The private equity venture industry has been adversely affected in the wake of modern expansions taking place in the healthcare software development department of The United States. In addition, events like the establishment of a new administration, widespread ambiguity on the topic of the PPACA (Patient Protection and Affordable Care Act) have led to rising concern among investors as to whether their investments will prove beneficial or not.
However, looking at the second side of the coin, few other notable events like modification in compensation outlines or union of the provider and payor world have maintained the significant speed of attracting investors. These considerations have managed to magically make reasonable people within the equity sector amid a substantial drop-off in healthcare merger and acquisition activity. Ancillary services and providers have witnessed healthy investment flow in addition to the hospitals and physician rehearses.
What are Ancillary Services?
To understand ancillary services better, we can say that these are the care and supplement providers to people of medical staff who are directly in touch and serve patients. Their basic job is to keep the medical field properly equipped with their required supplements in performing their duty.
For years, healthcare software development has efficiently managed to maintain its image as a safe option for investors because this industry remains largely untouched by the country’s economic imbalances or throughout the world. This is the prime reason why despite constant interruptions and uncertainties, the industry reached the milestone of covering the highest all-time value in 2016 since 2007.
The value of approximately $36.4 billion was disclosed in the media, including shares of private equity that too on a global basis. The value was the result of almost all the major and minor sector shares of the healthcare industry. The minor sector is usually referred to as the “healthcare-light companies,” the companies that are not covered under the direct impact of market fluctuations and reimbursements. This category was specifically designed to define a set of industries that may invite maximum investors with the least chances of market risk or loss. Most of the Ancillary services are considered a subcategory of this side of the healthcare market and are risk-free.
Theories behind the success of Ancillary Services Sector-
Over the years, ancillary service providers have been the favorite choice of private equity investors, considering the risk-free nature of this sector. Moreover, after years of research and observation, experts derived three core reasons behind the huge success of ancillary services despite the constant market fluctuations that took over other mainstream areas of this sector.
- As mentioned earlier in this article, the core task of ancillary providers is to keep the medical supplies of supplements fulfilled in the major and direct caregiver sector to patients. This makes this sector remain in constant demand without any effect of market changes. This also defines and completely justifies why ancillary services are a safer choice for investors than other sectors. It provides more sense of stability and profit-sharing.
- Ancillary providers have the scope of benefitting from basic business lines as well, in addition to higher institutional bodies. For example, laboratory requirements. This aids a great deal in maintaining uninterrupted demand and supply chain.
- Pending market saturation and payor actions create uncertainty in the profit-making period of some ancillary providers.
Some derivable examples of ancillary services or providers are urgent care, anesthesia providers, laboratories, healthcare IT, behavioral health, revenue cycle management, and many more.
Market fluctuations within the Ancillary sub-sectors-
Another point that must be noted here is that no matter how efficient these ancillary services have been over the years, the market attention does not remain constant. It keeps interchanging from sector to sector depending upon the prevailing situations in the states. For instance, currently, the three major ancillary health care sectors, namely ambulatory surgery centers, medical devices, and specialty pharmacies, have witnessed low demand rates. The investors found the other sectors much more attractive and beneficial at this point. However, this nowhere means that these three are any less-profitable. Just the market is in a different mindset. These fluctuations within the sector are very common and keep happening throughout the clock.
Brief view of current popular sectors-
Ancillary sectors like laboratories never step down from the demand chart. Reason being their essence in the healthcare software development market. Laboratories contribute to the research and development areas and are of national importance in maintaining coordination among care providers. This is the reason why it remains a center of attraction for private equity investors. They don’t hesitate in making high-level investments in this sector, and it has even witnessed some notable transactions worth over billions.
Another remarkable ancillary sector is urgent care which includes investments from free-standing emergency departments, CVs minute clinics, or special urgent care facilities such as orthopedic treatments. This industry has witnessed a significant rise in investment over the years and is on the continuous upwards graph.
Revenue Cycle Management deals with the elementary problems encountered by the healthcare software development providers like billing, magnificent tracking, or gathering monetary payments. Not just this, RCM is a diversified sector that contains a lot of varieties, and these variations are expected to be a prime reason behind the sudden and unexpected growth of this sector with surprising benefits. Like any other mainstream healthcare software development sector, RCM is also a complex administrative department that plays a significant role in revenue generation, tracking, and maintaining proper records.
Despite the above-given reasons, it is still an immense surprise how a small sector like ancillary providers, which is not directly connected to the market expansion, managed to overcome the efficacy of physician practices. Some other prime reasons for the same can be the rapid increase in the acquisition of hospitals’ physician practices. Hence, it does not require private equity investments for its growth. The enactment of major state laws prohibits or limits private equity firms from indulging in investment activities within physician practices.
Therefore, despite prevailing uncertainties, the private equity firms will continue to incline toward ancillary providers in the future as well.