Physician practices remain a top target for investors
In health services, deal volume decreased 9% from the fourth quarter of 2021 to the first quarter of this year, but volume is strong when comparing the last 12 months ending May 15 to the prior year period. Deal volume across all health service subsectors increased 5% in the year ending May 15, as compared to the previous twelve months. However, the value of those deals was 17% lower for the period.
Increases in deal volume is being driven by roll-up transactions as the industry tries to consolidate fragmented subsectors of health care, according to the report. These transactions are meant to create system that can deliver higher quality, patient-centric care using more digital tools.
Overall health services deal volumes are trending above the longer-term average and are expected to rebound in the coming quarters. Cash from private equity and corporations remains at unprecedented levels and will drive competition for the assets.
Long-term care is driving transactions this year, with 498 deals as of May 15, compared to 446 in the prior 12 months. Deal value increase 2% to $19.6 billion. This sector continues to be attractive to investors, despite staffing shortages and vaccine mandate issues. It is driven by solid fundamentals as the population continues to age.
Physician medical groups are also attractive targets. Dealmaking in the space nearly doubled in the first quarter of 2021 and has been at elevated levels ever since. There were 482 physician medical group deals through May 15 worth a combined $5.7 billion. Private equity and health systems continue to compete for these groups with private equity looking to grow their regional and national platforms, while health systems look for market presence.
Home health is another area of strength. There were 142 home health and hospice deals in the 12 months ending May 15, increasing 19% in value from 2021. This was driven by UnitedHealthcare’s acquisition of Louisiana-based home health group LHC Group, for $170 per share, or about $5.4 billion in cash, plus debt.
Other highlights of the report include: