include COVID, hospitals, physician practices, home care and telehealth.

Due to COVID-19, providers are experiencing overall volume and revenue declines. It is still unclear if volumes will go back to pre-COVID-19 levels or remain on the lower baseline. Specifically, consolidation within the hospital industry is occurring because revenue and demand for hospital beds is falling. With the lower demand, the number and size of hospitals in the next decade is expected drop and mergers and acquisitions activity is predicted to surge.

The hospital industry’s increasing consolidation efforts are also not directly related to the pandemic. Mergers and acquisitions have begun to move toward more large-scale deals.

Physician practices are experiencing increased consolidation as well due to hospital consolidation trends. PE firms are becoming the alternative for both primary physician practices and independent medical practices. Also, a growing physician shortage from an aging provider base will drive even bigger PE deals.

Lastly, the home care and telehealth segments have experienced heightened attention. Telehealth, specifically, is predicted to have explosive growth from interest in both freestanding telehealth businesses and incorporated telehealth practices.

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