Consolidation, Private Equity, Capital Markets, Data Breaches and Tiered Networks Will Impact NJ Healthcare in 2018

On Dec 4, 2017

The health law practice at Roseland-based Brach Eichler LLC has just released its outlook for 2018 and the top trends that will drive change and continue to shape New Jersey’s healthcare sector.  According to John D. Fanburg, managing member and chair of the health law practice, these are the top healthcare industry trends to watch in New Jersey for 2018:

Consolidation will continue, but the momentum will slow slightly. As physicians and group practices continue to look for ways to reduce expenses and inefficiencies in their practices, improve cash flow and bolster market share, they will look for merger partners to achieve greater economies of scale. This will include both single- and multi-specialty practices.

Private equity will still have an appetite for healthcare. Medical practices will continue to be a hot ticket for private equity deals in NJ, but since there are a finite number of deals (many firms have already made investments in NJ medical practices), the multiples will likely become more expensive. Over the past few years, private equity firms have been more specialty-oriented in the dermatology, pain, anesthesia and dental practice arenas.  In 2018, private equity firms will invest more in primary care physician practices that are ahead of the curve in offering new care delivery and payment models. In addition, because group practices are growing in size – through mergers and joint ventures – the value of transactions will be much larger than in previous years. However, in light of the 2017 decision in Allstate v Northfield, there will be greater scrutiny by the Board of Medical Examiners and other regulatory bodies in how these transactions will be structured.

More group practices will tap the capital markets.  As more practices grow in size, there is growing momentum in the public markets for medical practice rollups following the wave of practice mergers. Access to capital available through the capital markets will enable medical practices to expand their investments in technology, as well as hire professional management.  In addition, they will leverage their status as publicly-traded entities in their negotiations for managed care contracting.

The number of data breaches and HIPAA violations will rise. HIPAA violations will continue to occur as providers and other industry players take insufficient precautions with patients’ protected health information.  Federal and state regulators will respond, however, and enforcement will be swift.  In addition, hacking will continue to be a problem for healthcare providers and the industry more generally.  The public, will, unfortunately, become more accustomed to frequent healthcare data breaches as their numbers next year could rival those on the retail side.

Physician networks will narrow. Now that the wave of hospital lawsuits related to Horizon’s OMNIA program is dwindling, more narrow networks on the physician side will form as OMNIA continues to create tiers for physicians.  We may see additional lawsuits as a result, this time brought by physicians and physician groups.

“In many ways, New Jersey has become a barometer for how the healthcare arena is evolving nationally,” said Fanburg. “The business environment here is among the most competitive, and the regulatory climate, among the most challenging, nationwide. As with everything, with change there is opportunity. It will be interesting to see how these trends continue to shape the industry and lead to an even higher standard of care.”

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