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Middle Market Business Sentiment Report - July 2017

by KeyBank Commercial Bank 07.31.2017

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Each quarter, KeyBank surveys owners and executives of Middle Market businesses1 — those in the $20 million to $4 billion revenue range — to gain insights into selected topics and find out what they think about their companies in light of leading economic indicators, as well as the current political and business climates. Our focus for this report is on healthcare and the uncertainty over how proposed regulations might impact businesses in the coming months.

Attitudes toward a new healthcare plan

Attitudes toward a new healthcare plan

Proposed healthcare plan approval rate
Strongly disapprove/disapprove
41% of respondents
Strongly approve/approve
42% of respondents
Somewhat or extremely important to the long-term success of the plan
Coverage for pre-existing conditions
92% of respondents
No lifetime limits or caps on coverage
84% of respondents
Expanded Medicare preventative benefits
82% of respondents
ACA 10 essential health benefits2
82% of respondents
Economic snapshot versus March 2017

Economic snapshot versus March 2017

Expansion considerations – June 2017
Plans to expand fell 8 points
Plan to expand
71% of respondents
No expansion plans
29% of respondents
Fewer companies plan to expand in the next six months. Those that do cite hiring new employees as the primary method.
Likelihood to complete an acquisition (next 6 months) – June 2017
Plans to acquire fell 17 points
Extremely likely
21% of respondents
Very likely
23% of respondents
Somewhat likely
20% of respondents
Very unlikely
20% of respondents
Extremely unlikely
16% of respondents
The number of companies likely to complete an acquisition dropped as a lack of targets and economic uncertainty continue to be factors.
U.S. economic outlook – June 2017
Optimism fell 18 points
20% of respondents
Very good
23% of respondents
37% of respondents
17% of respondents
3% of respondents
Respondent optimism fell from last quarter. See how Bruce McCain, Chief Investment Strategist for Key Private Bank, views the economy using the link below.

See how Bruce McCain, Chief Investment Strategist for Key Private Bank, views the economy.

Healthcare weighs heavily on the minds of businesses and consumers alike

Perhaps nothing is more uncertain right now than the future of healthcare in the United States. Congress is locked in a partisan battle over the repeal and replacement of the Affordable Care Act (ACA), with both sides struggling to articulate the long-term benefits and feasibility of their very different approaches. It’s an issue that, unlikely to be settled any time soon, promises to have a major impact on business owners and executives in the coming months.

At the time of our poll in early June, the Senate had not yet released its version of the new American Health Care Act (AHCA), but respondents had already seen the House version of the bill and had heard much about how the Senate planned to modify it. General polls from the same period, such as the one from USA Today and Suffolk University on June 28, show that only 12 percent of voters approved of the Republican plan.

It’s important to remember that business owners and executives wear two hats — they must consider the business impact of changes to healthcare, but they are also consumers who worry about securing the best healthcare for themselves and their families. Clearly, healthcare is one of the biggest challenges facing our nation today.

GOP’s proposed plan
Compared to 42% of business owners/executives only 12% of the voting public approve of the GOP’s proposed plan
Top four expenses

Top four expenses...

Most sensitive to change
Employee healthcare
50% of respondents
Labor costs excluding healthcare
36% of respondents
Information technology
35% of respondents
Human resources
34% of respondents
Expected to substantially increase
Employee healthcare
37% of respondents
Labor costs excluding healthcare
26% of respondents
Information technology
24% of respondents
Human resources
23% of respondents

This quarter's survey asked respondents to identify expenses which, if changed, had the biggest impact on their businesses. The top four on the list were employee healthcare, followed by labor costs other than healthcare, information technology and human resources. Notably, most of these expenses are largely out of the control of the business owner or executive, so it’s no surprise that they are a source of concern. Other expenses, such as R&D, energy and debt interest, are more predictable and were rated as less of a concern by those surveyed.

In a related question, respondents were asked which expenses they expected would substantially increase in the next six months. The top four are identical to the earlier responses, which tells us that the same expenses that cause the greatest impact are the ones middle market business owners and executives are expecting to increase — not an ideal situation.

What does this mean?

Uncertainty is the overriding theme in the discussion around healthcare. Consumers are wary, business owners are wary and no one can accurately predict what will happen. Despite all the promises of lower costs and improved service or coverage, the current congressional gridlock and infighting do not bode well for a balanced solution that will ease our survey group’s fears.

So what are middle market businesses to do? With little to no control over healthcare and labor costs, business owners and executives should focus on those areas where they can make effective change. Improving cash flow with programs such as payment cards, ensuring the proper financing is in place to meet both short- and long-term needs, and managing interest rate risk are just some of the ways businesses will succeed in the coming months. KeyBank is committed to helping clients make the best decisions and implement the right programs to address the economic and political factors that affect their individual businesses every day.

Boost your employee benefits program. Find out how.

Healthcare is a major consideration for employees and employers alike, but it’s only one piece of a full benefits package. KeyBank offers comprehensive benefits consulting services to help you keep your business ahead of the curve. Check out some of our latest thinking on the ACA, reporting, compliance, fines and more. Learn More

Let’s talk about your business

For more information on KeyBank’s middle market capabilities, contact a regional executive.

Northeast Ohio/Western PA

Kip Clarke

Eastern NY & PA, CT, MA

Peter Cosgrove



Carol Nelson

Rocky Mountains

Tom Tulodzieski


Upstate New York

Gary Quenneville

Great Lakes

Skip Watson


New England

Sterling Kozlowski


1Business Owners/Executives — This sample group represents the opinions of respondents who are specifically business owners, C-suite professionals, or have the title of SVP, VP, controller or treasurer ($20M to $4B revenues).

2The 10 categories that this ties to are: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

The information and recommendations contained here have been compiled from sources believed to be reliable and represent the best current opinion on the subject. No warranty, express or implied by KeyBank, is made as to the absolute correctness or sufficiency of the information contained. This is meant as general information only; particular situations may require additional actions. ©2017 KeyCorp. KeyBank is Member FDIC.

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