Zak Eisenberg is the Vice President of Merritt Healthcare Advisors, which provides investment banking services to healthcare services organizations. In his role, he manages the strategic development and execution of ASC, surgical hospital, and physician practice transactions. Zak specializes in sourcing and analyzing transactions and capital and negotiating and structuring investments. Previously, he was a Biofund Venture Analyst at New Orleans Bioinnovation Center, a biotech and life science-focused venture capital firm, and led the analysis team at a renewable energy-focused private equity firm.
Here’s a glimpse of what you’ll learn:
- [1:13] An introduction to the webinar topics and panelists
- [6:30] How the new presidential administration impacts market transactions
- [11:53] Macro trends influencing the healthcare industry
- [16:38] Concerns about the demise of the ACA (Affordable Care Act) on the healthcare market
In this episode…
The incoming presidential administration could initiate significant changes to the healthcare industry, impacting transactions and real estate. What are the key trends shaping the future of healthcare, and what should practice advisors and healthcare practitioners consider for the landscape in 2025?
Possible revisions to the Affordable Care Act (ACA), regulatory rollbacks, or changes in federal healthcare funding could disrupt provider revenue streams, complicating billing and collections processes. Currently, the expansion in coverage strengthens providers’ financial positions by increasing the insured patient base. Healthcare business advisors Zak Eisenberg and Robert King observe that trends like demographic shifts and technological advancements increase demand for care while increasing financial pressures on providers, prompting practice consolidation. For healthcare real estate, reduced borrowing costs tied to inflation control efforts could spur more transactions in this capital-intensive sector.
In part one of the Transaction Healthcare webinar series, Chris Raphaely of Cozen O’Connor interviews Zak Eisenberg of Merritt Healthcare Advisors and Robert King of SkyView Advisors about future healthcare market dynamics. Together, they share concerns about the demise of the ACA, how inflation impacts healthcare real estate, and the future of market transactions in the wake of a new presidential administration.
Resources mentioned in this episode:
- Zak Eisenberg on LinkedIn
- Merritt Healthcare Advisors
- Merritt Healthcare Advisors email: contactus@merrittadvisory.com
- Chris Raphaely on LinkedIn
- Cozen O’Connor
- Robert King on LinkedIn
- SkyView Advisors
Quotable Moments:
- “In healthcare transactions, timing is everything; knowing when to execute can significantly impact the success of the deal.”
- “Our unique focus is on healthcare services, working with businesses that transact or raise capital between $20 and $500 million.”
- “AI and technology are poised to transform healthcare, creating efficiencies and saving time, especially in patient care coordination.”
- “For healthcare, bringing more people into the system who can pay insurance is a fundamental growth factor, opening up revenue opportunities.”
- “From a provider perspective, effective billing and collections are the lifeblood of medical businesses, crucial for sustaining operations.”
Action Steps:
- Understand market trends and demographics: Stay informed about the macroeconomic trends affecting the healthcare industry, such as the aging population and technological advancements. This awareness allows you to anticipate changes and adapt your strategy to leverage these shifts.
- Embrace technological innovations: Invest in AI and technology to improve efficiency in healthcare operations, as these tools can significantly enhance patient care coordination and reduce costs. By staying ahead in technology adoption, you address the industry’s slow uptake of tech, which can hinder growth and efficiency.
- Optimize real estate strategies: Consider sale-leaseback transactions and other real estate strategies to unlock capital and streamline operations. This approach can help mitigate the challenges posed by increasing real estate costs and a competitive market for quality assets.
- Navigate transaction timing wisely: Pay attention to market conditions and timing when entering the transaction process, as timing can significantly influence the success of a deal. Understanding when to buy, sell, or hold assets can help mitigate risks and capitalize on opportunities.
- Monitor regulatory changes: Keep abreast of legislative changes and their potential impact on healthcare transactions, such as those related to the ACA or Medicaid. Regulatory shifts can affect billing and collections processes, and being prepared can help mitigate potential disruptions.
Sponsor for this episode…
This episode is brought to you by Merritt Healthcare Advisors.
Merritt Healthcare Advisors is an investment bank with a unique focus on healthcare providers and their businesses.
Merritt leverages the healthcare industry expertise of its owner-operators, clinicians, investors, and advisors to develop surgical facilities that perform safe, efficient, and cost-effective procedures.
To learn more, visit https://merritthealthcare.com/.
Episode Transcript
Intro 0:04
Hello and welcome to Transaction Healthcare. I’m Zak Eisenberg, Vice President at Merritt Healthcare Advisors. Merritt Healthcare Advisors is an investment bank with a unique focus on health care providers and their businesses. Transaction Healthcare is a podcast focused on addressing questions and concerns at the intersection of healthcare transactions and business.
Zak Eisenberg 0:25
Zak Eisenberg here, this is a special episode from a webinar we delivered. It was so interesting that we wanted to share this part of it with you on the podcast. It’s brought to you by Merritt Healthcare Advisors. We’re a healthcare focused investment bank. We don’t work on anything else, mostly with provider businesses. Usually, we’re working with physician entrepreneurs, helping them to raise capital or sell their business, or sometimes helping them to buy other practices or invest in other types of ancillary service lines.
Chris Raphaely 0:56
Well, welcome everybody. Thank you for joining us tonight. Our webinar is entitled best practices in monetizing physician owned practices in real estate. We’re going to talk about associated issues for about an hour or so tonight. My name is Chris Raphaely. I’m your moderator. I am the co-chair of Cozen O’Connor’s health care and life sciences department. Cozen O’Connor is a full service 950 law firm, lawyer law firm with 30 offices throughout the United States and Canada. Our health care practice and life sciences practice group represents all types of players in the health care and life sciences industries, we focus on all types of transactions, including some of the fundamental transactions we’re going to talk about tonight. We focus on regulatory issues throughout the industry, as well as reimbursement issues that affect all types of providers and other folks who participate in the delivery of health care and life sciences throughout the United States. Tonight, we’re I’m joined by our two panelists. Our first panelist is Robert King, director of health care, real estate, SkyView Advisors, and I’ll turn it over to Robert to say a couple of words about himself and his practice.
Robert King 2:23
Thanks a lot. Chris. Good evening. Everybody. Welcome. Thanks for taking the time. As Chris said, my name is Robert King. I’m director of healthcare real estate at SkyView Advisors. SkyView is a national real estate transaction advisory firm. We specialize in several asset classes, one of which is healthcare real estate. What we do is we provide best in class transaction advisory service representing sellers of healthcare real estate. We have a national footprint. We focus primarily on medical outpatient buildings and ambulatory surgery centers. On the personal side, I have a 35 year career exclusively in healthcare real estate. Having owned and managed my own firm in Florida for over 30 years before joining SkyView, I’ve transacted over $600 million of healthcare real estate assets, and I specialize to a great degree in advising medical providers on the real estate strategies and sale leaseback transactions. Great to be here. Thanks.
Chris Raphaely 3:25
Thank you. Robert, I’m going to introduce now our second panelist, Zak Eisenberg. He’s a partner at Merritt Healthcare Advisors. Zak, do you want to tell the group a little bit about yourself and your practice?
Zak Eisenberg 3:36
Sure, thanks. Chris, Merritt Healthcare Advisors is a national investment bank, 100% focused on health care services. We don’t do anything outside of that space. We’re a lower middle market focused firm, which means we focus on businesses that will either transact or raise capital somewhere between 20 and and $500 million and health care services broadly includes provider practices, facilities, really anything touching health care services with a specialized focus on provider services, which is what we’re going to talk about today. We’re unique firm in that many of our partners, including myself, have investing backgrounds as well as operational backgrounds within healthcare, several of my partners are physicians and have been operators of ambulatory surgery center companies in the past or urgent care companies. So we bring a lot to the table when we’re advising clients and looking forward to chatting about the topic today, I think it’s important to a lot of physicians and operators in the space, and there’s obviously been a lot happening in health care recently with, you know, lots of the topics we’re going to talk about tonight, but you know, the change in government, AI, lots of different things that are impacting people’s businesses. So looking forward to the conversation, and good to see you both.
Chris Raphaely 5:01
Thanks, Zak. Just to give I’m going to go over a quick summary of what we’re going to try and go through tonight. In the next hour, we’re going to start with a market overview. Zak and Robert are going to talk about, you know, what the market looks like now, and what we can expect with the new administration coming in the beginning of next year, then we’re going to take three more in depth topics. The first one being creating value, talking about how practices are in real estate assets are valued. The second piece is deciding when to enter into the transaction process timing, as they say, is everything. So we’ll focus a decent amount of our presentation tonight on timing issues around when you execute a transaction. And lastly, on the detailed front, we’re going to talk about the chicken or the egg issue, which asset, if either do you sell first? And we’re going to look at, you know, a bifurcated approach as well as a holistic approach. And finally, subject to there being time remaining, we will take some questions from our audience tonight, and our panelists will will give you feedback to any individual questions, anyone in attendance, they have. So with that, I think we’ll go right to the first part of our agenda, and that’s the market overview. And I’ll kick it off with Zak. Zak, what are you seeing out there, and what do you expect in the coming, you know, year or two, as we move into a new administration in Washington?
Zak Eisenberg 6:50
Yeah, well, you know, obviously that’s the most recent news that’s probably on everyone’s mind. I don’t know. Maybe my view is a little outside of the beltway, but I actually don’t think there’s going to be much of an effect generally on, I’d say, especially lower middle market, middle market transactions, either with what is now the Trump administration, or would have been the Harris administration. I think high level there’s among investors, certainly excitement about the Trump administration coming in, and I think potentially from a transaction regulation perspective, or a you know, sec enforcement perspective, they’re going to be probably a lighter hand and then errors administration. But again, that only comes into effect with very, very large transactions, and at least for the space where Rob and I operate, there’s there’s little impact. So I’d say, generally, I fall back to really the massive macro, economic and macro perspectives that are influencing our industry. And the number one, I’d say, is demographics here in the States, which is an aging population, costs are going up faster than than revenue is going up, and so that’s putting squeeze on practices and providers, and is driving consolidation at the same time, because we do have an aging population, there’s a need For additional services. So you have, really, those two fold issues that are coming to a head at the same time over the next few decades that is driving a lot of what we’re seeing nationally, across across all 50 states and every market. The second big trend is, I think, really how AI and technology is going to affect this space in all sorts of ways. And, you know, as it pertains to real estate and health care, I think I was just reading this article, or an article on the economist about this, but just talking about, you know, even patient care coordination, for example, having the patients go to the right real estate location within the system, can create a lot of efficiencies and a lot of time saving. There are just so many ways that AI is going to impact this space, in particular in technology, and think healthcare is really well suited to it, because it has been slow to adopt any technology across the board, which you know has hurt, hurt health care in some ways, but I think now is a great time for it to for it to pivot. And the last issue, which I think isn’t unique to the US, is just a under supply of providers, so more doctors, more nurses. And this issue is made more acute because of the demographic issues. So it existed even before we had this, you know, Boomer silver wave, as they call it, that is retiring and starting to use Medicare and use health care services more. But I. Um, I think the, I think this issue pre-dated, this current wave of retirements and and older folks entering the health care system. So I think those are the biggest drivers to me, outside of any, you know, change in the administration.
Chris Raphaely 10:21
So more of the kind of a continuation of the macro forces that came to bear before the election
Zak Eisenberg 10:28
was determined. Yeah. I mean, the reality is, Trump was in office already, and the first time he was in office, he pretty much did the same thing in health care that we saw from every administration, which is a focus on driving costs down, because if health care costs are not taken, brought under control nationally, it will, it will eat our economy, right, and in a lot of ways that aren’t great for the US. So it’s a bipartisan issue. It’s true in every state. You know, different states have different approaches. One thing we can talk about later is some states have taken a very, I’d say, aggressive stance on anti consolidation measures. So for example, California just passed a new regulation saying that that practices need to, they need to notify the state government when a transaction is conducted with over a certain amount, either a certain size or a certain amount of revenue. And that creates a lot of burden for transaction processes, which in and of themselves are, you know, a fundamental part of the capitalism. And
Chris Raphaely 11:44
how about you, Robert, what are you seeing out there? And what do you think in store is the new administration takes over in Washington?
Robert King 11:53
Right? I’m going to go in the reverse order of Zak and as to macro trends. I won’t belabor the growth of the healthcare industry. It’s the most aggressively expanding market of any sector of the economy. Zak called it the gray wave, or the silver wave. I call it the gray tsunami, and it’s certainly here, and we can see it in the growth of the market. The second macro trend we see is the explosion of new capital coming into the healthcare real estate market. There’s been over 2.5 billion of new capitals entered the market in the last 18 months, which brings the total amount of available equity to an all time high of about 18 billion. So that’s very strong for the healthcare real estate sector. The last macro trend, which is about 15 years old, 10 to 15 years old, is that providers are moving service lines off the hospital campus into the outpatient model that continues to fuel great growth in the sector. So as far as where we are today. The market’s in great shape. The fundamentals anyway, national occupancy rates approaching 94% absorption is outpacing deliveries and has for the last five years, and that continues, rental rates are strong. We see on average, two to 3% annual increase in rental rates. So it the fundamentals of the market are very strong. Sure, we face some financial headwinds stemming, of course, from the increase of the top cost of debt. It’s a very capital intense business. Cost of capital is key to the success in the business transaction volume is a little depressed. We hit an all time high in 2022 we’ve seen it declined in the following five quarters, but in the last two quarters, it’s leveled off, and we really anticipate momentum on the positive side, as far as transaction volume, you know, quality, healthcare, real estate backed by credit worthy tenants and long term leases is still very much in favor for both investors and lenders. There’s no doubt about it. We see consistently, see 17 to 15 offers on our properties. And also very encouraging is we’re seeing the bid ask gap narrow, so more transactions are getting done. I think personally, the lowland transaction activity presents a great opportunity in the market. There’s a serious scarcity of good product coming onto the market, and with the abundance of pent up capital I mentioned, it’s ready to be deployed, they just need good product to buy the the amount of capital targeted at healthcare real estate has never been greater, and the competition for quality assets has never been greater. So the market is. Very healthy as far as the new administration. I mean, obviously health care real estate is affected by the health and growth of the overall health care sector, but I think key for us is, again, very capital intensive business low cost debt is the fuel that runs the engine. Clearly, the new administration, as most say, they do no bias, but they’re seeking to lower inflation and reduce interest rates. If we can see that manifest itself in the form of lower cost capital, that would be excellent for the market.
Chris Raphaely 15:36
Do either of you have concerns? Because I think you know, one thing we saw from the first Trump administration was, even though the ACA stayed in place during the entire run of the administration, there was a cutting back of, you know, like the open enrollment periods For joining the ACA plans. And, you know, the navigators were pulled back. Now there’s talk of, you know, Medicaid expansion or Medicaid maybe on the chopping block with the kind of the trifecta Republican era that we’re moving into. Do either have you concerned? Either of you have concerns on what that might do to the market, if that does come about in we have, you know, we kind of go back to pre ACA times, or at least partially back where we have significantly more uninsured folks. I think it would, yeah,
Zak Eisenberg 16:38
thanks. Thanks, Rob. I do think it would really create a lot of issues for provider businesses, really, mainly from a billing perspective. Forget about any political leanings that you may have if you think that’s the right thing or not. I just think from a billing and collections perspective, which is the lifeblood of any of these businesses, and very few of them do a an excellent job of it, would be extremely disruptive and challenging. We saw what happened. You know, even earlier this year with change, change healthcare, when there was this momentary disruption that impacts quite a large portion of collections across the country. It was catastrophic for many, many businesses. And I think a change at the federal level in the way that you’re talking about Chris would have probably even a larger effect, especially if you’re talking about Medicaid, which, as we all know, is funded at the federal level, but carried out at the state level, it would have knock on effects in local markets. The ACA is obviously a huge piece of legislation. If it’s just a wholesale repeal, that would be extremely disruptive. But at the same time, look, no, no piece of legislation is perfect, that there are many inefficiencies in the ACA that I think have been identified by by the market at this point. And my view is the likely route is that they modify it to some, to some extent, because the the impact would be, would be so enormous if they just wholesale repeat it and repealed it, but we’ll see what they do. There are a lot of priorities in the administration. And as you all know, there’s really only the first year to do, do things maybe, maybe the start of the third year. But really this first year is, is what counts for for Trump’s administration. That
Robert King 18:49
would be simply, Chris did any, any changes, legislative changes that affect the expansion of delivery models? Obviously impacts the real estate sector, real estate sector flows down, slows down the growth and the need for more space, simple as that, so it could have an impact. I don’t think it’ll be radical in any sense of the word,
Chris Raphaely 19:14
something we’ll keep an eye on, but, but I appreciate I agree with both, with both of what you’re saying.
Zak Eisenberg 19:20
Just one final thing to add there. I think for folks in healthcare, the ACA, you know, some parts obviously were bad, but bringing more people into the health system that can pay insurance is, overall, a good thing for the system, and grows the size of the market, especially if they can’t afford to pay for it in general, then it’s just lost revenue. It’s, you know, a drag on profitability of any any business. So if you just look at it from that perspective, as opposed to no revenue, it’s found revenue. So from a provider perspective, I think it’s quite good, you know, maybe for. For certain types of providers or certain types of insurers in particular, not as good. So it depends who you ask, I’m sure.
Outro 20:10
And that wraps up another episode of Transaction Healthcare. Hit the subscribe button to get notified when we release new conversations. And if you are someone interested in learning more about these topics, visit us@merrittadvisory.com or send us an email at contactus@merrittadvisory.com