Daily News: May 20, 2013

CIT: Mid-Market Healthcare Execs Expect Growth

Middle-market healthcare executives are focused on growing their businesses through acquisitions and investment, despite views of overregulation, a tepid economy and a major decline in approval of the Affordable Care Act, according to a study released by CIT.com.

The report, “U.S. Healthcare Outlook: Strong Performance Amid Healthy Capital Investment,” includes responses from more than 300 senior middle-market executives in the healthcare industry. The study was conducted by Forbes Insights on behalf of CIT.

“This study provides critical insight into the minds of middle market healthcare executives and their focus on growing their businesses,” said Steve Warden, president of CIT Corporate Finance, Healthcare. “Nearly a third of respondents indicated that acquisitions will be an important part of their growth strategy, with an equal amount expecting to increase spending this year. And while there is an intense feeling of overregulation, healthcare executives remain confident of their future growth potential.”

Key findings from the study:

Industry Focused on M&A and Financing: Roughly a third of healthcare executives say acquisitions will be an important (24%) or very important (8%) component of their strategy over the next year. Interest in M&A increases dramatically (59%) among medical device-related executives: 46% describe the strategy as important and 13% as very important.

Committed to Growth Through Investment: Nearly a third of respondents anticipate seeking financing of a significant nature in the next year. Here, the most frequently cited purposes include acquiring or implementing new technologies/patents/licenses (39%), increasing working capital (31%) and investing in a new plant and equipment (28%).

Support for the Affordable Care Act (ACA) Declines: In a sound reversal, the industry – on net – no longer favors the Affordable Care Act. In the spring 2009 iteration of this study, those in favor of healthcare reform outnumbered those opposed by a nearly 2-to-1 margin. In the 2013 study, support has dissipated, with 37% now opposing ACA, whereas 31% favor it and 32% are uncertain.

Some Positive Components of ACA. However, certain segments of the industry, such as healthcare IT providers and hospital medical centers, favor ACA. Pluralities also see benefit in ACA-induced Medicaid expansion, health insurance exchanges and reductions in the number of uninsured.

Overregulation Is a Significant Concern: Three out of five executives believe that their segment of the healthcare industry is overregulated. A nearly identical number (59%) say that overregulation exacts downward pressure on their performance.

Despite Overregulation, Executives Foresee Growth: More than half (54%) of healthcare executives have seen revenues increase in the past 18 months. More than half (52%) expect their revenues to grow in the coming year. Meanwhile, 28% expect “no change,” while just one in five (20%) anticipate revenue declines.

Prominent Healthcare Megatrends Are Fueling Strong Performance: The most frequently cited factors that are having the greatest impact on revenue are advances in technology (65%), which have led to expanded treatment options and improved efficiencies, and the aging population (65%), which has led to an increased demand for services.

To download the report click here.