January 3, 2018
The whirlwind of mergers and acquisitions that has occurred over the past two years will continue in 2018, according to Capital One’s annual healthcare survey of companies with annual revenue of $100 million to $3 billion. Roughly 50% of respondents, which illustrate a cross section of providers, pharmaceutical companies, investment firms, and other healthcare services companies, said they plan to buy or merge with existing businesses this year.
“Merger mania is just widespread,” said Lyndean Lenhoff Brick, president and CEO of the Advis Group, a healthcare consultancy. “You’re going to see it in every facet of healthcare. The reason is because there is still such pressure to reduce prices. What you lose in prices, you’ve got to start picking up in volume and market penetration.”
For example, Thomas Jefferson University in Philadelphia has expanded significantly in recent years, merging with Philadelphia University and Kennedy Health System in 2017, and scooping up Abington Health in 2015 and Aria Health System in 2016.
An overwhelming majority of survey respondents are feeling optimistic about this year: 76% said they expect their businesses to perform better this year than in 2017.
“I think people are feeling pretty good about going into 2018, which is what you’re seeing in the results here,” said Al Aria, senior managing director of Capital One’s healthcare lending group, adding that 2017 was one of the most robust years he’s seen since 2009.
Nearly half of respondents indicated they’ll hire more people than they did last year, with another 35% planning to hire the same number. Only 11% expect to hire fewer people than last year.
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