The impact of bundled payments on PE deal activity in healthcare
May 10, 2016
PitchBook Dealmakers Column
The healthcare market's shift to value-based reimbursements has led to aggressive moves by the Centers for Medicare and Medicaid Services (CMS) to roll out new initiatives and alternative payment models in support of its goal of tying 90% of traditional Medicare payments to quality or value by 2018. That includes the April 1 launch of CMS' first mandatory bundled payment program, which holds hospitals responsible for all costs and outcomes for Medicare-covered hip and knee replacements and caps the price Medicare will pay for the sum total of that care within 90 days of the admission date, even beyond hospital walls as patients are referred to post-acute care facilities. Investors who wish to succeed in healthcare, particularly in the post-acute provider space, will need to understand the broader financial impact of these and other alternative payment methods, which stand to significantly alter business models in a highly competitive landscape.
As described in the new BDO PE Deal Activity in Healthcare Report, interest in long-term care facilities, rehabilitation facilities and home health agencies has been growing, with 79 M&A deals reported in 2015, up slightly from 71 deals in 2014. As shown in the chart below, the value of the deals has climbed significantly year-over-year from $1.67 billion to $5.92 billion.
To learn more about deal activity and how alternative payment models are creating opportunities and challenges for private equity investments in healthcare, read The BDO PE Deal Activity in Healthcare Report, which includes a special Q&A with Patrick Pilch, Managing Director of The BDO Center for Healthcare Excellence & Innovation, about the impact of the new bundled payments mandates on facility operators and investors. You can view the full report here.
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