The main forces spurring health care mergers
CVS Health, owner of MinuteClinics, is trying to buy Aetna. Photo: Dina Rudick/The Boston Globe via Getty Images
"Attractive" profit margins and an aging population are the main reasons for the rush of health care mergers and acquisitions, according to a survey of health care and private equity dealmakers conducted by consulting firm West Monroe Partners.
Reality check: Even though health care players say "value-based care" drives their decision-making, the survey is a candid reminder a lot of the industry is driven by making money rather than improving care.
Driving the news: The West Monroe survey of 100 executives found three predominant factors that will make health care companies appealing takeover targets over the next 1-3 years:
- Attractive profit margins
- Aging population
- Overall growth in demand for care
Between the lines: There's no talk here about "patient-centered coordination" or "controlling spending growth." The responses suggest that dealmakers, especially those in private equity, know they can extract profit from companies that get a lot of revenue from government programs.
But not too much: Many companies and buyout firms have balked at closing deals "if a final analysis shows a large portion of government reimbursement" in a target company's finances. Almost three-fourths of respondents said they have walked away from a deal, due in part to the lower rates paid by Medicare and Medicaid.
- A shortage of quality companies, crazy-high valuations and too much debt also have scared off some parties from acquiring health care companies.