In-person events continue to bring energy back to the healthcare conference circuit. Last week, a group from Jarrard attended the American Health Law Association 2022 annual meeting. We joined more than 800 other attendees, mostly healthcare attorneys representing both law firms and in-house council for provider organizations. The rooftop receptions and perfect weather were a great follow-on to the Miami conference we attended in May and made for an excellent backdrop to discuss the challenging topics of mergers, partnerships and crises.
Here are a few key themes we heard while reconnecting with friends:
Lots of activity…but are the buyers there?
Generally, healthcare deal attorneys indicated that they’re busy. There are a number of deals progressing towards milestones in both the acute and non-acute side of things. Financial pressure is expected to drive activity in the acute care space over the coming quarters. CARES funds have run out. Bond covenants loom on the horizon… The expectation is that more hospitals and health systems who are financially challenged or distressed will be looking for partners. On the private equity side, there’s still quite a bit of dry powder – though if, when and how it’s deployed remains to be seen.
Looking more closely at activity among hospitals and health systems, sellers need buyers and there’s a question whether all of those seeking a partner or buyer will be able to find one. Potential hang-ups include the fact that financing gets more expensive by the day and that the FTC, DOJ and state AGs are training their powerful microscopes on consolidation – we’ve already seen several deals called off in recent months.
A search for greener pastures
Marriages weren’t the only thing that had attendees’ attention. Breakups, too, were a topic of conversation. Observers in the M&A world say organizations are evaluating their current partners to figure out whether they’re still the right relationships. And, whether there are more attractive prospects out there that would be a better fit for the organization going forward. It wouldn’t be a huge surprise to see an uptick in the number of partnerships that unwind.
A parallel topic among AHLA attendees involved the fit between organizations coming together in out-of-market mergers, a few of which are sprinkled through the list of recent deals. Cultural fit, in particular, was top of mind. Organizations looking to partner across markets need to ensure a thoughtful integration process – an imperative that holds true in both the acute and non-acute space.
An emphasis on equity
Health equity was very much a topic of conversation, particularly at the plenary sessions. Erin Richardson, chief of staff in the Office of the CMS Administrator, emphasized the “Biden-Harris administration’s focus on equity” during her keynote address. Our takeaway? Anyone considering a deal must have a message and plan for how a potential partnership will impact health equity.
With the meeting taking place days after the Supreme Court’s decision to overturn Roe v. Wade, there was an undercurrent running through the conference about possible effects of the decision. Questions centered on what the ruling will do for employee recruitment, particularly for younger workers. Will healthcare workers want to move to states with restrictive abortion laws? Will college, nursing, medical or graduate students want to attend school in one of those states? Speaking of health equity, how might this set us back? And, for companies considering employee benefits allowances that cover travel for services not available in certain states, will the laws even allow it? The potential ripple effects are extensive and inchoate.
Historic uncertainty
All told, throughout the conference lingered a feeling also evident during the AHLA Transactions Conference back in May. For the first time, given the competing market forces converging on healthcare, the outlook for the next few quarters is remarkably uncertain.
The AHLA takeaways gibe neatly with what we’ve been hearing from our clients whom we’re advising on communications and political strategy for a range of partnership projects. With seemingly more sell-side projects in the offing, will the buyers be there to get deals done in an ever-complex and challenging environment? Our advice: Sellers need to explain what they have to offer potential buyers. And, of course, continue to expect a lot of scrutiny for any proposed deal.
Above all, get out first and control your narrative.