We recently co-hosted a webinar with Behavioral Health Business during which we discussed exit planning and opportunities for owners and executives in the behavioral health space who may be thinking of or starting to plan an exit strategy from their business (i.e., sell their business). The webinar aimed to provide strategic insights into the behavioral health industry's acquisition landscape, covering diverse topics such as private equity models, positive aspects of behavioral health businesses, and building successful partnerships. The program featured Aly Champsi, managing director at DW Healthcare Partners, and Jenna Whigham, president of Abound Health. Jack Turgeon, senior consultant with VERTESS, served as moderator for the webinar.

At VERTESS, we've seen our number of home health clients increasing throughout 2023. I thought it would be worthwhile to share what we're witnessing and anticipating for this sector as we move into the final quarter of the year and head toward the new year.

Ambulatory surgery centers (ASCs) are a hot commodity. We're seeing an increase in the number of ASCs coming on the market and plenty of interest in high-performing — and sometimes underperforming — centers from the likes of hospitals and management/development companies, and to a lesser extent other ASCs/physicians and private equity (PE) firms. The latter is largely more interested in investing in companies with existing ASC portfolios or medical groups which own and operate one or more ASC. We're also seeing a growing number of PE firms going head-to-head with the large ASC strategic buyers and offering competitive alternatives to these heavyweight managing companies.

The Centers for Medicare & Medicaid Services (CMS) recently proposed a new rule for home- and community-based services (HCBS) that would make major changes to the way home care workers are compensated under Medicaid. What's most significant about the proposed changes is the requirement that at least 80% of the Medicaid payments for personal care, homemaker, and home health aide services must be directed toward the wages for caregivers.

I was fortunate to attend the ViVE Conference in Nashville earlier this week. If you are not familiar with ViVE, which launched in 2022, it merges the leadership of College of Healthcare Information Management Executives (CHIME) and the HLTH digital marketplace.

Over the past several years, we've seen a rapid rise in the number of new healthcare revenue cycle management (RCM) companies, existing companies launching RCM divisions, and transactions involving RCM companies. All three developments are tied to the greater demand for RCM services.

The home medical equipment (HME) industry was long dominated by legacy manufacturers with a high barrier of entry. But over the past few years, we've begun to see cracks in the decades-old status quo emerge. 

2022 proved to be a year that did not live up to everyone’s expectations. Riding on a wave of furious M+A activity in 2021, the initial optimism was met with bewilderment as buyers became increasingly selective and cautious in the transaction process as they sought to mitigate risk.  Deals that were expected to be straightforward experienced headwinds that led to a less-than-robust conclusion to the year.  Larger global economic issues, the continuing pandemic, and uncertainty in the political sphere undoubtedly influenced the healthcare M+A market.  However, we are already seeing signs of change in 2023. Deal activity is up and buyers still have a lot of dry powder to deploy.  The VERTESS team is pleased to offer its annual year-end review as well as the future outlook for each of the healthcare verticals our Managing Directors support.  We look forward to new challenges and successes in 2023!

It's been a wild ride for M+A activity in the healthcare space these past few years, with several significant global and domestic issues impacting deal flow. The effects of the COVID-19 pandemic will be felt for a long time. Russia's invasion of Ukraine has created global uncertainty. Domestic inflation has created cautious investors. Labor shortages have decreased profits for many providers.

All of these weighed down the healthcare space, yet it's estimated that of the $1.6 trillion in "dry powder" (i.e., unspent capital) globally, 15% is expected to be allocated to healthcare. And of that 15%, I expect a good percentage to go toward behavioral health.

Following the lull of transaction activity that affected all of healthcare in the first several months of the COVID-19 pandemic, the behavioral health space has experienced fairly steady transaction activity, including some large deals that had ripple effects throughout the space.

In this column, I'm going to share my thoughts on today's behavioral health and intellectual and developmental disability (I/DD) markets. I'll speak to the macro environment because those issues are impacting the decisions of buyers and lenders. In turn, these issues impact the values buyers are willing to pay for your company. I’ll also address how you, as an owner in this space, can use this information for your own planning purposes — that is, how to do what’s best for you.

In September, VERTESS Managing Directors, joined by members of the business development team, attended three national conferences: Cape Cod Symposium on Addictive Disorders, The National Association for Specialty Pharmacy Annual Meeting, and The Home Care Association of America Annual Leadership Conference. Dominating the tradeshow floors were exhibitors in the healthcare technology space. We estimated that these companies accounted for 40-60% of the exhibitors — a common thread intersecting the three different verticals represented at the meetings.

The information covered in the following column is derived from two sources. First, VERTESS recently conducted a survey of more than 20 buyers of substance use disorder (SUD) treatment providers on a variety of topics, including acquisition strategy and market trends. Second, I engaged in extensive discussions with fellow VERTESS team members who collectively are heavily involved in the private capital markets and witness the cycles in the verticals we represent.

My intentions in this column are to articulate broad concepts in current trends and developments within the broader healthcare M+A markets. While I am writing for owners of all healthcare businesses, there is a special emphasis on owners of SUD treatment businesses since the survey conducted was with SUD buyers and SUD is an area in which I specialize. SalientValue also has articles on general recommendations for healthcare business owners and vertical/segment specific articles outside of SUD.