Health Care Execs Predict Capital Needs Will Increase in 2017

For the second year in a row, merger and acquisition (M&A) activity is expected to be the health care industry’s preferred growth strategy, according to a recent survey of health care company executives and health care industry investors.

There is also a strong need for an increase in capital this year, the survey from Capital One (NYSE: COF) found. Nearly half of the 450 executives surveyed reported that they expect to see the need for capital to increase, which is up from 25% in 2016.

Perhaps driving the need for capital, 31% of executives, or one in three, said they would launch new segments or lines of business, which is up from 17% last year. And M&A transactions would drive growth plans for 38% of those surveyed, compared to 41% in 2016.

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Organic growth was found to be another top method executives anticipate to use as part of their growth strategy, with more than one quarter stating this.

“With M&A and a strong new business segment outlook, executives are clearly keeping all avenues to growth on the table,” Al Aria, senior managing director at Capital One Healthcare, said in a press release Tuesday.

Even though the need for capital is expected to increase in 2017, 94% of respondents expect their business to deliver financial performance on par or better than last year, the survey found.

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On the flip side, only 7% of those surveyed predicted weaker financials in 2017 compare to 2016.

Another area that is predicted to see some changes when compared to last year is the Affordable Care Act (ACA). Of the executives surveyed, 59% said changes to the ACA were among their largest concerns, which is a large jump from last year when only 33% said they were concerned about ACA changes.

“Even amid some uncertainty, optimism remains high across the health care industry,” Aria added.

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Written by Alana Stramowski

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