PwC: Healthcare Deals Remained Strong in 2023 Despite Headwinds


The healthcare industry faced several headwinds within the last 12 months, corresponding to higher rates of interest, more antitrust regulatory review concerns, higher valuations and recession worries. But despite these headwinds, health services deals “remained resilient” for the 12 months ending May 15, based on a PwC report published Wednesday.

“We proceed to stay optimistic in regards to the health services deals outlook for the rest of 2023, with corporate and personal equity (PE) players alike holding large levels of capital that should be deployed, and sector dynamics driving a necessity for health services firms to adapt and reinvent themselves,” the report stated.

Within the 12 months leading as much as May 15, health services deal volumes decreased just 4% from the 12 months prior. Deal volumes this 12 months were still nearly twice as high as from 2018 to 2020, nonetheless.

With regards to deal values, there was a 15% decrease in 2023 in comparison with last 12 months. This represents a “continuation of the trend seen in 2022 where a greater portion of deal volume is being driven by smaller value roll-up and add-on transactions versus transformational platform deals and megadeals,” the report said.

Still, greater than half of the deal value within the last 12 months was driven by megadeals, that are deals with a valuation of a minimum of $5 billion. This is comparable to 2021 and 2022.

There have been six megadeals within the 12 months ending May 15, based on PwC. These include:

  • CVS Health’s $10.6 billion acquisition of primary care company Oak Street Health
  • Walgreens-backed VillageMD’s $8.9 billion acquisition of Summit Health-CityMD, an organization that gives primary, specialty and urgent care.
  • The $7.1 billion acquisition of contract research organization Syneos Health by a personal investment consortium, which included Elliott Investment Management, Patient Square Capital and Veritas Capital
  • CVS Health’s $8 billion acquisition of home care company Signify Health
  • The $7.4 billion acquisition of Mediclinic International by a consortium of investors
  • Chubb’s $5.4 billion acquisition of Cigna’s life, accident and supplemental advantages business

When looking ahead, “recent uncertainty presents headwinds, but in addition yields potential opportunities,” the report said.

These uncertainties include Medicaid redeterminations — the method for determining enrollees’ eligibility for Medicaid — which resumed in April after a pause through the Covid-19 public health emergency. But this might be a chance for more growth within the exchange and employer-sponsored plans.

Antitrust opposition to deals may mean more medium-sized players might be in higher positions for deals as well.

There may even be “phased in” risk adjustment-based reimbursement declines over the subsequent three years for Medicare Advantage, as an alternative of the declines occurring all of sudden, based on PwC.

“While partially alleviating the immediate fears around MA plans, the continued deal with risk adjustment normalization presents opportunities for managed care, profit management, and point solutions programs to distinguish themselves in driving lower costs of care, and in turn, volume share within the broader payer and related support services segment,” the report said.

Photo: metamorworks, Getty Images

Source link


Please enter your comment!
Please enter your name here