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Thought Leaders: Despite Significant Changes, Healthcare Market Making Big Strides

2017 KEY TAKEAWAYS

• Surprisingly, indecision in healthcare legislation has not hindered reform and progress. The majority of hospitals and health systems have already made great strides in healthcare reform through private sector partnerships, rapid strategic consolidations and cost reduction strategies. Healthcare M&A activity peaked in 2017 transactions and announcements for 2018.

• While healthcare REITs have started to “pump the brakes” due to adjustments in interest rates and reductions in stock value, healthcare-focused private equity has stepped in and made major acquisitions in 2017 and will continue in 2018. Additionally, non-traditional funds, including global capital, will acquire more U.S. healthcare assets this year.

• Hospitals, health systems and providers have been preparing for and serving the aging population for the last decade, but millennials and smart medicine have already started to become an important trend for strategy officers at most hospitals and health systems.

• Medical office construction has increased because of pending tariffs on steel, lack of skilled labor and construction booms throughout the U.S. Lease rates for new construction will be impacted, and some ambulatory strategies could be delayed.

• Kelly Arduino at HFMA recently wrote that “finance is fashion,” an apt phrase to describe the constantly changing forces that shape healthcare business profitability. Capital availability and sourcing in 2018 will see non-traditional debt structures and their cost as a new frontier that is necessary for consolidation. Some formulated forces, such as demographic shifts, are predictable. Other forces, such as retroactive payment policies, are abrupt and some forces like new technologies are upending assumptions.

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