2020 Trends in Healthcare Mergers and Acquisitions

January 17, 2020

In 2020, we’re seeing the rate of mergers and acquisitions continuing above the long-term average. What’s ahead for the health care sector?

Since 2010, medical care systems have no longer been content to serve one or two cities. They’re serving whole counties and beyond — and on the lookout for strategic connections to increase cost efficiency and continue their growth patterns. A key strategy to meet these goals involves merger and acquisition (M&A) decisions.

In 2019, we witnessed a great deal of M&A activity in the hospital arena. This year, we expect a lot to happen in health care-facing technology. Here, we review what we’re seeing today.

High-Profile Medical M&A News

Health care groups have been setting merger records in the past several years. In 2017 the sector saw 115 M&A deals. The pattern continued in 2018 and 2019, with stunning growth and numerous high-profile transactions. These are just a few examples:

  • Atrium Health and Wake Forest Baptist Health merged to form a 49-hospital system.
  • Ascension-Presence added 10 hospitals, more than doubling its nonprofit network in the Chicago area, while the city’s Northwestern-Centegra became a 10-hospital system.
  • Fairview-HealthEast became the Minneapolis-St. Paul area’s main hospital system, with 11 locations.
  • HCA Healthcare Inc. expanded its presence throughout half of all U.S. states.
  • Emory-DeKalb Memorial Hospital grew into a 10-facility system for the Atlanta area.
  • Jefferson-Einstein Healthcare of Greater Philadelphia continued to add hospital locations.
  • CVS Health merged with Aetna — a watershed moment representing, according to CVS, the “start of transforming the consumer health experience.”
  • UnitedHealth Group acquired several physician practices including DaVita Medical Group.
  • Humana, joined by private equity firms, bought Kindred Healthcare.

Thus, by 2019, mergers in medical care systems nudged historic levels.

Future Trends Begin Today

What trends can we expect to see in 2020? It is clear that M&A will largely go unchallenged by federal antitrust regulators. With so many big companies having expanded their footprints, challenges to mergers are highly unlikely.

The focus will now move to data businesses. Given the transformation of various aspects of treatment through the use of data analytics, tech firms of various sizes are poised to become players in health system M&A.

A leading role model for this trend is Google. The tech giant’s parent company Alphabet brought on Dr. Robert Califf, the former FDA Commissioner, to steer future strategies for Google Health. Google has been meshing teams from its AI and hardware divisions to augment innovations such as DeepMind, which can detect kidney disease ahead of a doctor’s ability to diagnose it. DeepMind was a UK startup and one of Google’s most notable health-related acquisitions. Google navigated through choppy waters to acquire the startup. A number of British government health service providers who already used the startup’s technology opposed the purchase. Yet today Google Health supplies direct software services to several NHS trusts.

Top Five Areas for Health Industry M&A in 2020

We’re watching the medical device manufacturers as well as the robotic surgery area and a range of technology businesses. These will continue to attract health care companies striving to establish a presence in the most appealing spaces in this burgeoning sphere. Given the energy in this area, health care executives are forecasting 2020’s M&A activity to outdo what we saw in 2019.

Investors’ top five picks for the health care industries in 2020 are:

  • Health care IT and payment systems.
  • In-home care services.
  • Medical equipment and rehabilitation devices.
  • Pharma.
  • Behavioral health.

Despite fears that 2019 would bring a recession, medical industry M&A activity in 2019 was robust. The level of activity will likely stay strong through 2020, though data businesses may see most of the movement.

Unprecedented Drive

Acquisitions of provider locator services and interactive apps for patients are disrupting this sector and presenting forward-thinking business leaders with new opportunities for profitable growth.

Given the age of the baby boomer population, we can expect to see growth in activity involving elder care and the senior housing market as well. Throughout 2019, in-home health services saw continual M&A activity, with dozens of successful hospice company deals. In a particularly high-profile hospice deal, the integrated healthcare services company Encompass Health Corporation took over Alacare of Birmingham, Alabama. Yet plenty of smaller businesses have been driving this trend as well.

Regardless of company size, the emphasis on operational and financial efficiency stands out as a constant trait. And it’s accompanied by an unprecedented level of drive, innovation and momentum to achieve it.

Scott-Macon New York: Your Healthcare Transactions Partner

What’s in the year ahead for Scott-Macon New York? We expect to work with numerous businesses looking to expand within, and into, the health care sector through M&A. It’s exciting, transformational work. And of course it carries with it an intricate package of compliance issues and transactional challenges. Our health care senior team have direct knowledge of health care mergers and acquisitions. These dedicated experts at Scott-Macon New York are here to assist our clients successfully navigate 2020’s complex and rapidly evolving healthcare M&A environment.

To schedule an exploratory consultation with the Scott-Macon advisory team, contact us online or call us on (212) 755-8200. We offer a full range of merger and acquisition services for clients interested in selling or acquiring businesses. From beginning to completion, the mission and duty of our M&A advisory services is straightforward: to deliver the maximum value for our clients.