Dive Brief:
- M&A in the healthcare and life sciences markets is likely to keep up its brisk clip and even gain momentum in 2015, according to a new survey by KPMG.
- Not only is the ACA pressuring hospitals to come together to improve care coordination, the capital financial markets are offering low interest rates and strong hospital valuations, creating fertile conditions for selling or divesting assets, KPMG notes.
- Other factors driving the continued expansion of hospital M&A cited by survey respondents include large cash reserves (35%), availability of credit on favorable terms (22%) and opportunities in emerging markets, the survey found.
Dive Insight:
It's not surprising to learn that hospital M&A likely still to be going strong next year, as there appears to be a convergence of financial and strategic factors favoring such deals. Not only will hospitals with a strong war chest be looking for favorable deals, but so will troubled facilities looking for a savior. Given the modest profit margins hospitals are facing of late—in some cases, negative margins—consolidation is predictable.
That being said, there's a reason the ACO model is popular. It seems clear that if hospitals are in position to do so, many prefer to affiliate and share resources rather than effect a full merger. Not only do such arrangements preserve hospital and health system independence, they allow hospitals to avoid antitrust scrutiny, which has already ramped up as of late. While KPMG's data clearly captures an important dynamic, it doesn't tell the whole story.