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The Healthcare Market and the Impact of COVID-19

By Carolina D'Alencon | May 8, 2020

For the Healthcare industry, the COVID-19 pandemic has been less disruptive than we’ve seen in other industries, such as the Insurance sector, and has instead provided a catalyst for rapidly accelerating several healthcare trends that were already underway prior to the onset of the crisis. The 5 key trends we anticipate being impacted the most are:

#1 Widespread Adoption of Telemedicine

Telemedicine was already gaining traction among consumers and payors, as organizations search for channels to engage, monitor, and manage their patient populations. Many provider groups and health systems that deliver in-person care were previously unsure how to incorporate telemedicine into their service offerings. Yet, as socially-distanced patients strive to avoid exposure, the adoption of telemedicine has increased dramatically. In March alone, telehealth visits grew over 50%, with virtual healthcare interactions predicted to rise to one billion by the end of the year. Who ever would have thought we’d see hospitals on T.V. saying not to come into the doctor’s office?

The Trump administration has greatly expanded access to virtual medicine by allowing telehealth visits to be covered under Medicare. The administration also temporarily relaxed the regulations that previously disallowed virtual care using a smartphone or tablet, as well as credentialing requirements for providers to serve patients across state lines.

These changes, coupled with the increase in people working from home and socializing through video conferencing tools, are sparking a long lasting transformation in consumer behavior that will promote the further adoption of telemedicine in the long run and accelerate adoption even after the pandemic.

#2 Shift to Outpatient Care

The shift of care away from hospitals to lower cost ambulatory and outpatient settings was already an accelerating macro-trend in care delivery. As hospitals are inundated with high volumes of potential COVID-19 patients, they have been forced to suspend ancillary services, routine patient consultations, and elective procedures in order to maximize critical care capacity and protect patients and staff from unnecessary exposure.

The financial toll has been heavy, as hospitals essentially swap high-margin work for low-to-no margin work at the same time labor and operating expenses are at a premium. This reality has brought some older trends back to the forefront, namely the integration of outpatient and ambulatory care into health systems to provide access to alternative sites of service and capabilities for greater visibility and control of care coordination and referral management to direct patients to the appropriate site of service before they show up at the hospital.

#3 Staff Utilization

There aren’t enough healthcare workers in the United States to meet rising demographic utilization trends under normal circumstances. A spotlight has been cast on our healthcare labor shortage with thousands of clinical staff across systems temporarily removed due to possible exposure, the shuttering of physician practices for routine and preventive care, and the immediate labor demands for emergency response.   

As the healthcare industry struggles to meet the overwhelming demand caused by this burden on the system, we anticipate the acceleration of certain tasks being performed by lower level workers in order to free up the higher level workers. This change must be accompanied by relaxed regulatory requirements for physician oversight of mid-level providers and increased adoption of standardization in evidence-based care pathways to ensure all patients receive the best possible counseling regardless of geography or site of service. 

#4 Healthcare Robotics

Applications for robotics and artificial intelligence (AI) in healthcare continue to expand.  Like the prior trends, this was already underway in the industry, but we expect accelerated increase in adoption among providers as a result of COVID-19. Due to unique regulatory constraints particularly around data privacy and security, healthcare has lagged other industries that have embraced automation in the face of increased competition and labor shortages, most notably financial services, industrial service and manufacturing, and consumer retail. 

Patients who are calling their doctors to ask about symptoms, similarly to those who are going into hospitals for procedures that could be performed in a lower-cost setting, are tying up valuable physician and clinician time that could be used elsewhere. A large portion of initial consultations, patient information requests, clinical and administrative documentation processing, and diagnostic evaluations can be handled entirely or augmented by bots. Providers and their patients are slowly becoming more comfortable with these digital interactions as well. Increased investment in robotic process automation (RPA), natural language recognition, workflow embedded AI, and clinical rules engines will be prevalent across all healthcare sectors.  

#5 Payment Reform

As noted with regard to telemedicine, we are already experiencing payment reform, and expect to see it continue as a result of COVID-19. The availability and flexibility of healthcare workers to respond in tense times is dictated largely by reimbursement rates from programs including Medicare and Medicaid. The pandemic underscores the need for change in this area, as the burden of payment falls on hospitals and nonprofits to take care of the demographics hardest hit.

Additionally, when minimum wage healthcare workers, who are utilizing Medicaid themselves, are unable to afford care it puts their own patients at risk, exacerbates the labor crisis, and has produced some of the most heart wrenching stories from healthcare workers on the front lines who are forced to choose between their families and their patients. It is our deepest hope that the illumination of the chronic deficiencies of government payment policies and their human toll will spur a reconciliation to increase rates and provide livable standards for our front line healthcare workers and their patients. 

What does this mean for M&A?

In terms of healthcare M&A moving forward, we anticipate the Healthcare sector in general to receive a lot more attention from buyers, as the current environment has created some interesting dynamics in the M&A space. Many deals have been put on hold and buyers reliant on heavy leverage are on their heels dealing with tightening credit availability. At the same time well-capitalized investors are reacting to the disrupted competitive landscape as a buying opportunity and focusing their attention on companies that stand to thrive coming out of this. 

In particular, companies that play into our five previously mentioned trends will be especially attractive. At a time that valuations in other industries may be contracting slightly, we anticipate valuations to stay strong, if not increase, within the Healthcare space. Companies in this market with sticky and high monthly revenues, long-term managed service contracts, and enterprise clients will become increasingly attractive and possibly get a new premium, as the rest of the market is getting a small discount.

Additionally, the commercialization of digital formulary by major payors, increased adoption of HL7 FHIR standards, the ISO 13485 QMS for Software as a Medical Device (SaMD), and the proliferation of internet-connected medical devices has expanded the reach and efficacy of digital medicine. Firms developing digital channels for care delivery, as well as those utilizing the resulting data to drive improved health outcomes, will be well-positioned in the month’s ahead.

Healthcare companies will have a greater appetite for acquiring technology companies. However, based on our experience with buyers, we have found that it is difficult to find technology companies that focus solely in the Healthcare space. Oftentimes, technology companies operate across many industries with a healthcare component. We expect buyers to continue to get increasingly comfortable acquiring these types of companies for their general capabilities and then working to develop a Healthcare business.

Prior to COVID-19, there was already a M&A battle going on to acquire physicians. Hospitals and private equity groups alike were vying to acquire more qualified physicians and now the need has intensified, as health insurance companies who are starting their own groups will need qualified healthcare workers as well. The physician shortage will intensify that battle and cause physician groups to realign their areas of focus. In the current market, some physician specialties will cool down, while others heat up. For instance, dental and dermatology are currently large focal areas, but these may shift to critical care specialties that have been hospital-based historically, but are moving to outpatient in the current environment.

As the political and economic climate changes day by day, we continue to learn and adapt, and encourage anyone with questions to reach out. Our team may be working remotely, but we are very much engaged and welcome continued conversations on this topic or others. Please reach out to Ben Garber ( or Emily Halstenberg ( with questions. 

This blog was created in tandem by Ben Garber and Emily Halstenberg.


Blog Series: The Impact of COVID-19

The COVID-19 pandemic is impacting people across the world in their homes, in their offices, and in their wallets. With political turmoil, market uncertainty, and a general sense of fear at the forefront of many American’s minds – we at 7 Mile are consistently being asked the questions, “what does this mean for your business?” and “what does this mean for my business?”

As a result, over the next couple of weeks, we will be releasing our COVID-19 blog series, which dives deeper into those two key previously mentioned questions for each of the industry verticals that we cover. We welcome feedback and questions, as we continue through the series. Other posts include:

About 7 Mile Advisors

7 Mile Advisors provides Investment Banking & Advisory Services to the Business Services & Technology Industries globally. 7 Mile Advisors advises on M&A and private capital transactions, and provides market assessments and benchmarking. As a close-knit team with a long history together and a laser focus on our target markets, 7 Mile Advisors helps its clients sell companies, raise capital, grow through acquisitions, and evaluate new markets. For more information, including research on the M&A markets, visit


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