Mergers and acquisitions (M&A) in healthcare moved at a rapid pace in 2021 and had prolific deal volume. New regulatory and technological requirements along with tailwinds in certain sectors accelerated deal volume and industry dynamics. Below are some key drivers that played a part in accelerating industry consolidation and M&A activity in 2021 and we anticipate the ongoing impact of these into 2022 market trends:
Post-Acute:
- Transition to the Patient Driven Groupings Model (PDGM) no-pay RAP on January 1, 2021
- Review Choice Demonstration (RCD) implementation in Florida and North Carolina
- National expansion of Home Health Value-Based Purchasing (HHVBP) in 2023
- Federal mandate requiring states to implement Electronic Visit Verification (EVV) for Medicaid personal care services and home health services
- Continued expansion of the Hospice Medicare Advantage Value-Based Insurance Design (VBID) Model
Behavioral Health | Intellectual Developmental Disabilities (I/DD); Mental Health; Autism:
- Rising demand and recognition of the importance of behavioral and mental health treatment
- Telehealth and innovative delivery models leading to increased access to services
- Industry resiliency demonstrated through the public health emergency (PHE)
Specialty Physician:
- Payment and Documentation changes for Evaluation and Management (E/M) Services
- Increased incentive for Quality Payment Programs (QPP)
- Merit-based Incentive Payment System (MIPS)
- Medicare Shared Savings Program (MSSP)
- Advanced Alternative Payment Models (APMs)
- Continued decrease in physician fee schedule conversion factor (nearly 4% decrease from previous year)
Of the many factors impacting the M&A landscape, perhaps the most influencing has been the ongoing COVID-19 pandemic. This ongoing public health emergency has led to patients seeking home-based care as an alternative to facility-based care. The post-acute industry continues to watch and support H.R.5514 – Choose Home Care Act of 2021 which will allow eligible patients to seek care and recover in their home.
The pandemic has also accelerated the shift to utilizing telehealth and virtual visits across all health care settings. This new demand has expedited the delivery of behavioral health and specialty physician treatment from nontraditional resources. From 2020 through first quarter 2021, Investors including venture funds and private equity firms have flooded the market with over $2 billion dollars into telehealth services and technology*. Consumers now have more options than ever when seeking mental health and other specialty physician services. Telehealth has allowed providers to meet consumer expectations of convenient care options, while increasing a non-traditional revenue stream in the market. Additionally, regulatory provisions have increased Telehealth opportunities. The consolidated appropriation act of 2021 and American Rescue Plan Acts of 2021 has increased the patient’s ability to receive care. Medicare patients can now receive telehealth services for behavioral health care in their homes in any part of the country. This includes most behavioral health services such as counseling, psychotherapy, and psychiatric evaluations. The appropriation Act also included additional funding for FCC broadband access to ensure low-income consumers can access internet services at home and also provided almost $250 million in additional funding for the COVID-19 Telehealth program to disburse directly to providers.
Additionally, the federally proposed capital gains tax increases have further incentivized buyers and sellers to close deals prior to the roll out of the rate increase. High industry fragmentation has also left a long runway for industry consolidation through acquiring competitors, diversifying service offerings, and expanding into new geographical territories. This has helped drive innovative partnership models among providers and investors. Ongoing investments and interest from Private Equity (PE) firms both small and large, have continued to propel consolidations across the healthcare industry. This brought forth expansions into new markets, execution of a buy-and-build platform playbook, and emergence of more innovative technology to their portfolio of companies to support the shift to more home-base or outpatient care settings.
As we look to 2022, we anticipate another active year of transactions across all healthcare sectors. The regulatory landscape of approved and proposed regulations such as VBP and capital gains tax increases, respectively, may create both turbulence and acceleration of deals prior to taking effect.
As deal volume has grown in recent years, so too has McBee’s capabilities and offerings in M&A. McBee is honored to serve as a trusted strategic advisor to support our clients. We’ve partnered with buyers and sellers in the industry including healthcare service providers, PE firms, law firms, and individual investors; our services have helped get deals done efficiently, while uncovering key compliance risk areas in the process. Below is a summary of how McBee helped clients complete deals in 2021:
Buy Side:
- Uncover compliance risk areas associated with clinical documentation, billing, and corporate compliance programs
- Provide compliance-related data to assist buyers with calculating liability reserves, purchase price, and deal structure
- Assist buyers in the Representation and Warranty Insurance (RWI) diligence call process
- Identify quality trends and best practice improvement areas to give buyers a head start on post-close integration planning
- Assist in post-close integration
Sell-Side:
- Independent review of seller agency to provide feedback on their compliance, the quality of their current processes, and go to market readiness
- Comparison to other industry leaders to help sellers and their advisors assess their agency
- Guidance on achieving best practice with clinical documentation, billing, and corporate compliance programs before going to market
- Equip agency with compliance related data to assist with calculating purchase price, deal structure and liability reserves.
McBee’s unique advantages for every acquisition equip organizations with the insight needed to maximize value and empower negotiations. Partnering with us, you’ll receive trusted, strategic guidance you need to confirm the compliance of any investment, no matter how complex. Discover how a McBee can help you adapt, innovate and thrive in the 2022 M&A world.
