Preliminary Survey Findings: Impact of the Trump Administration on Health IT and Is Health IT in a Bubble?December 13, 2017
In January 2018, HGP will release the complete findings from its bi-annual Health IT M&A survey. The complete survey is 13 questions, and, in today’s Research Note, we’re calling out two questions and responses.
What is the regulatory impact of the Trump Administration on your company?
When we woke up the morning after the November presidential election, we felt certain that the Affordable Care Act as we know it would be dramatically altered or repealed. We were concerned that this uncertain regulatory path under the new administration would result in a bit of a headwind for the Health IT industry because industry stakeholders may not have the conviction to invest in technologies due to unclear regulatory incentives and requirements for many of these programs. The Trump administration immediately and aggressively pursued repeal, as part of the overall preference for deregulation, price transparency, and patient responsibility. As the year passed and bills did not gather the required support of Republicans, the GOP moved on from healthcare reform to tax reform, thus leaving much of the ACA construct in-place. However, even tax reform addresses core pillars of the ACA, such as the elimination of the individual mandate. In the face of all of this, it is surprising to see nearly 80% of respondents state that the Trump administration has a neutral or positive impact on their performance. Only 1 out of every 5 respondents have experienced a negative impact. In a way, the biggest development in healthcare regulatory reform was that there was not any major development! We suspect that the positive results indicate a combination of generally strong purchasing trends for Health IT, as well as a capital budgeting cycle for FY 2017 that was put into place prior to the November election. No doubt health systems are betting on a future of tougher operating conditions, given the recent mega-mergers between Ascension and Providence St. Joseph Health, Catholic Health Initiatives and Dignity Health, and Advocate Health Care and Aurora Health Care, as well as pay-vider deals such as CVS Health buying Aetna and Unitedhealth buying Davita’s Medical Group. As we roll into the FY 2018 budget cycle, we will continue to closely monitor the link between purchasing cycles, regulation and policy.
Health IT has attracted significant investment recently and seen an accelerating number of acquisitions; do you think Health IT is in a "bubble"?
An interesting observation to this question is the trendline from our 2015 survey:
Respondents tilted more in favor of bubble than in prior surveys. Perhaps the over 20% rise in the stock market in 2017 influences this sentiment. Most likely, it reflects the 46% annual growth in global Health IT investment since 2011, according to HGP’s data as of Q3 2017. At HGP, we think the Health IT market offers unbelievably strong fundamentals as well as a superior investment thesis. That said, there is certainly bubble behavior among pockets of investors and acquirors and no shortage of distressed assets in the market.
More on the HGP Bi-Annual HIT M&A Survey
To assess the general sentiment on the status and future of Health IT, we surveyed C-level and business development professionals at 500 companies across the Health IT sector. Out of the 500 companies surveyed, we gathered responses from 85 distinct companies across the Health IT landscape. HGP surveyed a mix of C-level executives, M&A professionals, and private equity professionals. For purposes of the survey, we broadly define Health IT as any health software, data, information, consulting, or technology-enabled outsourcing company that may serve providers, payers, pharma, employers, or consumers. However, respondents include both Health IT companies (70%) as well as Enterprise Software, Benefits Brokers, Healthcare Services, Health Insurance, Medical Device, Biopharma, Media, PBMs, GPOs, and Telecom organizations (taken together, 30%) that may have an expressed and strategic interest in Health IT.
We’ll be releasing the entire survey in January. Feel free to contact us with any questions and you can sign up for our research at www.hgp.com.