Hartford Business Journal

24 Hartford Business Journal | February 8, 2021 | HartfordBusiness.com Consolidation, technology to have major impact on healthcare industry in year ahead PHOTO | CONTRIBUTED By Greg Bordonaro gbordonaro@hartfordbusiness.com J acob Ullucci is a longtime healthcare banker who recently joined KeyBank as a senior relationship manager to help lead the Ohio-based lender's healthcare group in New England, including Connecticut. His target client base includes medical centers, hospitals and physician groups as well as home health, behavioral health, medical device and dental practices. Health care is a leading industry in Greater Hartford and it's gone through major changes even prior to COVID-19. The pandemic has created new pressures on the industry but also created new opportunities. Ullucci recently participated in a Q&A with Hartford Business Journal to discuss the changing healthcare landscape in Connecticut and New England. You've been involved in healthcare banking for awhile, having been in a similar role at Santander Bank most recently, and also at Citizens Financial Group. How has the healthcare industry changed over the last decade? There are two changes that stand out. The first is the evolution of technology and the impact it's had on health care. The second is consolidation. The industry has become much more tech reliant over the last decade. Electronic medical records and healthcare apps to track health is just the start. Additionally, telehealth has exploded in popularity since the pandemic began and is likely here to stay. Meantime, healthcare costs continue to rise and financial pressures related to operations continue to drive industry consolidation. In fact, 2020 saw the continuation of mergers of multibillion-dollar systems, in the formation of larger super-regional systems. The benefits of these mergers include operating scale, securing critical mass of covered lives, market diversification and creating sustainable physician networks that position health systems for value- based care. For long-term survival, health systems will need increasing scale and market relevance within and across relevant markets. There's been a lot of M&A activity in the healthcare industry in recent years. How will COVID impact the trend? I believe smaller hospitals and health systems will struggle as financial pressures continue, which has been exacerbated by the pandemic. This will significantly accelerate hospital M&A activity in 2021 and beyond. Health systems recognize the urgent need to position for value-based care, the growth of Medicare Advantage and continued consolidation in the physician market. Hospitals and health systems of all sizes will seek partnership opportunities that offer the benefits of scale, additional access to capital and the ability to take on risk. Diversification of risk, not historically a driver of not-for-profit consolidation, is increasingly a strategy driving system M&A. It's not necessarily a bad outcome, but healthcare consumers — including businesses — should be aware of this as their experience may be impacted. What are major trends in health care in the year ahead that the industry needs to prepare for? Obviously, the pandemic has completely changed our lives and the ability to effectively work remotely has become paramount. As we get comfortable with Zoom and similar technologies, we also get comfortable with the idea and convenience of telehealth. I'm hopeful that the pandemic will be a memory by next year, but the reality is that the impacts will continue long after it's over. For anyone who feels as if they always fall ill shortly after visiting their primary care physician, they'll take comfort in having an examination in their bedroom instead. I believe telehealth is a new normal that is here to stay. Greater Hartford and even New Haven have a growing medical- technology industry. Are banks looking at companies like these as potential customers? What's the outlook on the growth of medical-technology companies? Yes. Based on our own experience in developing proprietary IT platforms with tech companies, we recognize the value of the med- tech industry, which is why we've identified this segment for growth. They are centric to the evolution of healthcare delivery and we want to partner with those organizations and help them bring game-changing technology to market. Are there any other emerging or growing healthcare companies or organizations? Urgent care centers continue to grow in popularity as they allow patients to see a doctor without an appointment for injuries and minor illnesses. Urgent care is for injuries and illnesses that need the attention of a doctor but not necessarily the emergency room, and is far more cost effective. Hospitals across the U.S. and in Connecticut faced many challenges in 2020, including financial ones. Many hospitals faced steep losses last year, even with the help of federal aid. How are hospitals going to respond and get back to a more stable financial footing? Optimistically, hospitals are projecting a return to pre-pandemic elective surgical procedures. Elective surgical procedures are a sizable source of revenue and many hospitals shut down elective procedures as the pandemic deepened and there was real fear that healthcare systems were going to be overwhelmed. There is pent-up demand for elective procedures and a return to normal will help hospitals regain their financial footing. What will be the key credit and banking needs of healthcare organizations in the year ahead? Access to liquidity and loans to fund expansion and buy equipment will continue to be important credit needs. The Fed has indicated the low-interest rate environment is here for the foreseeable future, so capital costs will not be excessive, which is an important point to consider when measuring debt repayment on the heels of such a difficult year. Additionally, as banking continues to become more digitized, organizations must be mindful of and prepared for fraud with robust cybersecurity measures. Jacob Ullucci, of KeyBank, says financial pressures brought on by COVID-19 will likely lead to additional hospital mergers. ON THE RECORD: Q&A

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