A growing number of hospice, home care and home health companies are involved in mergers and acquisitions as they position themselves to better take advantage of growing, lucrative healthcare market.
As millions of Baby Boomers and their parents age, there’s a rising demand for comprehensive long-term health care for them. It’s an excellent opportunity for companies with the resources to provide the care they need either in their homes or in hospice facilities.
Savvy health care companies are using mergers and acquisitions to capitalize on it.
Three Trends Driving Healthcare M&A
There are several reasons mergers and acquisitions in the healthcare industry makes sense. They include profitability and the ability to provide more comprehensive care to more people. However, there are three major trends driving large healthcare companies frenzied M&A activity. Those trends are the profitability of offering diversified services, the potential for growth by ‘One-Stop Shops’ and the focus on the value of providing quality care over serving a high volume of patients.
An Evolving Health Care Landscape
Health care for the aging is evolving in several different areas simultaneously. One group of patients needs a variety of health care services, but want them provided in their homes. Another segment of the aging patient population recognizes their health care needs will change and want one health care company to handle their changing needs. A third group of aging patients is focused on getting the highest quality care available. Attempting to satisfy all of these groups is leading to more M&A activity in the healthcare industry.
#1. Serving Diverse Markets
With rising home health care profits, the rosy hospice industry outlook and a growing pool of elderly patients willing and able to pay for costly, high-quality care, health care companies are looking for the best way to capitalize on these diverse, lucrative, markets. With an eye on the broader regulatory environment, even the largest healthcare companies are trending their current transaction efforts towards diversity to insulate their businesses. They see this as the most effective way to prepare for change and growth.
Leveraging Diverse Revenue Streams
The ability to tap into diverse revenue streams enables healthcare companies to insulate themselves against market changes and volatility. To facilitate this, companies are seeking out partners with unique strengths and specialties to merge with or to acquire. Smaller companies that do quality work make the ideal targets for M&A. Joining forces enables both companies to grow, better serve more patients and enjoy a greater level of success.
Increased regulatory and data requirements which are difficult for small companies to meet, access to more resources and strong capital markets make consolidation attractive for many smaller companies. For larger health care companies looking to diversify the services they offer and take advantage of opportunities in the marketplace, M&A makes good business sense as well. M&A can make companies more well-rounded and attractive to investors and a growing number of aging patients.
Home Health Care Profits
One of the fastest growing and most lucrative segments of the healthcare industry is home health care. Today the health care market is characterized by:
- An rapidly escalating number of elderly patients
- A growing home health market size
- Rising home care business profit
- Increasing home health trends
This bodes well for health care companies with the vision, resources and experience to tap into the home health care market. To many companies, the home health market size growth and soaring home health care profits are trends that will continue for the foreseeable future. For them M&A activity that can help them benefit from the booming home health care market is a savvy move. The key is not to ignore the other elements of the lucrative healthcare market.