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Are we slowing down in healthcare?
We are starting to see the digital health solution hype slowing down along with more scrutiny on healthcare mergers and acquisitions.
Deal Are Slowing
Healthcare dealmaking is slowing down as the industry feels the pressure of record-setting inflation. Only 154 deals were completed or announced in May, down from 176 in April to 274 in January. The busiest sectors so far this year have been life sciences, medical devices, healthcare IT, and physician practice acquisitions. Each of these sectors has seen more than 100 deals in 2022.
According to a report by Rock Health, a digital health startup accelerator, digital health startups have raised over $4.5 billion in the last two years. This influx of cash is primarily due to the pandemic, which has thrust telemedicine, virtual care, and digital capabilities into the forefront of healthcare. However, not every digital health startup adds value.
Healthcare CIOs have watched companies raise millions of dollars to develop platforms that are supposed to make healthcare delivery better, more efficient, and less expensive. But often, these startups fail to deliver on their promises. They don't realize how complex healthcare organizations are. Startups are eager to step in and create technology to address these inefficiencies, but these efforts often produce more hype than meaningful solutions.
Healthsystem Merger Blocked
The Federal Trade Commission recently announced that two hospital systems in New Jersey (RWJBarnabas Health and Saint Peter's Healthcare System) that were planning to merge had canceled those plans, following an FTC complaint that a merger would be anticompetitive.
The merger would have combined two hospitals located less than a mile from each other, which also happen to be the only two hospitals in the city of New Brunswick, New Jersey. The transaction was presumptively unlawful, with combined shares of approximately 50 percent for inpatient general acute care services in Middlesex County, New Jersey. It would have resulted in higher prices and lower quality of care for New Jersey residents.
The FTC's complaint alleged that the merger would likely lead to higher prices for a wide range of inpatient and outpatient services and potentially reduced availability of some services currently offered at one or both hospitals.
For the remainder of the year, will we see fewer mega-mergers and more failed health tech companies? We are witnessing layoffs by these health tech companies as it gets tougher to raise new funds coupled with solutions failing to show a positive ROI.