Health Care Merger and Acquisitions Activity Increases Significantly
NORWALK, Conn.–(March 31, 2011)–Merger and acquisition activity in the health care industry’s service sectors burgeoned in 2010 as the impact of Credit Crunch and Great Recession on the economy began to fade. A total of 458 M&A deals were announced in nine sectors of the health care services industry, up 24 percent from the 368 announced in 2009. Moreover, the dollar volume spent on this M&A activity soared over 425% from $12.3 billion in 2009 to $64.9 billion in 2010. “While the middle market continued to thrive in 2010, we saw a return of the mega-deal with 18 separate billion-dollar transactions announced during the year as compared with just one in 2009. The passage of significant health care reform in March 2010, just one year after the generational market bottom, helped to accelerate the recovery in the markets,” commented Sandy Steever, editor of The Health Care Services Acquisition Report, Seventeenth Edition.
The Hospital acquisition market showed marked progress in 2010. Seventy-three M&A transactions were announced in 2010 involving 175 hospitals with 29,294 beds for a combined price of $12.8 billion. (These figures include Community Health System’s $7.3 billion hostile bid for Tenet Healthcare Corporation.) Even without the Community-Tenet deal, 2010 posted a 38 percent increase in the number of hospital deals, a 59 percent increase in the number of hospitals acquired and a 212 percent increase in the dollars spent on hospital transactions. However, certain indicators of hospital pricing fell in 2010 from their levels in 2009; for example, the average price-to-revenue multiple was just 0.66x as compared with 0.78x the previous year. This decrease reflects a higher level of bankruptcy and distressed sales in 2010 with nine such sales as compared with just one in 2009. Stephen M. Monroe, a partner at Irving Levin Associates, commented: “With capital beginning to return to the market, buyers now have the means to take advantage of acquisition opportunities represented by financially distressed sellers. As this market evolves, acquisition pricing will continue to seek its ‘new normal’.”
In other highlights, Physician Medical Group merger and acquisition activity rose to its highest level in five years. In 2010, this sector posted 63 deals involving 2,370 physicians for a combined total of $425.4 million. Merger and acquisition deal volume thus increased 54 percent year-over year while dollar volume skyrocketed 330 percent. Mr. Steever observed, “As hospitals and integrated delivery systems attempt to create Accountable Care Organizations, they are building the physician component of these organizations through acquisition. Further, hospital-based physician practices stand to prosper more than freestanding practices in the emerging reimbursement environment, prompting physicians to join forces with acute care providers.”
The Health Care Services Acquisition Report, Seventeenth Edition, contains nearly 200 pages of hard-to-find information on all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health, home health and hospice care, rehabilitation and other services mergers and acquisitions in 2010. One other services sector, long-term care, is treated separately in The Senior Care Acquisition Report, Sixteenth Edition. Irving Levin Associates, Inc. is a Norwalk, Connecticut-based research and publishing firm specializing in health care investments. The firm has more than 50 years experience in the health care and seniors housing acquisition market. The Health Care Services Acquisition Report, Seventeeth Edition, may be purchased for $595 by calling 800-248-1668 or logging in at https://www.levinassociates.com/har17order.
The Explosive Specialty Pharmaceuticals Market: Who Gets, Who Pays, Who Decides?
IRVINE, Calif.–(March 31, 2011)–A new white paper explores some of the most pressing issues surrounding specialty pharmaceuticals – the single most explosive prescription medications market in terms of growth and cost – and offers recommendations to address them.
It is estimated that spending on specialty pharmaceuticals will climb to more than 40 percent of total drug spend by 20301. This new pharmaceutical category raises important questions for the health care system, including who controls patient access to these expensive drugs and who should pay for them.
Slowing the Impact: The Role of Specialty Pharmacy in Managing Progressive and Chronic Diseases provides unique perspectives and recommendations from a diverse group of experts. This white paper is based on the proceedings of a groundbreaking multidisciplinary roundtable discussion that explored specialty pharmacy issues. Moderated by Susan Dentzer, editor in chief of Health Affairs, the roundtable featured a panel of experts from clinical practice, disease and patient advocacy, bioethics, the pharmaceutical industry and pharmacy benefits management, as well as a person living with multiple sclerosis.
Despite the diversity of the experts, the white paper reveals many points of consensus around specialty pharmaceuticals in the face of rising health care costs. These include bringing patients into the decision-making process about treatment and costs; enhancing knowledge about drug efficacy and safety; and questioning allocation of resources.
“Patient education is important in understanding evidence-based medicine, reducing costs, and figuring out programs to get the right people the right treatments,” said Jacqueline Kosecoff, Ph.D., CEO of Prescription Solutions and one of the roundtable experts. “People with chronic and serious diseases need help with follow-through so they can experience the value of not only the specialty medication, but also the high-touch care involved in treating their conditions, such as counseling, transportation assistance, and other social support services.”
Also known as biologics, specialty pharmaceuticals are used to treat serious or chronic medical conditions such as multiple sclerosis, cancer, hemophilia, HIV and rheumatoid arthritis. These drugs offer enormous clinical value and profound hope to millions of patients in need. Many of the approximately 57 million working-age Americans living with these diseases2 depend on these highly effective drugs to continue working and to be productive members of their communities. However, the high costs, special handling requirements and adherence challenges associated with specialty pharmaceuticals pose serious questions about their impact on health care and the roles and responsibilities of all those involved in their delivery and uptake.
Slowing the Impact outlines recommendations to address these challenges, including the need to convene more stakeholder forums; better engagement of patients in managing their own health; a commitment to data collection and data sharing; and leveraging successful health delivery models to make care more accessible, affordable and of higher quality. The recommendation that enjoyed the broadest and deepest support was the creation of national patient registries, which have proved valuable for other medical specialties such as pediatric oncology. The experts also agreed that establishing multimedia public information programs would broaden awareness and knowledge of specific diseases and treatment options.
The experts whose perspectives and challenging questions appear in Slowing the Impact include Dr. Kosecoff; Nancy Berlinger, Ph.D., Deputy Director and Research Scholar, The Hastings Center; J. Ross Maclean, M.D., MBA, Vice President, Health Services, Bristol-Myers Squibb; Lee N. Newcomer M.D., Senior Vice President of Oncology, Women’s Health and Genetics, UnitedHealthcare; P.J. Weiner, Senior Manager, Advocacy Programs, National Multiple Sclerosis (MS) Society-NY; and Kenneth Bandler, MS patient and patient advocate.
The white paper is being made available by Prescription Solutions, a leading pharmacy benefits management organization and UnitedHealth Group (NYSE: UNH) company, which sponsored the expert roundtable. The paper can be downloaded here.
Survey: Forty Percent of U.S. Primary Care Physicians Considering Leaving the Field
Poll finds many docs believe best earning years are behind them
WASHINGTON, DC (March 23, 2011) — M3 USA, parent company of MDLinx, a medical market research firm, released the results of its annual poll of U.S. primary care physicians. Conducted at the close of 2010, the survey of 3729 family care physicians found that 40.3 percent considered leaving their primary care practices this year, with 16.5 percent reporting that 2010 was the first year they had considered such a career change.
“The poll results are not surprising given the rising financial pressures for family practices,” said Craig Overpeck, Chief Operating Officer of M3 Global Research. “Only 15.6 percent hold out hope of 2011 being a better than average year for their personal income, with 17.7 percent forecasting 2011 to be one of the worst earning years of their career. The survey also reported only three out of five physicians enjoying better job satisfaction than they anticipated on their first day in medical school.”
“The growing avalanche of paperwork, insurance bureaucracy, office overhead expenses, and challenges of small business management have many practices reeling,” said Stephen Smith, Chief Strategist for M3 USA. “The most satisfying element of the job for many doctors is face-to-face time with patients, and that has been eroding steadily for the past decade. This trend is very disquieting for a crucial national profession already suffering increasing shortages of primary care physicians.”
Deloitte Report Reveals Hidden Costs of Health Care One Year After Health Care Reform
WASHINGTON, DC (March 22, 2011) — As health care reform marks its one-year anniversary, a new Deloitte report reveals that consumers are spending $363 billion, or 14.7 percent more, on health care than traditionally reported in official government accounts. This spending falls outside of conventionally-counted health care costs such as doctors, prescriptions, hospitals and health insurance coverage. Demonstrating the significance of the amount consumers now spend on health care, the additional costs captured in the new Deloitte study support an increase in consumer discretionary spending on health care from 16.2 percent, for items traditionally reported by the government, to 19.9 percent, which surpasses housing and utility costs at 18.8 percent.
More than half of the spending (55 percent) in these ancillary areas was for the estimated value of supervisory care, or care given by unpaid relatives and friends. Supplemental expenditures included complementary and alternative medicine (CAM) practitioners (8 percent) and products (1 percent), functional foods and other nutritional products, vitamin and mineral supplements (15 percent), health publications (1 percent), ambulance services (3 percent), other ambulatory care, such as blood banks, some health promotion programs (6 percent), mental health services (8 percent), homes for the elderly (4 percent) and weight loss facilities (1 percent).
“It has been one year since the passage of health care reform, and our report sheds new light on the hidden costs of health care, and how these costs can add up significantly to billions of dollars and can even eclipse housing as a household expense,” said Paul Keckley, Ph.D., executive director, Deloitte Center for Health Solutions. “Our study explores the financial context for the decisions consumers – not simply patients – make about how they spend their money on health care, which will only increase in importance as health care reform continues to take hold.”
The Deloitte report, “The Hidden Costs of U.S. Health Care for Consumers: A Comprehensive Analysis,” (www.deloitte.com/us/consumerhealthspending) was conducted by Deloitte’s Center for Health Solutions and Center for Financial Services to gauge the total costs consumers really spend out of their own pockets on health care products and services, beyond what is typically paid by insurers and other government sources, such as Medicare and Medicaid.
“The ability of the U.S. economy to recover will be affected in part by how much consumers have in their pockets to spend,” said Andrew Freeman, executive director of the Deloitte Center for Financial Services. “This reveals a tremendous burden on the average consumer.”
Additional findings in the report:
- According to the Deloitte study, the total 2009 U.S. per capita expenditures were $9,217; professional services (29 percent) and hospital care (27 percent) were the biggest categories.
- The estimated value of supervisory care ($199 billion) is significantly higher than total spending on nursing homes ($144 billion) and total spending on home health care ($72 billion), and was only somewhat less than prescription drug expenditures ($246 billion).
- Around 70 percent of spending on nutrition industry items was directed towards functional foods, a category which includes such items as enriched cereals, breads, sports drinks, bars, fortified snack foods, baby foods and prepared meals.
- Seniors account for 36 percent ($1.01 trillion) of total health care expenditures, but are only 13 percent of the population.
- Nearly 83 percent of the $2.83 trillion 2009 U.S. health expenditures were attributed to those with family incomes of $100,000 or less, who make up 89 percent of the total population.
- One in five (21 percent) adults surveyed said they paid a medical bill late in the last 12 months.
- A total of 27 percent of adults estimate that 5 percent or less of their household budget is spent on health care; 17 percent said 26 percent or more is spent on health care.
- A majority (80 percent) of adults surveyed said they would use generic medicines, seek free advice from a pharmacist or other medical professional (70 percent), and use technology (61 percent) if it would save money for health care.
- Approximately 43 percent would visit a retail clinic, and one in five (20 percent) would visit another country for more affordable medical care.
- And, 26 percent would skip a medical test or screening, skip a visit to the dentist or doctor altogether (26 percent), or skip refilling a prescription (22 percent) to save money on health care.
“Our study suggests that as the U.S. economy struggles to rebound and consumers continue to be stretched to pay their bills, they are confronted with difficult choices, such as paying for health care instead of other household expenses,” added Keckley. “Many consumers are turning to alternative and over-the-counter products, switching to generic medicines, or even skipping the doctor or visiting a retail clinic instead to save money. Health care organizations looking to address these unmet consumer needs should consider their strategy to expand their focus to include alternative products and services outside of the confines of the traditional health care sector.”
Methodology
In this study, the most recently available NHEA data (2008) was projected for 2009. Information drawn from a variety of sources was used to produce estimates of health expenditure in identified additional areas. Information from the Medical Expenditure Panel Survey (MEPS) was used to develop estimates of expenditure by family size and income. When combined, a dataset was produced which represented a broader picture of the health sector in 2009. This final dataset estimated total health expenditure by payment source, age group, family income and family size for each health service area.
Consumer Telephone Survey
The Deloitte Center for Health Solutions commissioned Harris Interactive to conduct a telephone survey of 1,008 U.S. adults 18 years-old and older between September 29 – October 4, 2010. Data were weighted to be representative of the total U.S. adult population on the basis of age, sex, race/ethnicity, education, region, number of adults in the household, and the number of phone lines in the household where necessary to align them with their actual proportions in the population. The survey results have a sampling error of +/- 3 percentage points at the 95 percent confidence level.
Health and Economic Concerns Threaten Retirement Dreams of 50+ Pennsylvanians, According to New AARP Study
HARRISBURG, Pa., (March 9, 2011) — A new AARP survey of Pennsylvanians age 50 + reflects a population that dreams of leisure pursuits, traveling and spending time with family in retirement. However, in the wake of the national recession, older adults don’t have what they need to accomplish their most important goals due to growing concerns over health care and economic issues.
“The Voices of 50+ Pennsylvania: Dreams and Challenges survey paints a picture of 50+ Pennsylvanians coming to terms with a difficult economy,” said Dick Chevrefils, AARP Pennsylvania State Director. “While mid-life and older adults would prefer enjoying a secure retirement, the reality shows those dreams are being replaced by real concerns about having enough money to retire and stay healthy.”
More than 400 Pennsylvania residents were surveyed in January as part of a huge AARP research effort — the Association conducted separate surveys in each of the 50 states and three territories where AARP has offices, plus a national survey — to better gather information on the needs, interests and concerns of Americans age 50 and older.
Among the Pennsylvania survey’s findings:
- Almost half of adults 50+ say the cost of health care and staying healthy are the top problem or challenge facing mid-life and older adults in their state. Nearly three in ten cite economic issues as the largest challenge.
- At a more personal level, adults 50+ say vacations and seeing their children and grandchildren happy are what they personally dream about doing next in their lives.
- Health and financial security are very important in the lives of adults 50+. More than nine in ten say staying healthy, staying mentally sharp, having adequate health insurance, and receiving Social Security and Medicare when needed are extremely or very important to them.
- Adults 50+ do not have everything they need in order to accomplish their most important goals: Only about two in ten have what they need to protect themselves from consumer fraud. About three in ten have what they need to stay healthy.
- Over eight in ten adults 50+ worry about one or more financial issues. Public assistance benefits and maintaining finances and lifestyle in retirement are worries for over six in ten.
- More than half of 50+ adults surveyed are experiencing some difficulty paying monthly household utility costs.
- About 40 percent of adults 50+ worry about one or more consumer protection issues. Almost eight in ten were concerned enough about protecting themselves against consumer fraud and unfair and deceptive business practices that they regularly review their credit card and other financial statements.
- Staying in their own homes as they age is important to adults 50+. Nearly all say it is important to have long-term care services that allow people to remain in their own homes.
- In the current economy, adults 50+ believe it is important to protect education and local public safety services (police and fire) from budget cuts. Eight in ten believe it is important to protect home care services that allow people to stay in their own home.
“From the state’s 4.2 million adults age 50+ to families caring for aging relatives, the concerns raised in this survey affect many Pennsylvania households,” said Chevrefils. “We will use this information to guide our advocacy and outreach work and continue helping Pennsylvanians age 50+ live their best life.”
For a copy of the complete research report, contact the AARP Pennsylvania staff member listed above or visit www.aarp.org/pa.