A seismic, once-in-a-lifetime market shift in health delivery and payment models requires every organization in the industry to rethink its business model, structure and mode of operation.
- Reimbursement based on improved health outcomes, as opposed to fee for service, is pushing providers to broaden their scope of care across a fragmented system.
- The growing ability to diagnose, monitor and treat chronic diseases offers an opportunity to maximize outcomes while eliminating ineffective treatment.
Higher standards for health
These shifts require
more sophisticated tools, people and infrastructure. The landscape is complex and competitive and traditional models of delivery are inadequate for today’s standard of care, documentation and billing.
What is the answer for many health organizations? Health companies are increasingly looking at M&A, alliances and joint ventures for a solution. This allows them to expand their geographic footprint to gain the scope and scale of services and infrastructure capabilities needed to survive and compete.
Current and expected M&A activity
Health executives are positive about deal fundamentals, according to the EY 14th annual Capital Confidence Barometer, with almost two-thirds seeing a positive trend for acquisition opportunities.
The most recent EY Capital Confidence Barometer also found that health executives anticipate the trend of increased M&A activity to remain well above historical health sector averages. Overall, 56% of respondents expect to actively pursue acquisitions in the next 12 months. This represents the second highest percentage since late 2010. Almost two-thirds of health respondents indicated they have three or more deals in their pipeline.
The reason for this trend is likely to be the fragmented nature of the healthcare industry. Whilst reimbursement is tied to overall health outcomes, risks increase as providers only deliver a fraction of the care. Leaders see alliances as an opportunity to manage these risks, improve the quality of overall care and lower costs.
And where a merger or acquisition may not be the right fit, health companies are increasingly looking at strategic partnerships and joint ventures to expand their geographic footprint and have more input into the continuum of care. In fact, with 50% of respondents planning to enter into alliances with other companies or competitors, health organizations are vastly outpacing their global counterparts (40%) in other industries.