SKOKIE, Ill. (PRWEB) March 05, 2018
Kaufman Hall, a leading provider of strategic and financial consulting services, and enterprise performance management and decision support software, today announced key findings from a new physician group report, including a 3.1 percent combined revenue increase from the U.S. physician group sector and continued robust consolidation.
Revenue from approximately 200,000+ physician groups reached $265 billion in 2017, demonstrating that the robust U.S. economy and increasing demand for services are helping to offset higher out-of-pocket patient costs, payment declines for specialty providers, and instability generated by changes to federal policy and funding streams. About one-third of U.S. physician groups remain independent, compared to 57 percent in 2000, but that number is continuing to drop, as signaled by the 37 percent increase in physician group transactions from 2016 to 2017.
“We just saw the third year of extraordinary year-over-year growth in transaction volume for physician groups,” commented Kristofer Blohm, Senior Vice President with Kaufman Hall’s Mergers, Acquisitions, and Partnerships practice. “The uptick in activity wasn’t that surprising, but the magnitude and continued momentum in this area are remarkable. We thought 2016 was a momentous year, and now we’ve seen another year of double-digit growth in 2017.”
The physician group sector has seen annualized growth of 2.8 percent since 2012, which has spurred interest from buyers willing to wager that financial performance will remain strong and recession resistant. According to Blohm, “Interest in physician groups has expanded as potential partners are now willing to make bets on large multi-specialty groups. Activity in higher-margin specialties, such as dermatology, which have historically been of interest, also continue to be strong.” Interested parties now include other major physician practices in adjacent and sometimes entirely different geographies, along with traditional buyers, including provider management companies, payors, private equity firms, and hospitals and health systems.
Key deals from 2017 include Ares Management’s $1.45 billion acquisition of DuPage Medical Group, a 600-physician multi-specialty group spanning more than 100 suburban Chicago locations. The year closed out with the major announcement that Optum planned to acquire DaVita HealthCare Partners, Inc., for $4.9 billion. While early, 2018 activity is starting out strong with Envision Healthcare announcing its intent to evaluate strategic alternatives for its physician-led services segment.
From the physician group perspective, access to capital and the need for advanced operations and technology expertise are contributing to the trend of practices seeking to join well-developed and fiscally robust entities. “Independent groups across the country are weighing their strategic options and evaluating what it will take to thrive in the future,” said Blohm. “Generating new revenue and building infrastructure and scale while trying to cut costs are monumental challenges for physician groups, and many may not want to manage these challenges alone.”
About Kaufman Hall
Kaufman Hall provides management consulting and software to help organizations realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods into their strategic planning and financial management processes, and quantify the financial impact of their plans and strategic decisions to consistently achieve their goals.
Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; cost transformation; treasury and capital markets management; and mergers, acquisitions, partnerships, and joint ventures.
Kaufman Hall software includes the Axiom Healthcare Suite, providing sophisticated, flexible performance management solutions that empower finance professionals to analyze results, model the future, and optimize organizational decision making. Solutions for long-range planning, budgeting and forecasting, performance reporting, capital planning, and cost accounting deliver decision support, reporting, and analytics within an integrated software platform. Kaufman Hall's Peak Software empowers healthcare organizations with clinical benchmarks, data, and analytics to provide a higher quality of care for optimized performance and improved patient outcomes.