This week delegates from around the world descended on London for HBI 2019 to discuss the healthcare market and its various sub-sectors. Here are the things we learnt:

1. Digital is coming – but we still don’t know when who or how much it’s going to cost

Payors say that digitalisation of services has seen savings of anything from between 20% to 40% – but it’s key that this is only where they have some control over the patient pathway. Sweden has had to admit that digitalisation has been a “strain” on its reimbursement and it was assessing whether all remote consultations needed to be reimbursed at the same cost and one doctor said he would hate to see a “fee per use” model. Such differing regulations and reimbursements are what’s holding back a pan-European consolidator.

2. More cash for deals

Liquidity grew substantially in 2018, with PE investors amassing $1.8trn worth of dry powder in need of a home. This, coupled with an increase in credit funds on the scene, spells extra cash for deals.

3. Multiples drop across geographies

Though multiples across healthcare services for 2018 have been below sector average for the last decade. Companies that are growing fast are trading at a significant premium, however. We see a big difference between long-term, run-rate and current year multiples, but all generally in the low to high teens and not below 10x. In Spain, we’re seeing multiples of 20x or more. In emerging markets, valuations are around 15x.

4. The drive to outpatient continues

Apparently, we’re at the dawn of the End of the Hospital. Cost containment in inpatient is hitting margins of all developed market operators. Three strategies are emerging: go into high-growth emerging markets, extend the patient pathway by going into ancillary services or position yourself as the quality leader for complex, high-acuity care which in theory should feel the pinch less. But each comes with a unique set of challenges and is yet to prove a winning strategy.

5. No disruptors

Go back three years and there was much talk of Uberisation and how new players would disrupt the existing order. So it is significant that such talk is now absent. No one has a clear idea of what Amazon plans to do but it is likely to squeeze medtech and pharma before we see big changes in how health care services are delivered. Existing players, particularly occupational healthcare players with a lot of patient-contact, are successfully introducing new telehealth and digital models

6. Value-Health is no panacea

Payors and operators are increasingly sceptical that new value health metrics based on patient outcome will work. They are seen as overly complex. Even if they do reward quality, value health payments do not necessarily change behaviour. Instead, insurer VGZ in the Netherlands gave a hospital a lump sum to cover a five year period during which it massively reduced overactivity in a consensus-driven model working with doctors. At Bernhoven Hospital this cut costs by 2017 to 84% of 2014 levels.

7. Emerging market cities becoming oversaturated

Those high-growth markets supposed under capacity is now being questioned. Indian hospital Manipal CEO Dilip Jose showed that India’s urban beds-per-capita is now in line with developed markets which has led investors to switch their focus away from the cities. The same was said of South Africa, the GCC and other major emerging markets but without sufficient PMI penetration purchasing power is low outside the hubs.

8. Patients know they are consumers – and are voting with their feet

We would welcome your thoughts on this story. Email your views to Rachel Lewis or call 0207 183 3779.