Top 5 Trends in Healthcare for 2022
- January 4, 2022
Last year at this time, we explored the top five trends in healthcare we perceived for 2021. With the year practically complete, let’s consider them again and expand on where we see 2022 going.
The 2021 trends included:
- Post-COVID Transactions
- Political Transition
- Value-Based Arrangements
- Operations and Efficiencies
While some of these trends will continue, let’s expand and consider others for 2022.
COVID Challenges Continue
Our country realized much progress in our battle against the COVID virus. Vaccinations have become the norm, and while this dreaded pandemic virus still victimizes many people, for the most part, the United States has dealt with it satisfactorily. There are still challenges as we start the year, including the variants that appear far too often. Hospitals continue to care for COVID patients, yet we have moved on societally. Most people are trying to conduct their lives with some sense of normalcy. Some pocketed areas are experiencing higher rates of hospitalizations and related cases. Still, again, overall, between the efforts to vaccinate the adult populous and other initiatives, the challenges are at least somewhat stabilized.
On a broader scale, the effects of the COVID virus and all its challenges over the past two years have left an indelible impression, changing our lives forever. We will continue to work differently, meet people differently, and be vigilant toward how such viruses are spread and treated once encountered.
Our healthcare delivery system will likewise never be the same. COVID caused improvements in sanitation and overall precautionary measures to prevent the spread of COVID and all diseases. The U.S. healthcare system has learned much from this experience.
Financially, COVID has cost billions and changed our healthcare delivery system forever. Indeed, the top trends for 2022 are essentially a result of the COVID pandemic experience.
Consolidating Transactional Activity Continues
Even with the COVID pandemic, there are many ongoing success stories relative to healthcare providers’ financial performance and overall economic standing. Part of this is due to continued consolidation through transactional activity. Overall, we view this as a positive, allowing providers to reduce duplicative care and other inefficiencies. Moreover, it will enable enhancing financial positions through well-thought-through transactions. These can be mergers of medical groups, hospital-physician medical group affiliation, and indeed, private equity (PE) venture capitalists’ investments and partnering.
Will this trend continue in 2022? Yes, undoubtedly. There are enormous appetites for consolidation, creating more significant sources of capital to grow and expand as our healthcare system continues to thrive, providing high-quality and patient-focused healthcare services.
In addition, we see the variedness of the transactions continuing, meaning an openness exists to be creative in structuring consolidation-oriented transactional activity among healthcare providers and payers. While the government will continue to be involved in oversight and regulatory requirements of such transactions, its involvement has not inhibited them. While tax legislation (such as reducing or even doing away with capital gains tax rates) could stymie them significantly, for the time being, there is no indication of this. Likely, it will not occur with 2022 being an election year.
So, we anticipate 2022 to be an active year with all varieties of consolidated transactional activity between healthcare providers and investors. The values will be likewise high (and the returns and risks as well), but the opportunities to improve overall economic performance post-transaction will be a massive driver of affiliation transactions. However, most entities do not have to feel pressured to do anything as they will continue to function successfully in their present state. Thus, it will take wise and savvy leadership to determine how, when, and what is the best affiliation transactional model to pursue.
With the current log jams in Washington and 2022 being an election year, we do not anticipate much new legislation to inhibit healthcare transactional activity and other industry development areas, a positive signal for healthcare providers.
On the not-so-encouraging front are the ever-growing and expanding inflationary trends that have recently been a relatively benign trait. Indeed, costs have increased but are not so much attributable to inflation. Now there seem to be more signals of such price increases where the consumer’s purchasing power (as well as the healthcare provider) will be lessened. There is no way to avert this, and even if transactions result in higher economic values, their purchasing power (or inherent value due to inflation) will be effectively less.
The inflationary trend should be watched closely, and wherever possible, investments in assets that hedge against inflation should be a part of the healthcare provider investment portfolio.
Strategic versus Tactical
For many years we have focused on strategies for growth and expansion and related matters within our healthcare industry. While we continued to work on the tactical side, the longer-term strategies have seemingly been more prominent. Due to the things noted above, the need for more day-to-day tactical strategies may result. Indeed, we should not overlook the strategic planning component of our businesses and our plans for the future. Short-term plans are always needed and take on the more day-to-day tactical elements of running a healthcare business. Longer-term strategies should be in play, but for 2022 we may need to focus more on the day-to-day matters.
So, not a tremendous amount of change from 2021, but some important (and perhaps not too subtle) key trends we see unfolding for 2022. All should be vigilant as we work with and for healthcare providers, payers, and indeed, the everyday consumer within our country. We should remember that we have much to be thankful for, and even though the trends and some of them are ominous clouds above us, there is always a ray of sunshine that will prevail.
Max Reiboldt, CPA