The Lexpert Special Editions profiles selected Lexpert-ranked lawyers whose focus is in Corporate, Infrastructure, Energy and Litigation law and relevant practices. It also includes feature articles on legal aspects of Canadian business issues.
Issue link: https://digital.carswellmedia.com/i/1470136
12 www.lexpert.ca Feature THE BIG ROLL-UP IN HEALTH CARE ONCE THOUGHT OF AS THE LAND OF UNIVERSAL, PUBLICLY FUNDED HEALTH CARE, CANADA HAS SEEN A WAVE OF CONSOLIDATION IN A FRAGMENTED INDUSTRY. HERE'S WHY AND HOW THE TREND CONTINUES CANADA HAS always been thought of as the land of universal, publicly funded health care, a health care market that is not condu- cive to merger and acquisition activity – not like the United States, where M&A roll-ups in the privately run health sector have been happening for years. e reality, however, is that investors are taking an interest in health care M&A in Canada, whether it's non-human services like veterinary care, practices such as dentistry and orthodontics that are not part of universal health care, or new ventures such as virtual care. ere even is some dipping of toes into areas of health services that provide a blend of government-funded services with those paid for through private means. "e fundamental thing people should be thinking is that a significant amount of our health care system is not part of government-insured services," says Susan Newell, a corporate commercial lawyer who works in the health practice at Osler, Hoskin & Harcourt LLP. "A large number of health services are paid for privately and are outside of the publicly funded insured service regime. And there are some great opportunities for M&A." Clinic ownership in Canada is still frag- mented and has not yet encountered the mature consolidation observed in the US and other jurisdictions. Part of that is the perception that many foreign stakeholders have historically viewed the Canadian health industry as a complex sector for several reasons. ese include: • e sector is predominantly provincially regulated so that the provision of health services is geographically siloed • It involves a complex government health insurance regime for renumerated health professionals • ere are rules that say, in particular health professions, provincially regulated health professionals must be the sole or majority shareholder, director, or officer. ey must fulfill specific management roles in any cor- porate entity carrying on the practice of a regulated health profession. However, public corporations, private companies, and private equity are increasingly participating in health care service acquisi- tions, "with generalist companies looking at multiple service providers and specialized companies focusing on more targeted invest- ment opportunities," says Newell. Newell and other lawyers in this practice area say they expect the trend to continue, given the shi toward more reliance on private health care providers and virtual methods of service delivery. In a world in which aging demographics and increasing costs have stretched the health care system, M&A in this area is also seen as a way of creating efficiencies, especially through the "back office" functions. is M&A activity is oen driven by the "'dry powder' of private equity funds," says Andrea Johnson of Dentons Canada LLP. ey are sitting on billions, she says, and looking to roll up sectors that are fragmented and ripe for consolidation. "ere's a long history, particularly in the US, of private equity that specializes in health care becoming a major player in the sector," she says. "Given the differences between our health care system and that of the US, private equity roll-ups didn't appear to have as much relevance here, but now we're seeing the increase [tendency] of these funds to import their learning to benefit Canadian innovators, especially as health care is becoming more technology-enabled." Curtis Cusinato, co-head of mergers & acquisitions at Bennett Jones LLP in Toronto,