Consolidation of Clinics, MDs and Hospitals into Integrated Systems is Accelerating

PALM BEACH,  Fla., Dec. 3, 2020 /PRNewswire/ -- 2020 will be a year that will not soon be forgotten across all aspects of everyday life… and also in the commercial sector… including healthcare. Especially healthcare some would say. While 2020 is a year of emotional and financial hardship for most healthcare systems, it's also a year of rapid change, innovation, and new ways of thinking and serving. In a quest to grow, find profitability, and for many, to simply to stay viable – partnerships, JV's, and M&A will again come to the forefront of business strategy. But there's less certainty as to exactly how this will play out. Will M&A and joint ventures between like players surge in the months ahead, or will we see more rapid-fire tech and public-private partnerships executed in record time?   According to an article in Healthcare Innovation said that: "The consolidation of primary care physicians into affiliations with integrated health systems has been accelerating, as has the consolidation of hospitals into large, existing systems… The consolidation of hospitals and physicians has been changing the landscape of health care delivery in the United States."   Active companies in the markets this week include: Cardinal Health (NYSE: CAH), Skylight Health Group Inc. (OTCQB: CBIIF) (CSE: SHG), Tenet Healthcare Corporation (NYSE: THC), CloudMD Software & Services Inc. (OTCQB: DOCRF) (TSX-V: DOC), WELL Health Technologies Corp. (OTCPK: WLYYF) (TSX: WELL).

Another article in Health Leaders Media agreed, saying that although hospital M&A activity is down because of the pandemic, industry executives do expect an uptick in 2021.  The NIH also chimed in adding: "Health care delivery systems are becoming increasingly consolidated in urban areas of the United States… The acquisition of physician practices is a process that will be difficult to reverse in the current health care environment. Provider revenue uncertainty is a key factor driving consolidation, with public and private attempts to control health care costs contributing to that uncertainty. As these efforts will likely continue, and possibly intensify, community health care systems now are less consolidated than they will be in the future. Acquisitions of multispecialty and primary care practices by integrated delivery systems follow a common process, with relatively predictable issues relating to purchase agreements, employment contracts, and compensation. Acquisitions of single-specialty practices are less common, with motivations for acquisitions likely to vary by specialty type, group size, and market structure. Total cost of care contracting could be an important catalyst for practice acquisitions in the future… In the past, market and regulatory forces aimed at controlling costs have both encouraged and rewarded the consolidation of providers, with important new developments likely to create momentum for further consolidation, including acquisitions of physician practices."

Skylight Health Group Inc. (CSE:SHG) (OTCQB: CBIIF) BREAKING NEWS: Skylight Health to Enter into 15th State with Acquisition of Tennessee Clinic with $2.2 million in Revenue and $0.4 million EBITDA - Skylight Health Group Inc. (formerly CB2 Insights) ("Skylight Health" or the "Company"), one of the largest multi-specialty healthcare systems in the United States, is pleased to announce that it has entered into a Letter of Intent (LOI) to purchase the assets of Healthcare Resources Management LLC ("HRM") which operates Perimeter Pain and Primary Clinic ("Perimeter") in Cookeville, Tennessee. The planned acquisition of HRM expands the Company's bricks and mortar and telemedicine services to 15 States and will add 12,000 new patients to its current roster of 120,000.

HRM has been operating Perimeter in Cookeville for over 7 years with strong patient retention. Services to patients include primary care, chronic pain management, interventional procedures, weight management, regenerative medicine and aesthetics. Services provided by Perimeter are primarily reimbursed through insurance carriers including Medicare, Medicaid and other commercial payors.

The Company expects to see continued growth in patient registrations and visits as Perimeter continues to thrive among the challenges most clinics have faced due to the recent COVID-19 pandemic. Further, the Company will work quickly to expand on the current offering of services by leveraging its current telemedicine infrastructure to provide access to patients across the state of Tennessee. Upon completion, services offered by Perimeter will apply to Skylight Health's entire patient base. These services are immediately accretive as they allow the Company to expand complementary billable services. Patients will continue to benefit from the expansion of services in-house. The Company will benefit by expanding the per patient insurable revenue share-of-wallet by retaining these services internally.

"Perimeter represents the first of complementary non-primary care acquisitions and is in direct alignment with our strategy to expand on services offered to our existing patient base nationally," said Prad Sekar, CEO, Skylight Health. "Adding vital services like chronic pain management, interventional procedures and other from Perimeter will benefit tens of thousands of our current patients and will be deployed nationally within the existing framework of payor contracts in each state we are organically establishing over the next year."

HRM represents the fourth announced acquisition by the Company in the last 60 days. This acquisition supports and strengthens the 3-prong growth model which includes growth from the current infrastructure, new services and acquisitions. The Company will pay as per the agreed upon terms of the LOI, a transaction value in cash of CAD 1.03 million representing an EBITDA multiple of 2.6x. Perimeter reported revenues in 2019 of CAD 2.2 million and net income of CAD 400,000. This transaction is subject to a satisfactory due diligence period by the Company and mutual agreement to an Asset Purchase Agreement and Closing Conditions. The transaction is expected to close on or before December 31, 2020.     Read the full release for Skylight Health Group at:  https://skylighthealthgroup.com/press-releases/  

Other recent developments in the healthcare industry include:

Cardinal Health (NYSE: CAH) has reached an agreement with the Centers for Disease Control and Prevention (CDC) to act as a network administrator in Phase 2 of the Federal Pharmacy Partnership Strategy for COVID-19, which will enable retail independent, small chains and long-term care pharmacy customers to participate in the vaccination effort. The COVID-19 vaccine will be distributed by the CDC's central distributor.

"Cardinal Health is committed to working with the CDC and our pharmacy customers to ensure a safe and secure COVID-19 vaccine administration network across the United States. The breadth and expertise of Cardinal Health makes us a vital partner to help the country move forward," said Victor Crawford, CEO Pharmaceutical Segment. "Pharmacists are serving on the front line of the national response to the COVID-19 pandemic and are an important part of our nation's fight against the pandemic."

Tenet Healthcare Corporation (NYSE: THC) recently announced its results for the quarter ended September 30, 2020 (3Q20).  Ronald A. Rittenmeyer, Executive Chairman and Chief Executive Officer, stated, "The third quarter of 2020 was in many ways more challenging than the second, with COVID positive inpatient census surging by approximately 64 percent in our markets in late July and August. Our operators executed exceptionally throughout our entire system, ensuring they cared for the surge in COVID patients and continued the safe return of non-COVID patient volumes closer to normalized levels. Our operating discipline was further demonstrated as we exceeded expectations for both Adjusted EBITDA of $621 million, before adjusting for the changes in guidance issued by HHS in September, as well as cash flows, which increased by 26 percent on a year-over-year comparison before the additions of grants and advances. With the issuance of revised guidance on grant income from HHS late in the quarter, we, along with other providers, are facing new challenges in terms of federal support. We believe our hospitals' focus on additions of strategic service lines, coupled with continued positive growth and efficiency at USPI and Conifer, has positioned us well this quarter and provides the basis for continued solid performance going forward."

CloudMD Software & Services Inc. (OTCQB: DOCRF) (TSX-V: DOC), a telehealth company revolutionizing the delivery of healthcare to patients, recently announced that it has closed the previously announced acquisition of Re:Function Health Group Inc. (" Re :F unction "), a leading rehabilitation clinic network, with 8 clinics and 37 specialists and allied health professionals.

Dr. Essam Hamza, CEO of CloudMD commented, " We are excited to close the acquisition of Re:Function and have already started working with the entire team. Through strategic M&A, we have acquired a number of already successful standalone healthcare solutions that combined, will create one transformative platform that emphasizes whole-person care. The integration of these solutions is already very much underway and already showing early beneficial results . I am extremely proud of our team for their diligence and focus in building the solid foundation which has enabled CloudMD to be a leader in the space ."

WELL Health Technologies Corp. (OTCPK: WLYYF) (TSX: WELL), a company focused on consolidating and modernizing clinical and digital assets within the healthcare sector, recently announced the following updates:  WELL has completed its previously announced acquisition of all the issued and outstanding shares of Source 44 Consulting Incorporated ("Source 44") - Source 44 provides cybersecurity consulting and professional services to businesses across Canada and generated more than $20M in revenues with over $2Min EBITDA⁽¹⁾ in the past 12 months. - This acquisition is intended to enhance WELL's ability to protect healthcare clinics and their data across Canada, as cybersecurity continues to be a top priority for the healthcare industry.

Source 44 is WELL's second cybersecurity acquisition, complementing the Company's prior acquisition of Cycura Inc.'s cybersecurity business and positioning WELL as a leader in providing cybersecurity related services to a broad range of sectors including healthcare.  - Source 44 will be situated in WELL's Cycura Data Protection Corp. business unit, which acts as a consolidation point for additional cybersecurity related assets as WELL continues to build shareholder value through accretive and disciplined capital allocation in the cybersecurity space.

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