Health care organizations realign strategies for resilience and growth

Health care executives feel satisfied with their performance during the pandemic but recognize the need to invest for the upturn.

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verall, health leaders believe they demonstrated resilience during the pandemic. According to the latest EY Global Capital Confidence Barometer (pdf), nearly half believe their company overperformed against their peers in terms of operational stability and did a better job of identifying, evaluating and responding to emerging risks in real time.

Some hospitals will continue to be challenged by cash flow constraints in 2021 stemming from lower patient volumes, rising expenses and a changing payer mix. As vaccinations become more widely available and consumers return, health care volumes should rise in the second half of 2021.

For most health systems and hospitals surveyed, revenue and profitability are expected to reach pre-pandemic levels by 2022.

Pandemic drives health care executives to accelerate strategic and portfolio reviews

For many health care CEOs and other business leaders, the emergence of the COVID-19 pandemic, and its resultant economic shock, posed an existential threat to their business. In response, 85% conducted a comprehensive strategy and portfolio review in 2020. For 80% this was unplanned — a direct response to changing events.

Key strategic considerations include managing the longer-term impact of the pandemic, digital and technology investment and divesting of underperforming assets. The operational and strategic levers under review may not have changed radically, but which of these levers receives the most attention may shift in the wake of the pandemic.

Digital transformation hops on the fast track

More than half (53%) also believe they excelled over the past 12 months with respect to digital transformation. With a forced decline in outpatient and inpatient hospital visits, health systems suddenly accelerated the adoption of virtual technologies — such as telehealth, m-health, AI and analytics — to effectively reach patients and leverage resources.

Yet, health care organizations also realize they need to do more to accelerate their digital agenda, with 57% of respondents saying their organization will be increasing its investment in digital transformation. In addition to increased investment in digital health and analytics, health care organizations are looking to improve technology-enabled back-office remote work capabilities. We’ve talked about the need for health care organizations to fast-track their digital transformation efforts before, but we believe this is the year these initiatives take root.

Sixty percent of health care respondents expect to see private equity play a more competitive role in M&A activity as health providers reposition through the recovery stage. With US$2.8t in dry powder available, including nearly US$1t dedicated to buy-outs, private capital is well-positioned to take advantage of the value creation opportunities during the recovery period.

Meanwhile, of those planning to acquire within the next 12 months, 64% are looking at assets outside of their own countries, but within their immediate regions. Top investment destinations include India, the US, New Zealand, Singapore and Saudi Arabia.

Health care executives will continue to realign strategies to remain resilient and accelerate growth

Since the outbreak of the COVID-19 pandemic, health care has been on the front lines of the crisis. Although the pandemic has negatively impacted revenues and profits across the sector, health care executives appear poised for accelerated change.

The pandemic has served to solidify and accelerate digital transformation and convergence, while at the same time forcing a focus on specific operational and strategic considerations, including supply chain, capacity and technology capabilities.

As 2021 unfolds, health care executives see Europe (38%), Latin America (18%) and India (14%) as key growth markets over the next three years. They will continue to refine and recast their strategies with an eye toward resiliency and long-term growth in a post-pandemic world.