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M&A momentum to continue in 2023 as providers seek strategic partnerships: KaufmanHall

Financial and clinical challenges will ensure merger and acquisition activity remains strong in the healthcare sector in 2023, building on the momentum of last year, Kaufman Hall said in a Jan. 12 report.

One of the main drivers behind such M&A will continue to be the financial headwinds so many healthcare systems face, the report outlined. Smaller organizations, or those more financially strapped, in particular will be looking for alternatives, including stronger partners who can potentially inject their relatively hefty capital.

And while COVID-19 is still present, the worst of the pandemic is apparently behind us, allowing for strategic discussions that had been put on hold to again take place as industry players determine how to find their next level of technological and clinical innovation within developing partnerships, Kaufman Hall said.

Well-documented market forces such as higher interest rates and increasing regulatory activity are headwinds the healthcare sector will have to deal with, but these will likely be mitigated by an overwhelming need for strategic moves.

"We believe, however, that these tactical factors are overshadowed by an increasingly important strategic rationale for providers to form partnerships," the report said. "For many organizations, the answer to at least part of the question will be a partnership or transaction that provides the resources needed to pursue their post-pandemic strategies."

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