According to Vertess, an international healthcare-focused M + A advisory firm with expertise in diverse healthcare and human service verticals, ranging from healthcare IT to life sciences and other specialized services and products, every sector of the healthcare industry is struggling to figure out what TrumpCare will mean to their businesses. Some will do better under TrumpCare, but most will do worse. There is one sector, however, which is guaranteed to grow like gangbusters under a Trump administration: Healthcare IT. Vertess explains why.
First, there will be a sharp uptick in government spending. According to the research firm Winvale, the US Government already spends approximately $6.7 billion on healthcare-related IT. This direct IT spending will dramatically increase over 2017. However, this is a drop in the bucket compared to the new Secretary for the Department of Health and Human Services Tom Price's operating budget. Secretary Price will manage an annual budget of more than $1 trillion.
Vertess expects Secretary Price will want to maximize every dollar of his limited budget to satisfy his ambitious boss. This means he'll be looking to improve the performance of the CMS, the Centers for Disease Control and Prevention, the National Institutes of Health, and the Food and Drug Administration, among others. There's no question that this will drive a significant increase in IT spending.
Second and, more importantly, TrumpCare (whatever form it finally takes) will include an increased emphasis on cost control and outcomes that will drive healthcare providers to use more technology, according to Vertess. Much of this technology spending will be necessary so that healthcare providers can reallocate costs of care management onto patients.
This will force post-acute care providers and other segments that are notoriously slow adopters to increase spending on new systems, new technology, and upgrades to existing IT systems.
What does this mean for Healthcare IT firms? A rapidly growing market, obviously, means opportunity for growth. However, history shows that such markets often outpace the ability of companies to grow their business organically. Because of this, there will be a flurry of mergers and acquisitions in the IT healthcare segment in 2017 and beyond. Indeed, some of that activity has already manifested itself as forward-looking healthcare IT firms position for the oncoming changes. There were several notable Healthcare IT transactions in 2016, which comprised over $1 billion each. Many of those companies will be in Orlando, Fla., during the HIMSS conference.
What this means is that there's never been a better time to sell a healthcare IT firm because the feeding frenzy is already starting. Similarly, and a bit ironically, there's never been a better time to expand by acquisition. Yes, it's a seller's market, but there is so much potential growth in the IT segment that it will be almost impossible to grow organically and keep up with the market.
For more information: www.vertess.com.