Healthcare Investment Banking

Steven R GerstWhile many Mergers & Acquisitions professionals fear that the slew of health care laws and regulations that took hold during President Barrack Obama’s presidency may chill dealmaking, there is a silver lining, says Steven Gerst, MD, Founder & Principal of Asclepius Life Sciences Fund, LP ( and Managing Director, Capital Markets for Olympian Capital Management, LLC, new regulations and politcial changes may worry some private equity and strategic buyers. However, both the medical device and health care information technology (IT) sectors continue to be a vibrant playing field for buyers due to hospitals and private practices being mandated to invest in new technologies, such as electronic medical record systems, Gerst explains. We caught up with Gerst at the recent Alliance of Merger & Acquisition Advisors’ (AM&AA) Summer Conference in Chicago.

How is the new health care law affecting deal flow?

Between the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 and the Affordable Care Act of 2010-known as ObamaCare-those two laws are driving tremendous investment opportunity and growth, primarily in two sectors: health information technology and medical devices.

Why are these sub-sectors of health care seeing the most uptick in M&A?

They’re driving the highest multiples, said Gerst. This trend is leading to major consolidation because as soon as these companies are formed and as soon as they hit a level of profitability that is attractive to the middle market, they’re being purchased by both insurance companies and aggregators. The government is primarily driving it, too. The HITECH Act subsidizes the cost of, or purchase of, electronic medical record systems providers, which are increasingly being bought by physicians in private practice and hospitals. The government now penalizes hospitals for not using EMRs and so they must attest to using EMRs meaningfully.

The new MACRA, MIPS and the APM legislation is shifting provider reimbursment from the current  “Volume-Based” system (in which providers maximize income through more inpatient admissions, patient visits and performing more procedures) to a more outcomes driven, “Value-Based”  system of reimbursement.  This will drive tremedous investment opportunities in to remote patient monitoring companies such as which is able to leverage technology into the home to achieve the Triple Aim of of Ceneters for Medicare and Medicaid which includes;

  1. Improves Access to Care in both urban and rural markets
  2. Improved Quality of Care delivery by linking the home vital sign monitoring systems directly and in real-time into the hospital and provider’s electronic medical record system to provide immediate health monitoring to keep patients healthy and out of the hospital Emergency Room or Intensive Care Unit, while simulatenously avoiding costly 30 day readmissions, and
  3. Dramatically reducing the overall cost of healthcare delivery to increase the “Leftward Shift” in Healthcare.












Are more PE firms noticing the potential deal opportunities within health care?

Very few hedge funds and private equity firms have the depth of expertise in health care to understand the value and size of what’s coming with the new law. Since our team at Asclepius Life Sciences Fund, LP ( has more than 100 years of experience in health care mergers and acquitions, we see a lot of deal flow in the biotech and pharmaceutical areas and tremendous opportunity for start-ups and young growth companies.  Deal Flow is driving off this new health care reform because doctors are required to have all of these new technologies. And every doctor, hospital and insurer will have to offer these new technologies to remain competitive in these new Value Based Markets.

For more information on related topics, visit the following:

Strategic Buyers
Private Equity
Health Care