The changing face of long-term care continues to drive merger and acquisition activity for the fifth straight year, according to two new reports.
Deal volume involving long-term care and assisted living properties jumped 7.3% in the second quarter of 2019 versus the same period last year, according to PricewaterhouseCoopers’ U.S. Health Services Deals Insights.
Overall, such transactions made up 41% of 543 healthcare transactions in the first six months of 2019, PwC said. The auditing giant also said last week that the long-term care subsector had the highest number of quarterly deals at 114, continuing a stretch that dates to 2014.
Its analysts said the sustained growth was influenced by numerous factors, including capital availability; interest rates; regulation, policy and tax reform impact; inpatient volumes pressure and high costs; cross-industry deals; and the pursuit of capabilities that target specific patients.
“Interest in managing high costs and population health, while engaging patients and addressing social determinants of health, remain top-of-mind issues,” Nick Donkar, US Health Services Deals Leader for PwC said in the report’s executive summary.
PwC noted that the only $1 billion-plus deal was Ventas’ June announcement of its plan to acquire 31 Quebec-area independent living communities, plus four in progress, through an 85% / 15% equity partnership with Le Groupe Maurice.
PwC used data from Irving Levin Associates, Dealogic Equity Capital Markets Analytics, S&P Capital IQ, and publicly reported deal transactions.
Citing slightly different numbers, attorneys and analysts with Epstein, Becker & Green reported in Bloomberg News last week that the long-term care sector is the most active in health-care sector through June. Their analysis included 143 announced or closed transactions.
That is up 43% from the 100 long-term care transactions through the first six months of 2018, according to the Bloomberg Law-Healthcare Advisory Panel.
The Epstein experts, writing with representatives from ECG Management Consultants, pointed to the surging aging population and recent healthcare initiatives that expanded insurance coverage as major M&A drivers. While volume has grown, the shifting payer mix and lower reimbursement rates provided for Medicare and Medicaid patients means providers are seeking more strategic alignments.
“Long-term care organizations have shifted focus to improving operational efficiencies via economies of scale, resulting in further industry consolidation,” they wrote. “In addition to strategic acquisitions, long-term care organizations also have attracted interest from financial sponsors such as private equity groups and real estate investment trusts (REITs) due to the sector’s relatively stable cash-flows and inherent value of the real estate that comes packaged with business operations.”
