Deal activity declined last year across nearly every segment of healthcare, according to newly released data from Irving Levin Associates.
The report covers home health and hospice, rehabilitation, hospital, managed care, laboratory services, physician medical group, behavioral health, e-health and other services mergers and acquisitions in 2023.
“Disclosed spending declined significantly, hitting approximately $72 billion, compared with $125 billion in 2022. Announced spending totals in 2023 suffered because most deals were private transactions, and most of the dollar investments were concentrated on large biotechnology and pharmaceutical companies, which are not included in this report,” according to the authors.
Deal volume for the healthcare services sectors reached 1,811 transactions last year versus a record high of 2,093 in 2022.
Activity in the physician medical group sector decreased by 14% to 535 deals in 2023. That was after reaching a historic high of 619 deals in 2022, an annual record for any individual sector, including long-term care, that is tracked by the firm.
“Although there’s still plenty of interest in the healthcare M&A market, investors could not navigate the high interest rates of the past year,” said Dylan Sammut, editor of the report. “The elevated cost of capital forced many buyers to slow down their M&A strategies, especially private equity investors.”
Oak Street Health’s $10 billion acquisition of CVS Health marked the “largest services deal of the year,” according to Irving Levin Associates. In June, Oak Street Health, a driver of CVS Health’s value-based strategy, moved into four states.
Levin noted that in addition to higher interest rates in 2023, staffing issues and increased regulatory challenges also affected mergers and acquisitions activities.
“There were several health system mergers called off throughout the year. And none of these tailwinds are unique to 2023. We expect more of the same throughout 2024,” Sammut said.
