In this special Speaker Series, Becker's Healthcare caught up with Corey Palasota, director of business valuation and transaction advisory at VMG Health.
Mr. Palasota will give a presentation with VMG Managing Director Kevin McDonough at Becker's Hospital Review 7th Annual CEO + CFO Roundtable titled "How Cash-Strapped Health Systems Can Leverage Non-Operating & Intangible Assets to Enhance Returns" at 10:15 a.m. on Tuesday, Nov. 13. Learn more about the event and register to attend in Chicago.
Question: What keeps you excited and motivated to come to work each day?
Corey Palasota: Diversity of work and relationships. The valuation and advisory profession requires constant learning, thoughtfulness, integrity and craftsmanship. These demands have kept me engaged on a day-to-day basis as work never seems mundane or uninteresting. Secondly, the relationships developed with clients and colleagues have been meaningful and encouraging. Earning the confidence and trust of clients as they navigate impactful decisions has been personally rewarding. Lastly, I am fortunate to work alongside a young and energetic team.
Q: What major challenges, financial or otherwise, are affecting hospitals in the markets you serve? How is your hospital responding?
CP: Expense growth is outpacing revenue growth for many of my hospital clients. This dynamic is causing their margins to shrink and making it more difficult to fund needed capital improvements, service debt loads and expand service offerings. At the same time, the valuations for strategic investments have risen due to increased competition from new entrants with excess capital (e.g. insurance companies and private equity firms). Finally, hospital clients have continued to generally struggle with physician engagement and coordination with their physician employed networks.
From a transaction standpoint, these hospital systems have been responding through a combination of avenues including the following: (1) divestiture or joint venture of underperforming non-core service lines (e.g. home health / hospice), (2) joint venture of profitable service-lines to increase or maintain market share (e.g. imaging, ambulatory surgery centers), (3) continued evaluation of large-scale mergers, acquisitions or affiliations with other operators, payers or providers.
Q: What is one of the most interesting healthcare industry changes you've observed in recent years?
CP: Historically, the healthcare battleground has always been among payers, operators and providers. In some markets all three parties compete against each other, while in other markets two parties (e.g. hospitals and insurance companies) try to collectively gain advantage over the third (e.g. providers). An interesting shift that appears to be occurring is the emergence of a fourth player, the patient, and a fifth player, the employer. Patients are becoming more empowered, engaged and aware of their options. The growth of retail-based medicine is a great example of how patients are changing their view of traditional healthcare. Additionally, we are starting to see large employers seek a greater role in the healthcare industry. I am personally interested to see what results from the announced collaboration between Amazon, Berkshire Hathaway and JPMorgan.