CIT takes temperature of healthcare market

Healthcare executives appear optimistic about revenue and growth in 2015 and express a desire to make additional investments and seek financing in the coming year, according to a recent survey of the sector by CIT’s corporate finance, healthcare division.

Respondents expect trends around mergers and acquisitions to continue to rise and acknowledge the benefits of consolidation for the industry. When considering adoption of new technology and non-traditional methods of care, they cite both benefits and drawbacks of each. These executives recognize that healthcare costs are becoming too great for consumers and encourage consumers to take a more active role in managing their healthcare costs.

“Our study reveals how middle market healthcare executives view the state of their industry, as well as the opportunities and challenges they expect to face in the coming year,” said William Douglass, group head and managing director of CIT corporate finance, healthcare. “Executives are optimistic, and while they continue to confront new challenges, they believe 2015 will be a year for growth.”

Most healthcare executives are fairly optimistic about the major financial metrics for 2015—including revenue, price growth and volume growth, believing all three are likely to increase relative to the previous year. Very few expect a decrease.

However, a substantially-smaller percentage (40%) anticipates an increase in capital spending in 2015. And a similar proportion (44%) envisions that their company will be at least somewhat likely to seek financing this coming year. Both projections—the potential increase in capital investments and the potential demand for financing—are based on requirements for new hires, information technology, and construction or renovation.

In real terms, just over half say they have been part of a merger or acquisition in the past two years, and nearly all feel M&A will likely increase or remain static, over the coming year.

The vast majority say technology improves both the quality and the convenience of care. Given the current stress around costs, some 75% recognize the positive impact technology can have—for the industry as a whole and their sector specifically—to bring costs down for the consumer.

Most feel the stakes are higher for the healthcare industry with respect to technology, and say they struggle to figure out which technological advances will be most relevant. More than 80% also worry that scalability is a genuine concern and that technology in the healthcare industry is such a large undertaking.