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April 2021

Healthcare Providers Quarterly Earnings – Q4 2020


Industry Overview

In 2020, the Healthcare industry was front and center through a challenging and turbulent year for the global economy. However, a rapid return to pre-COVID operating levels across many healthcare verticals serve as an indicator of industry-wide resilience.

The proliferation of Virtual Healthcare, which exploded in 2020, will continue into 2021. Patients will have expanded virtual options and greater access to care through telehealth platforms and providers. As the space evolves and balance between in person and virtual care is calibrated, attention will be given to evaluating the quality, outcomes, effectiveness, cost, and patient experience related to virtual care options and innovations. Providers, especially those heavily reliant of fee-for-service reimbursement, were severely impacted when forced to scale back services to help stem the spread of the virus.

Through 2020, certain providers of elective treatments were negatively impacted as services were unable to be offered during the height of the pandemic leading to widespread cancelations and postponement of high-margin procedures. While the initially impact shocked the provider system, many organizations have reacted by reevaluating their delivery model altogether. Providers who have historically been heavily reliant on fee-for-service reimbursement were impacted more severely than value-based care providers when forced to scale back services to help stem the spread of the virus due to decreased treatment volume. These factors are contributing to and accelerated shift away from fee-for-service delivery and towards value-based care.

Despite immediate slowdowns in deal volume following initial COVID-19 closures, investors and lenders regained confidence over the summer of 2020, driving Q4 healthcare services M&A spend to $25 billion, which is nearly two times higher than Q3 2020. Perceived pent up demand and an anticipated return to pre-COVID patient volumes is expected to drive investor opportunities and optimism in 2021, with the highest activity expected in the Life Sciences & Pharmaceutical, Medical Device, and Healthcare IT sectors.

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