HCIT and Technology Enabled Services Sector Update

Information technology and technology enabled services continue to be central to the healthcare industry. With 60% of U.S. adults estimated to have a chronic disease and 40% of U.S. adults estimated to have two or more chronic diseases, providers and payors seek technology that supports better care coordination across the healthcare ecosystem to improve long-term disease management and better manage the cost associated with providing this care.

Select HCIT Themes

• Shift to Ambulatory and Post-Acute Care
  
• Shift to Value-based Care Models
• Solutions for Self-Funded Benefits
• COVID and the Acceleration of Virtual Care

01. Capital Markets Update

Despite the downturn at the onset of COVID-19, the February and March 2020 market correction proved to be short-lived

• Equity markets quickly rebounded through the remainder of 2020 and peaked in January 2022
• Macro-economic issues (e.g., inflation, Ukraine conflict) have led to market declines since then
• Public HCIT companies outperformed the broader markets through February 2021, hitting its peak a year before the broader markets, mainly due to waning enthusiasm around telehealth and technology-enabled care
• Consistent with the broader markets, IPO activity in the first half of 2022 ground to a halt
• While private placement activity has slowed, 2022 could still end above levels achieved pre-COVID-19 with transactions addressing a broader scope of healthcare themes

02. M&A Markets Update

2021 was a record year for the M&A markets fueled by hopes of an improving economy, concerns around potential changes to capital gains treatment,  and pent-up demand for deals put on hold at the onset of COVID-19

• While transaction volumes through July 2022 trail 2021, 2022 remains on-track to exceed pre-pandemic levels
• Sellers include a mix of financial sponsors, strategic divestitures, public, and private entities
• Financial sponsors and non-HCIT strategics so far have been the most active buyers this year
• Strategic HCIT companies are making more selective acquisitions
• While still important to care delivery, transactions focus less on virtual care and more on general healthcare themes (e.g., revenue cycle management, value-based care, advanced analytics)