Changing market dynamics present new opportunities

Share this article:
Imran Javaid
Imran Javaid

A convergence of regulatory and market influences are triggering a wave of mergers and acquisitions in the long-term care (LTC) industry. This convergence presents new opportunities and considerations for operators of all sizes. The dollar volume in LTC mergers and acquisitions jumped to $16.3 billion in 2011, up from $12.1 billion in 2010, according to The Health Care M & A Report from Irving Levin Associates, a healthcare research and information firm.  In addition, the number of publicly-announced deals in the senior housing and long-term care sector jumped over 50% from 2010 to 2011, according to the report.

The increasing transactional activity seen in 2011 accelerated in 2012 and a myriad of industry changes present substantial opportunities for LTC operators exploring expansion, consolidation and acquisition, particularly those in the middle market. Virtually all LTC facilities are undergoing significant operational changes.  Two of the biggest challenges facing the industry are: (i) a need to update information technology systems, including the implementation of electronic medical records and, (ii) changing reimbursement models.  The two challenges are interrelated.  The technology upgrades are essential, in part, to maximize reimbursements as payment systems evolve from a “pay-per-service cost-based model” to a “price-and performance-based reimbursement model.” This transition to price-based reimbursement on performance will make tracking clinical outcomes and investments in technology even more essential.

While government reforms and recent industry changes have the potential to deliver higher-quality care and increased operational efficiencies, not only are the changes costly, but not all businesses can afford to operate in this new environment. As a result, the LTC industry, which has traditionally been fragmented, will continue to experience more transactional events and consolidation.

As changing market dynamics come into play, and we move into 2013, there are a number of scenarios we anticipate. For example, in this changing environment, middle market LTC companies may be best positioned for long-term success. Independent operators may be interested in being acquired by regional chains, while regional operators may seek to merge with or be pursued by national organizations.  Middle market companies have the advantage of being able to look for opportunities in multiple directions -- as buyers, partners or acquisition targets, or some hybrid. Regardless of how the prospective deal activity unfolds, LTC businesses of all sizes will have opportunities to profit in light of the steadily increasing consumer demand for LTC.

Imran Javaid is the Managing Director, Commercial and Specialty Finance, Capital One Bank.

Share this article:

Featured Listings

Anacapa Technologies, Inc.

Anacapa Technologies, Inc.

Anacapa Technologies, Inc. is a veteran-owned, federally certified small business based in San ...

Bulk TV Internet

Bulk TV  Internet

Bulk TV & Internet is a leading provider of television, Internet and phone ...

Chestnut Ridge Foam, Inc.

Chestnut Ridge Foam, Inc.

The CAREFLEX PHPFP Mattress is our most popular model within acute care and ...

more »

More in Marketplace

Preventing burns in seniors

Preventing burns in seniors

Hot-water scalding comes when a person accidentally turns on the hot water and the pre-set temperature for the water heater is too high. As an administrator or caregiver at an ...

Reducing energy footprints with LED

Reducing energy footprints with LED

Long-term care facilities need to ensure that residents, staff and visitors have appropriate lighting in parking facilities and high traffic areas for wayfinding, safety and visual comfort.

Are hard surface floors really greener?

Are hard surface floors really greener?

While it cannot be denied that hard surface flooring is likely to last longer than carpeting, there are studies that question if it is actually easier and more cost effective ...