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 KPMG Survey Shows Wall Street High on Health Care Sector for 2020

KPMG’s new survey of Wall Street interest in investment in the health care and life sciences sector shows stakeholders most likely to put their money into the home care and hospice space versus long term care and managed care, but the report said attention to all areas of long term and post-acute care remains active for 2020.

Speaking on the broad health care and life sciences sector, KPMG said the high amount of deal activity witnessed in 2019 would likely extend into the new year. However, Carole Streicher, KPMG deal advisory leader, said, “The election-year political climate has given some cause for concern, but other fundamentals are very positive for deals and investment, particularly around the need to cut costs and invest in innovation.”

Only 23 percent of life sciences investors surveyed characterize the sector as in a “bubble” (with stock prices too high versus their real value), a drop from 48 percent a year ago, according to the 2020 and 2019 KPMG Health Care & Life Sciences Investment Outlook, respectively. Among health care investors surveyed, 50 percent viewed the sector as in a bubble in 2019, and that fell to 39 percent for 2020.
In 2020, 51 percent of health care investors surveyed see strong or moderate fundamentals (up from 25 percent from 2019), and 42 percent of life sciences investors see the same (up from 20 percent from 2019).
KPMG said nearly half of investors surveyed expect that the 2020 election could have a potentially negative impact on investment activity in health care (48 percent) and life sciences (47 percent). Only 19 percent of investors surveyed expect the election leading to increased investment in health care, and 13 percent of investors surveyed said the same for life sciences.
“Health care is an important campaign issue; increasing access to health care and lowering prescription drug costs will be among the highest priorities for voters in districts across the country,” said S. Lawrence Kocot, national leader of KPMG’s Center for Healthcare Regulatory Insight. “The acceleration of U.S. health care spending represents both an opportunity and a risk for health care investors.”
On where investors may put their money, the survey said 23 percent were interested in the home care and hospice subsector, while 17 percent eyed long term care and 15 percent managed care. Of all the subsectors, health care IT (information technology) and revenue cycle management garnered the most interest by those surveyed at 30 percent. Hospitals and health systems trailed the pack with only 8 percent expressing investor interest, KPMG said.
“Strong investor interest in health care IT mirrors the realization that data is the new health care currency and that data is not useable without the proper IT in place,” said Kristin Pothier, global and national strategy leader for KPMG’s health care and life sciences practice.
In other areas, the report said cost consolidation/economies of scale was selected among the biggest drivers of merger and acquisition (M&A) activity (58 percent), followed by acquisition strategies (34 percent) and changing payment models as leading factor (31 percent), according to the survey respondents, who were asked about their top three choices of catalysts for M&A.
The 2020 KPMG Health Care & Life Sciences Investment Survey included 333 health care and life sciences investment professionals in an online survey in September and October 2019. Respondents were finance, strategy, and c-suite executives from corporations, health systems, private equity firms, and investment banks.
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