NASHVILLE—Healthcare providers and the pharmaceutical and biotechnology industries are expected to produce the most merger and acquisition activity this year behind only the technology sector, according to a new survey by accounting and consulting giant KPMG (PDF).
About 60% of 553 M&A professionals surveyed placed the pharmaceutical and biotechnology sector among their most active for consolidation and 47% of the respondents believed healthcare would be third out of six sectors to see lots of M&A activity this year.
Only the technology sector was expected to be more active among 18 different industries listed, including automotive, retail and a variety of financial services. About 70% of the respondents felt technology would experience the most M&A activity this year.
Healthcare merger activity is being driven by providers looking to expand geographically, develop new service lines and adjust to changes in reimbursement, said Bill Baker, who leads KPMG's Healthcare and Life Sciences Deal Advisory practice. “Healthcare is facing a great deal of upheaval because of the profound changes influencing finance, regulation, supply chains and technology, both for their own information systems and the science behind new treatments,” Baker said.
At a healthcare media day in Nashville last week, KPMG Healthcare Provider Solutions principal West Johnson said providers and insurers are grappling with profound reimbursement changes that are putting an emphasis on quality and value over volume.
Those changes were partially behind mega-mergers seen last year between large insurers, including Aetna and Humana, he said.
What remains to be seen is whether in the short term, those consolidations will lead to lower consumer costs, something anti-trust regulators on the state and federal level are keenly watching as these mergers progress, Johnson said.
But longer term, market demands are going to require that costs come out of the system, including in recent mergers and activity expected in 2016.
"Cost is going to come out because it has to,” Johnson said.