Can health care become pain-free?
EY US Health Transaction Advisory Services Leader
Key drivers of projected health care cost increases and demand for services are the aging population and rise of chronic disease.4.
Health care no longer operates solely in a fee-for-service world. Instead, compensation models are increasingly outcomes-based, with an eye toward the consumer’s overall health and value for their money. Health companies are increasingly looking at M&A, alliances and joint ventures to expand their geographic footprint and to have more input into the continuum of care — all to gain the scope and scale of services and infrastructure and technology capabilities needed to compete and succeed in this new model.5 As health organizations must serve ever-growing populations with increasingly complex conditions, there is a new volume PLUS value paradigm. It is no longer enough to treat as many patients as possible, though the number of patients – as well as those with chronic conditions and multi-morbidities -- is certainly not decreasing: providers must deliver care more efficiently and effectively to maintain their bottom line. The new framework requires different approaches.
A forward-looking vision, with sensitivity to stakeholders and the necessary technologies to support strategic growth is essential. For example, payers that are embracing the Accountable Care Organization (ACO) model, which rewards providers for health outcomes rather than merely procedure volume, are encouraging health care stakeholders to implement coordinated care networks. Organizations that are forming strategic partnerships with other health providers and upgrading their technology to capture and act on the data necessary to positively impact outcomes will be best positioned to capitalize on this shift.6
Acquisitions will continue as a major tool to achieve scale in this environment. In determining the appropriate growth path, there are three steps organizations should take that will clarify the goal, provide focus on the key issues driving a structural change, and help uncover the best possible pathways forward. These steps include: 1) target the ideal strategic outcome or market positioning, 2) identify the gaps or risk areas within current offerings or capabilities, and 3) look to the financial and operational metrics to help guide which structures are optimal. It is best to examine all the variables simultaneously, including possible organizations to align with, the strategic next step, and the best organizational and financial structure for all the stakeholders involved.7
The next challenge is to capture the synergy opportunity and cost savings across the new, integrated organization. It is no longer the prize at the end of an acquisition. Planning for and realizing these savings requires time and dedication to the goal and will ultimately become much more important than the price paid for the acquisition – it will quite literally determine the final value of the transaction. A focus on technology, tools, and digital devices — to track required outcomes and leverage analytics to increase operational and patient effectiveness – is an important component of ultimately realizing the savings. Applying these principles and steps will help organizations not just survive, but thrive throughout health’s transformation. Smart growth will drive success.
4 “Key drivers of projected health care cost increases and demand for services are the aging population and rise of chronic disease,” EY US Health: Capabilities, Trends, May 2017, EY, 2017.
5How do you prepare today for the health care of tomorrow? New horizons September 2016 edition, EY, 2016.
6 24th Annual Health Sciences Tax Conference: Issues in population health management and clinical integration networks, including accountable care organizations, EY, 2014.
7How do you prepare today for the health care of tomorrow? New horizons September 2016 edition, EY, 2016.