The Federal Reserve is likely to ease interest rate increases starting in the next session or two, KPMG’s Ash Shehata and KPMG’s Global & US Private Equity Leader Glenn Mincey said Thursday during a press roundtable discussion.

“That puts kind of a very positive mood in the environment,”  Shehata said. “I think before even the feds are making their final moves, people are taking action.” 

Corporations, he added, are looking for potential deals and provider acquisitions.  

Mincey added that 2022 was the second best year on record, behind 2021, for healthcare deals. The demand trend seems to be heading toward behavioral health and home healthcare, he added.

“Much of the decline was due to the larger macroeconomic uncertainty and constraints on access to capital that we’re all experiencing in the [private equity] industry,” Mincey said. 

“Dry powder” is still plentiful, and sellers are still interested, he added, indicating that the challenge is in aligning buyer and seller pricing expectations.

Three factors are going to drive dealmaking going forward, according to Shehata. 

“No. 1 is the effects of the settling in of the labor shortage,” he said. “The second one is going to be the compression of margins on the healthcare delivery system.

“And then the third one is the continued pressure on reimbursement rates, which were likely going to see both at the federal and state and, of course, commercial insurance levels,” Shehata continued.

Supply shortages and customer acquisition costs are the bread and butter of private equity, Mincey said, adding that he expects to see “quite a bit of innovation and efficiency in that direction.” 

The use of artificial intelligence in healthcare is “transformational” right now, he said, because technology has the ability to automate mundane tasks.

“Those are things that occupy a significant chunk of every professional’s day,” Mincey asserted. “If you can make a healthcare professional more proficient with his or her time, they will become much more effective.”

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