A large majority of healthcare executives expect they’ll pursue mergers and acquisitions before the year is over, according to a recent GE Capital Healthcare Financial Services survey of healthcare services executives.
While 43% anticipate pursuing refinancing in the next few months, more than twice as many—88%—executives believe M&A is in their near-term future, according to the survey, which examined the expectations of more than 200 senior executives within the healthcare services industry in advance of its 2013 Healthcare Services Conference held last week in Washington, D.C.
Overall, optimism was high, as 72% of executives believe their businesses will have a stronger upcoming performance as compared to the last few months. Only 4% are anticipating weaker performance, while nearly a quarter believe they will perform the same.
“We expect conditions to continue to be strong for the balance of this year into next year,” says Jim Seymour, senior managing director for GE Capital’s Healthcare Financial Services Real Estate segment. “Looking on the senior housing side, the demographics remain very strong. The improving economy is very good, particularly on the less-acute side of the [senior housing and care] continuum.”
Still, there are some headwinds facing the industry stemming from economic performance, regulations, financing availability, and healthcare reform.
Budget pressures and the looming possibility of a government shutdown are worrisome to 37% of executives surveyed, followed by Affordable Care Act changes as the reform law is implemented (30%) and regulatory scrutiny (26%). Only 8% of respondents are worried about their access to financing when it comes to the future of their organization.
Anecdotally, while there’s been an “awful lot of uncertainty” on the skilled nursing side—particularly when it comes to reimbursements—the outlook has improved, says Seymour.
“The reimbursement environment [for the sector] is in better shape now than any of the past three years,” he says, adding that this positive outlook is expected to continue through the rest of this year into 2014.
Another sector with a positive outlook, according to executives, is home health.
More than four in ten surveyed (41%) picked home health as the segment of healthcare services—out of hospice, hospitals, rehabilitation, home health, and assisted living/skilled nursing—they expect will see the most growth through the remainder of the year.
The hospital segment was a close second with 38% of executives in agreement, followed by assisted living and skilled nursing, at 28%.
“As the survey points out, the trend of integration and consolidation is continuing across healthcare services,” said Darren Alcus, president and CEO of GE Capital, Healthcare Financial Services, in a statement. “Companies are seeking ways to grow in a challenging environment. Decreased utilization, reimbursement rates under constant pressure and increased regulatory scrutiny have made it difficult to grow organically, so we’re continuing to see companies turn to M&A.”
Written by Alyssa Gerace