Capital One’s annual survey of healthcare leaders has found that merger and acquisition activity is once again expected to be the industry’s preferred growth strategy in the year ahead. However, nearly one in three executives (31 percent) plan to drive growth by launching new segments or lines of business—a jump from 17 percent last year. Thirty-eight percent of respondents said that M&A transactions would drive their growth plans in 2017—down three percent from 2016—and more than a quarter of respondents (26 percent) pointed to organic growth initiatives as their top growth strategy.
In addition, nearly half of those surveyed expect their capital needs to rise in 2017. Forty-two percent expect that they will require more capital in the year ahead, a sharp rise from 25 percent in last year’s survey.
“With M&A and a strong new business segment outlook, executives are clearly keeping all avenues to growth on the table,” said Al Aria, Senior Managing Director, Capital One Healthcare. “As capital needs rise, it’s critical that companies find a financial partner that understands the healthcare marketplace.”
Capital One’s survey of more than 450 healthcare executives also revealed that potential changes to the Affordable Care Act (ACA) pose the greatest challenges for the industry. Fifty-nine percent of respondents cited ACA changes as their chief concern, a big jump from 33 percent last year. Eighteen percent of those surveyed cited regulatory uncertainty as the industry’s top challenge. This outlook is quite different from last year’s survey, where an equal number of respondents (one-third) identified the ACA and regulatory issues as their top concerns.
Despite these concerns, projections for performance mirrored the findings in Capital One’s 2016 survey. Ninety-four percent of respondents expect their businesses to deliver financial performance on par or better than last year, compared to 95 percent last year. Nearly two-thirds of respondents (61 percent) predict a stronger year ahead, and just seven percent anticipate weaker financials in 2017.
“Even amid some uncertainty, optimism remains high across the healthcare industry,” said Aria. “We look forward to working with our clients to provide financial solutions that help them meet their goals for 2017.”
The Capital One survey, conducted between Nov. 29 and Dec. 22, 2016, asked professionals to provide their industry and company outlook for 2017. Respondents included more than 450 senior executives from healthcare companies, including pharmaceutical, healthcare IT and medical technology companies, hospitals, healthcare service providers and health systems, as well as other industry participants.