The US health care sector includes more than 830,000 hospitals, doctors’ offices, emergency care units, nursing homes, and social services providers with combined annual revenue of about $2.2 trillion. M&A activity in the sector has been robust over the past several years as the nation grapples with healthcare reform. One segment of the sector seems to be of particular interest at present…Healthcare IT.
The Patient Protection and Affordable Care Act, better known as “Obamacare” continues to have far reaching implications across all healthcare subsectors. Demands for quality healthcare data continue to increase and private equity funds and strategic buyers alike are investing in new segments that improve provider workflows and patient outcomes. Investments span a variety of provider and services assets, including healthcare-related information technology (HCIT) solutions.
The recent passage of the Protecting Access to Medicare Act of 2014, also known as the “doc fix” bill, spared the US health care sector the effects of physician rate cuts and comprehensive medical coding changes for another year. The bill delayed a Medicare physician rate cut based on the sustainable growth rating (SGR) formula and physicians have avoided an approximate 25 percent SGR rate cut for several years by winning reprieves from lawmakers. Another major change for the health care sector, implementation of the ICD-10 medical coding system, was also delayed until October 2015. Adopting the new diagnostic codes, which the AMA opposes, will require significant IT investment.
Some medical entities have already invested in preparing for the ICD-10 change, but Healthcare IT activity should be robust as providers implement these costly programs. Investors will look to capitalize on this coding change.