Investors have spent almost 10 times more to buy medical supplies in the second quarter of 2021 compared to the previous year’s period.
Solic Capital Management reported a total transaction value of $ 126.1 billion in the three months ended June 30, which the company characterized by a “stunning” increase of $ 12.9 billion announced during the same period in 2020. Huge increases in long-term care, hospital and e-health sectors have increased spending in the recently ended quarter.
“It looks like investors are trying to make up for lost time,” Solic wrote of his findings.
Today’s investors are particularly private equity firms – particularly those that roll-up their existing portfolio companies – and special-purpose acquisition companies. That’s a change from five years ago, when buyers were primarily health systems, Solic said.
The hottest area for investments to date is primary care, a surprising finding given that private equity tends to favor specialties with higher reimbursements such as dermatology, ophthalmology and orthopedics. Primary care also tends to have higher proportions of Medicare and Medicaid patients than specialties that attract more commercially insured clients.
What makes primary care so attractive now is the older generation of Baby Boomer and the continued expansion of Medicare Advantage, the Solic authors wrote.
Insurance companies are particularly aggressive when it comes to building primary care acquisitions to increase their influence of patients on the front-end and control costs in their own Medicare Advantage plans. For private equity investors, it’s more about having more influence in negotiations with insurers if they control any doctors in the area, said Greg Hagood, senior general manager of Solic.
“The vision is, I think, to manage care, which can contribute to any savings in the overall cost of care, whether you’re the private equity investor or the insurance investor,” he said.
Notable recent primary care agreements include the acquisition of Miami-based senior care provider Cano Health into South Florida University Health Care for $ 600 million. The combined company has 143,000 members, 88 medical centers and more than 1,000 staff and affiliated providers.
Hagood also highlighted Clayton, Dubilier & Rice who reported the acquisition of the Millennium Physician Group, another large practice in Florida with more than 300 suppliers.
Hagood said the trend has attracted people’s attention because historically primary care was a stable enterprise but not one of great margin. The new theory, however, is, “while continuing to expand practices, there is efficiency in large numbers.”
In terms of business accounts, Solic made 542 transactions in the second quarter of 2021, an increase of 58% from the 344 offers announced in the previous year’s period. The 2021 period is down 11% from the first quarter of 2021, in which there were 611 reported transactions.
Increased agreements mean fewer doctors working in independent, privately owned practices. Nearly 70% of doctors will be employed by hospitals or corporations as private equity firms and health insurers as of January 2021, according to an analysis by Avalere Health, which also suggested that the COVID-19 pandemic has accelerated the trend. .
The side effect is a higher health cost. A recent pair of Health studies found that doctors employed by hospitals were more likely to order inappropriate magnetic resonance imaging tests and that the overall test volume increased after hospitals acquired medical practices.