More than half of finance executives are projecting health IT and data to see strong investment activity in 2018 and 2019, according to a new survey. But they're also concerned that a bubble is growing in certain health and life sciences realms.
Fifty-two percent are projecting that the health IT and data subsectors will have a lot of investment activity in 2018-19, followed by outpatient services at 44 percent, and 33 percent each for pharma and biotech and also post-acute care services.
The greatest activity will be in digital technology, data analytics and other sectors that help move the healthcare industry from volume to value, according to former Utah Governor Mike Leavitt, founder of Leavitt Partners and chairman of Leavitt Equity Partners, one of the two firms that conducted the survey.
Yet finance executives are concerned that a market bubble is developing for several sectors in healthcare and life sciences. Despite this, they expect a great deal of investment and mergers and acquisitions activity in health IT and outpatient services.
KPMG LLP and Leavitt Partners surveyed 265 finance executives at healthcare corporations, investment banks and private equity firms for their joint Investment Summary 2018 report. The groups found that 36 percent see the current state of the healthcare and life sciences market as a "moderate bubble" and an additional 22 percent see the market as a "bubble likely to burst."
When asked about overvalued sectors, respondents most frequently cited biotech (71 percent), specialty physician practice management (67 percent), behavioral health (63 percent) and healthcare IT (58 percent).
At 23 percent and 17 percent, Medicaid plans and population health/primary care, respectively, were described as the most undervalued.
"Healthcare stakeholders are anticipating accelerated investment activity in sectors that are enabling the transition from volume to value, such as digital technology, data analytics and outpatient services," Leavitt said.
KPMG's Deal Advisory Practice for healthcare and life sciences leader Carole Streicher added that mergers and acquisitions have been active in healthcare and life sciences as those organizations have looked to grown in recent months.
"Survey respondents see continued investment and acquisition activity in 2018," Streicher said. "But we are seeing some concerns about valuation among market participants."