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January 27, 2016

Healthcare M&A activity hits record level in 2015

Healthcare merger and acquisition activity grew by 14 percent nationally last year, setting a new record for healthcare M&A deal volume, according to Health Care M&A News, which is published by Irving Levin Associates Inc. in Norwalk.

There were 1,498 deals last year in 13 healthcare service and technology sectors tracked by Health Care M&A News. Service sectors include behavioral health care; home health and hospice; hospitals; labs, MRI and dialysis; long-term care; managed care; physician medical groups; rehabilitation; and other. Technology sectors include biotechnology; eHealth; medical devices; and pharmaceuticals.

“Healthcare mergers and acquisitions benefited from a perfect storm of low interest rates and the building effects of the Affordable Care Act,” Lisa E. Phillips, editor of Health Care M&A News, said in a news release. “Three years into the ACA, more consumers have health insurance and the shift to bundled payments is under way. Healthcare providers, health insurers and pharmaceutical companies are all looking for greater scale and cost efficiencies. We’ll see if 2016 can deliver the same level of growth.”

Spending on deals last year reached $563.1 billion, also a record and 45 percent more than in 2014, the release said.

Healthcare services comprised 62 percent of last year’s deal volume due to increased investor interest in post-acute healthcare sectors such as long-term care and rehabilitation, the report said. Long-term care and rehabilitation deals rose 18 percent and 58 percent, respectively. Behavioral healthcare deals also rose 58 percent.

Deals involving physician medical groups, both primary care and specialty care physicians, rose 47 percent as hospitals and health systems moved closer to a value-based reimbursement system, the report said.

The biggest gain occurred in the managed-care sector, with the 45 deals representing a 105 percent increase over 2014. The only service sector with fewer deals was home health and hospice, down 33 percent from 2014.

The health care technology sector was led by deal volume and spending in pharmaceuticals, even though deal volume dipped 10 percent in that category. But spending in pharmaceuticals was $297.4 billion, a large chunk of that including the $160 billion pending purchase of Allergan plc by Pfizer Inc.

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