Interest in health information technology (IT) vendor acquisitions continues to be very high, while infrastructure categories and value-based market segments, such as population health and care coordination, top the list of acquisition targets, according to a report from Healthcare Growth Partners, a health IT investment bank.
For its 2015 year-end market review, Healthcare Growth Partners surveyed C-level and business development professionals at 400 companies representing a cross-section of healthcare, including payers, providers, biopharma and medical technology, and health IT, as well as software and information services companies with varying degrees of exposure to health IT.
One finding of the survey indicates that the health IT marketplace is becomingly increasingly diverse, with less than half of companies in the market classified as health IT based on the traditional definition of the term. Health plans, healthcare providers, biopharma and medical technology, benefits consultants, enterprise software vendors, consumer products companies and other new entrants are redefining the market and expanding the universe of buyers, Christopher McCord, managing director at Healthcare Growth Partners, wrote in the report.
According to the survey, 80 percent of respondents made a health IT acquisition in the past two years and 90 percent are actively seeking health IT acquisitions this year.
The survey responses indicate that those companies seeking acquisitions this year are highly interested in the population health/data analytics/CDS sector (76 percent) and the care coordination/telemedicine sector (52 percent). Other top sectors include remote care management (RCM) tech or services, other infrastructure technology, specialty applications and electronic medical record (EMR)/clinical documentation technology.
As far as M&A activity, there were 309 health IT M&A transactions in 2012, followed by a drop in transactions to 222 in 2013 and then a rebound to 308 transactions in 2014. There were a record 328 transactions in 2015, according to the Healthcare Growth Partners report.
According to McCord, since the introduction of the Health Information Technology for Economic and Clinical Health (HITECH) Act, the health IT market has evolved as “vendors are constantly reacting to a steady mandate of feature requirements, alternative payment models, quality reporting and compliance provisions.” And, he noted that the complex mix of policy and market dynamics, such as consumer-driven healthcare, “creates opportunities and challenges due to the market inefficiencies, which stakeholders can choose to either exploit or solve.”
According to McCord, the health IT market is undergoing a “multi-stage evolution sparked by advancements in technology and the implementation of policy.” “The evolution is likely to result in a decentralized and personalized care delivery model that will ultimately cater to a discretionary and informed consumer patient,” McCord wrote.
“Underlying the evolution is a series of policy and regulatory initiatives that serve as catalysts for both innovation and purchasing decisions. In effect, many new health IT markets are created on the back of regulatory programs,” he wrote. And, he noted that there is “huge opportunity to lead the market based on the early identification of the downstream implications of policy.”
McCord also wrote that the “holy grail” of the health IT market evolution is personalized medicine, yet, in order for this sector to be achieved at scale, “all stakeholder incentives require near perfect alignment, an aim unlikely to be realized in the next several years.”
While McCord describes the evolution of the health IT markets as governed by politics, policy and regulation, he also noted that “the pace of innovation and change is accelerating at lightning speed.”
“The amount of capital, frustration and desire for action is at a tipping point. While we advise pragmatism, disruptive innovation should and will ultimately prevail. The ideal strategy is based on a formula that aligns stakeholder interests and optimizes both regulatory and market forces,” he wrote.
