The pandemic is shifting how patients access care, with telehealth seeing significant gains, as well as home health care and remote work.

After years of accelerating growth, it should come as no surprise that health care merger and acquisition activity declined during the first half of 2020, as the coronavirus outbreak threw a wrench in financial projections and business planning. According to PwC's mid-year Health Services Deals Insights Report, released last week, deal values are down 52% over the same period last year, and the actual number of deals was down 21.5%.

"The deal process is going to be a bit longer as a result of COVID, but this doesn't mean fewer deals," notes Nick Donkar, PwC's U.S. health services deals leader. "There were many deals in the works already–near the finish line–that were able to close in the early phases of the pandemic. All parties want to keep the doors open and provide access to affordable care, so deals will need to ensure this continues."

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Indeed, the report noted an uptick in deals at the end of June, though cautioning that deal activity will be uneven for the remainder of the year as companies balance the short-term challenges caused by the pandemic against long-term strategy.

"In coming back from the headwinds of COVID, health services companies will look for strategic reasons – growth, supporting markets, portfolio of assets – to realign their deal strategy," Donkar. "Health services is a resilient sector and here will be a rebound in deals, rather the timing and velocity of the rebound is still to be determined. We expect continued growth in non-traditional methods of care."

The pandemic is also shifting how patients access care, with telehealth seeing significant gains, as well as home health care and remote work. "Behavioral health is also seeing COVID-related demand, and Medicaid enrollment has increased, so capabilities in these areas could become more valuable," the report notes. "Solutions that ease social determinants of health remain a key focus, as food insecurity grows and social distancing complicates daily activities."

In addition, two sectors saw increased M&A activity: labs, MRI & dialysis, as well as "other services," which includes things such as medical office buildings, outpatient facilities, pharmacy-related services and physician staffing services.

The PwC report outlines three factors that it expects will affect deal activity:

1. Health services companies' liquidity positions
2. The short- and long-term needs COVID-19 creates
3. Pre-existing market dynamics

The report highlights several market dynamics at play this year, including the upcoming presidential election and the pending Supreme Court review of the ACA; consumer expectations when it comes to health care technology experience; and competitive pressures.

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