Healthcare Industry

Q4 2023: Mergers and Acquisitions Trend Report

Industry Overview

• The overall outlook for the Healthcare Industry is positive. As the population continues to age and demands more general and specialized medical care, one can expect business to expand within this sector of the economy.
• Inflationary pressures combined with outpacing healthcare input costs and labor shortages may constrain the future profitability of operators within the sector. These effects depend on how heightened costs are passed along through negotiated contracts with public and private payors.
• The Healthcare Industry is made up of hospitals, ambulatory healthcare services, nursing, residential care facilities, and social assistance services.

Key Industry Trends

• Operators in this industry are expected to benefit from technological innovation and the digitization of healthcare. Telemedicine, artificial intelligence for program matching, and pharmaceutical research are poised to bolster the field.
• The number of enterprises in this industry is expected to increase over the next five years.
• Demand for healthcare is extremely inelastic as economic changes have very little effect on people’s medical spending habits. As seen by the COVID-19 Pandemic, however, the supply of medical assistance and treatment can be very volatile.

Recent M&A Transactions

Historical Performance

• Expanded Medicare and Medicaid funding over the past five years has contributed to a funding uptick in the latter half of the current period.
• Over the past few years, digital health tools have flourished, indicating the start of gradual shift towards healthcare delivery and digital therapeutics.

Future Industry Growth

• Many healthcare and social assistance entities will adopt digital and telehealth tools to bridge the gap between urban and rural communities regarding healthcare access. Grants awarded by the Biden Administration will help rural healthcare organizations expand critical services through digital tools.
• Mounting healthcare costs and reimbursement cuts will incentivize smaller, independent healthcare providers to join larger health groups. Larger health systems gain negotiating power with insurance providers to secure better rates.