Even though the COVID-19 pandemic continues to roil the healthcare landscape financially, mergers and acquisitions remain robust thanks to heavy interest in the mental health and telehealth sectors, one expert says.
Providers have faced major declines in patient volume since the onset of the pandemic. But experts at the firm PwC say financial constraints haven’t cooled deals in the healthcare space.
“This is an interesting recession with a tremendous amount of liquidity in markets,” said Manoj Mahenthiran, head of the private equity sector practice at PwC, in an interview with Fierce Healthcare. “What we are still seeing is that for the right assets, prices really haven’t gone down.”
A prior report from PwC released in July found that the number of deals among provider and payer industries declined in the first half of the year by 21% compared to the same period in 2019.
But there has been a major shift among certain sectors of the healthcare industry.
One of the hottest sectors is in behavioral health that has taken advantage of new flexibilities for telehealth.
“This whole pandemic has shone a spotlight on some of the mental health issues in the country that may have been taboo in the past,” Mahenthiran said.
Digital behavioral health startups raised $588 million in funding in the first half of this year, according to a report from venture capital fund Rock Health. That was on top of the record $5.4 billion in startup funding for digital health investments overall, the report found.
Investors are still very interested in the telehealth space even though there is uncertainty over what the regulatory outlook will be after the COVID-19 pandemic.
The Centers for Medicare & Medicaid Services gave more flexibility for providers to get Medicare reimbursement from telehealth, and providers embraced the technology to grant access for patients afraid of going to an office or hospital due to the pandemic.
But those flexibilities last through the COVID-19 public health emergency, which was recently extended.
“There is apprehension on what will this post-COVID environment look like and what will happen with reimbursements,” Mahenthiran said of investors in telehealth. “If things are delivered over this medium versus the office medium for sure that is definitely something that weighs on a lot of PE funds that are thinking about entering this space.”
But he countered that the popularity of telehealth will outweigh any changes in reimbursement rates.
“Their view so far is that the volume growth is going to far outweigh any such rate reductions,” Mahenthiran said. “It is definitely part of the calculus.”