Consolidation among hospitals and health IT companies will grow this year in the wake of the Affordable Care Act, according to a new survey report by Bass, Berry & Sims, published in association with Mergermarket.
Healthcare organizations are the subsectors most likely to see an increase in acquisitions and mergers in 2014-2015, the report, "Healthcare & Life Sciences M&A Outlook," finds. Eighty-six percent of healthcare and life services professionals expect mergers and acquisitions to increase in the industry, with capital needs and economies of scale as two major reasons for the consolidation.
The healthcare industry is seeing "significant implications of the ACA take hold," Angela Humphreys, a member of Bass, Berry & Sims and healthcare transactions attorney, told Brian Ahier, director of standards and government affairs at Medicity, in a LinkedIn post.
"Reforms like these are pushing providers to do more, better, for less--which in turn drives them to consolidate to become stronger in this new healthcare climate," she said.
Some of the pressures from the ACA--such as finding ways to run more efficiently, coping with shifts in reimbursement policies and replacing depleting inpatient revenues--lead to hospital consolidation.
In addition, 20 percent of the report's respondents said that physician groups will be a top area of consolidation over the next year. Mergers can serve as a good avenue for groups trying to upgrade their business models, the report said.
The report's respondents also identified the need for IT support capabilities as a major driver for consolidations in the future.
Technology in the healthcare industry is continually changing the way things are done, and with those changes come more regulations. One way healthcare providers can keep in line with new rules--such as the HITECH Act and Office of the National Coordinator of Health IT's 10-year interoperability plan--is through acquisitions.
And many healthcare providers have a long way to go when it comes to implementing interoperability, which means more acquisitions are likely.