The healthcare industry is undergoing significant change, and the exceptional pace of M&A activity in this sector shows no signs of letting up. Health IT is estimated to increase its spending by approximately 40% over the next 2 years - from nearly $60 Billion in 2013 to over $83 Billion by 2015.
Corum has observed that this explosive growth is the combined result of 3 fundamental changes impacting the healthcare industry.
The first is regulatory change. Here in the US - responsible for 40% of the world’s healthcare spending - we’ve only begun the implementation of the Affordable Care Act, with all the accompanying uncertainty & complexity of the new law, plus the waivers, carve-outs, delays and political issues attached. Just one part of the multifaceted regulatory changes in the US has already pushed a wave of consolidation in the EHR/EMR space. Deadlines are approaching with escalating penalties kicking in after this year. We’re also seeing the roll-outs of state exchanges and, starting last month, IRS enforcements challenging the scale and robustness of healthcare software.
Then there’s technological change. Major trends like big data, analytics, security, cloud and mobile are having a significant impact on healthcare technology just as they have across all sectors.
And finally, societal change. As a bulk of the population ages, the requirement for healthcare increases; plus we have a patient population accustomed to internet-based data access and communications who are increasingly interested in their own care. Patients are becoming informed healthcare consumers, creating a popular demand for modernization with usable, effective software. The troubled rollout of the insurance exchanges underscores this need for innovation. Meanwhile the model is moving from volume-based care to value-based care.
These changes continue to drive exceptional activity in the health technology sector, including three deals for Corum clients last year. Public sector valuations are over 22 times revenue, and major deals like Experian Group acquiring Passport Health Communications for $850 million and Harris Computer Corporation acquiring QuadraMed for $85 million are leading the way.
If you have a company focused on streamlining, optimizing or otherwise eliminating one of the many pain points within today’s healthcare market, then you have a unique opportunity to take advantage of an unprecedented level of interest from both strategic and financial buyers in today’s M&A market for Health IT.