Bringing a new doctor on board

Four value-based care strategies to drive success

Market forces are driving investments in value-based care, which incentivizes improving health outcomes while controlling costs.

In brief

  • To succeed in value-based care, health care organizations need to rapidly acquire and scale a mix of organizational, care management and technology capabilities.
  • The lines are blurring between health care insurers and providers, as payers acquire primary care provider networks, home health and virtual care organizations.
  • To take the lead, health care executives should pursue both organic and inorganic investment methods that prioritize the value-based care capabilities they need. 

Innovation and investment in value-based care are surging, with more than $25b in related merger and acquisition (M&A) activity in 2021, according to EY research. As market forces propel the US health care system to reward better health outcomes and value over volume, payers and providers are rethinking how to acquire the capabilities needed to keep pace.


Pressures spurred by consumer expectations, government policy and regulations, and the pandemic continue to accelerate the move to value-based care. Employers are also helping drive the transition by partnering with value-focused companies through sponsored plans or by enrolling with networks that are innovating to deliver better employee care at a lower cost.


Making a successful transition from fee-for-service to fee-for-value requires a mix of organizational capabilities, care management processes and technology. For most organizations, this involves such a fundamental shift in the way they operate that it’s unlikely to build all the capabilities in-house and keep up with changing market demands. But M&A isn’t the only answer either. 


Health care executives need to guide the transition by first deciding what type of organization they should become to succeed in a market that rewards value-based care. Then they can identify the required capabilities and create the strategic roadmap:

  • Define the value-based strategy and capabilities needed to achieve strategic goals.
  • Consider where to invest organically and inorganically to acquire the capabilities.
  • Tailor the integration approach to focus on the right priorities.

$25b in deals bring value-based health care capabilities


EY research identified 25 deals that targeted acquiring value-based care capabilities. Although a few megadeals focused on home care delivery networks, the remaining investments are spread across a broad mix of other capabilities needed to implement value-based care (VBC) models.

Figure 1: EY research identified an estimated $25b+ in VBC-focused deals in 2021, among individual deals valued at >$100m transaction value 

Through this research, the EY team identified several trends that defined value-based care investing in 2021:

  • Investment by payers is outpacing that of providers.
  • Payers are investing more broadly across the value chain to build capabilities traditionally held by providers.
  • Providers are investing in capabilities that are more closely aligned to their core operations.
  • Health care organizations are integrating customer experience and digital capabilities into their overall strategy.
  • Purpose-built, value-based care startups backed by private equity and venture capital are on the rise.

Payers and providers are increasingly deploying inorganic strategies — including M&A, joint ventures (JVs) and partnerships — to rapidly acquire and scale capabilities. Digital, home-health and population-health acquisitions are increasing as payers and providers accelerate development of whole-patient data ecosystems that enable new value-based payment models.

Buy or build? Organic and inorganic strategies for value-based care

EY research identified four strategic archetypes that characterize how organizations are expanding value-based care capabilities. Investment strategies vary significantly between payers and providers, given their different expertise and core strengths. Health care executives can build momentum by focusing on specific priorities across the VBC value chain that align to their chosen strategy.

Figure 2: Payers and providers can pursue organic and inorganic strategies to acquire adjacent capabilities across the VBC value chain.

Figure 3: EY research identified four archetypes that characterize how organizations are investing to expand value-based care capabilities.

Innovator: vertical integration

Payers are actively using M&A to add capabilities traditionally held by providers as they expand participation in value-based care models. By acquiring organizations in adjacent industries such as primary care provider networks, home health delivery and virtual care, they are using vertical integration to improve managed care coordination, increase transparency and align incentives in value-based care networks.

Strong operational capabilities and established playbooks for integrating adjacent M&A transactions are core elements for vertical innovators, who are continuously working to expand and deepen their capabilities along the value chain. These moves by payers are increasing the industry disruption already putting pressure on health care systems and practice networks, making it an important strategy for providers to consider as well. According to a recent EY survey, health care CEOs have increased their M&A appetite, with 70% planning to pursue an acquisition in 2022.

Value-based care capabilities targeted:

  • Payers: primary care, population health management, physician groups, home health, digital health, telehealth, outpatient services
  • Providers: population health management, RCM, telehealth, digital capabilities

Key factors

As health care leaders consider M&A transactions in adjacent industries, harvesting deal value can be complex. Buyers focus on success by building a strong integration governance structure with a clear branding, go-to-market and customer strategy, while managing major stakeholders such as patients, clinicians and associates through the changes. While leading M&A practices apply, there are some areas more unique to value-based health care capabilities that require special attention:

  • Due diligence to avoid blind spots: Adjacent M&A involving unfamiliar business models, risks and value drivers may require resources with expertise in the target’s sector to accurately address industry-specific diligence questions. For example, HIPAA/HITECH and privacy matters, physician contracting and compensation, and licensing and regulatory compliance all require thorough diligence.
  • Early identification of synergies: Value capture can be more complex when integrating strategic adjacencies. Assess the current-state operating models to determine where compatible systems and processes exist to leverage scale across IT, supply chain and other back-office functions, while preserving the uniqueness of the target business.
  • Careful timing for functional integration: Trying to integrate too much too soon can burden management, employees and patients, triggering a talent departure – a risk that is prevalent across the health care industry today. Integrating functions related to regulatory, compliance, credentialing, and financial and accounting requirements often need to be prioritized for day 1 of close, while complex care model and technology integrations should be carefully sequenced post close.
  • Retention and cultural fit: Communicate the deal rationale and strategic vision to gain buy-in from target employees and major stakeholders. Develop a clear and concise message that will motivate and excite the employees to stay with the company. Develop a change management program to bridge cultural gaps and monitor employee experience.

Collaborator: partnering and joint ventures

Collaboration through health care partnerships and joint ventures (JVs) is trending up, as these inorganic strategies offer an alternative path when organizational or regulatory issues make traditional M&A less attractive. Health care enterprises often use partnerships as an incremental step prior to a full combination.

Strategic health care partnerships can streamline care management, improve patient experience and potentially reduce costs through increased coordination between insurers and those delivering care. For example, several payers and providers have formed partnerships to provide value-based services to Medicare and Medicare Advantage members in specific geographies. In addition, both payers and providers are embracing innovative partnerships with technology companies to build digital and population health capabilities related to delivering value-based care.

Depending on the degree of integration needed, health care partnerships can require many of the same steps as traditional M&A. Partnerships also require a strong and transparent governance structure tailored to the uniqueness of the collaboration. Health care organizations tend to be less experienced with executing and managing partnerships compared to traditional M&A, which can add another level of risk and challenge.

Targeted value-based care capabilities (both payers and providers):

  • Payer/provider health plans
  • Specialty and disease management programs
  • Technology to enable population health, risk management and care models
  • Data sharing and interoperability 

Key factors

Partnerships require many of the same processes as traditional M&A, such as due diligence, integration planning and change management. In addition, there are processes more unique to forming effective health care partnerships.

  • Identify the right partner: Look for organizations with complimentary and compatible assets such as digital, population health analysis, care coordination, revenue cycle management and other capabilities needed to fill gaps. The partners should also share an enterprise-wide commitment to delivering value-based care. For example, when evaluating providers, payers should carefully evaluate how likely a provider is to succeed in adopting risk-sharing and value-based payment models.
  • Establish governance and management: Some of the most critical aspects of getting partnerships right include:
    • Board governance
    • Dispute resolution and exit planning
    • Structuring service level agreements (SLAs)
    • Negotiation, valuation of asset contributions and equity stake
    • Clarity around roles, relative authority and decision-making
    • Alignment on management team that includes a dedicated finance function to manage and track partnership performance, value creation, risks and gain share
  • Define value creation goals and structure incentives: Set baselines and expectations for financial and operational performance.
    • Develop incentives that will help drive value creation and motivate partners to adopt new behaviors
    • Consider risk tolerance and if necessary, create a path to risk sharing that starts with the upside and transitions to downside risks over time.
    • Develop and agree on performance metrics and measurement systems
    • Commit to joint problem-solving and shared decision-making

Scaling disruptor: achieving value at scale

Some payers and providers are deploying a mix of organic and inorganic growth strategies to acquire, create and build scaled capabilities to deliver value-based care more effectively and profitably. Insurers are acquiring other payer networks to target expansion in key geographic markets and concentrated value-based market opportunities such as Medicare Advantage. Organic investments focus on building and scaling internal technology capabilities such as clinical workflow automation, EHR/analytics and interoperability required to manage value-based care efficiently.

Value-based care capabilities targeted:

  • Payers: network management, revenue cycle management and billing, claims management, and plan expansion to build scale
  • Providers: core clinical workflow management, process automation, population health, network management, provider acquisitions

Key factors

Core to scaling horizontal capabilities is striking the right balance of inorganic investment and developing in-house capabilities to service value-based care. As with other strategies, M&A in health care requires special attention to regulatory issues, as well as an effective integration playbook. Other factors include:

  • Recognize market differences: Building an effective value-based care network depends on the market factors, from contract dynamics to competition and risk-lives penetration.
  • Map your investment plan: Determine which levers work best for achieving your goals:
    • Inorganic horizontal M&A expansion to grow in select markets
    • Organic investment in processes and restructuring to drive efficiency and cost optimization
  • Hire and acquire to scale internal capabilities: Focus on the specific value-based competencies you need to develop as an organization:
    • Network curation and management
    • Scaling care teams
    • Systems integration and interoperability
    • IT and analytics platforms with a focus on purpose-built technology for value-based care and scalability

Data scientist: digital-first acceleration

Some health care organizations choose to focus more narrowly on expanding the digital capabilities that are essential for any successful transition to value-based care. Whether the path is through traditional M&A, partnerships or building internal capabilities, health care executives are clearly committed to investing in digital transformation. The recent EY Digital Investment Index survey showed the health care industry increased digital investments by 65% from 2020 to 2022.

Digital platforms with value-based care capabilities targeted (both payers and providers):

  • Telehealth
  • Population health
  • Digital health coaches
  • Core clinical analytics
  • EHR and interoperability

Key factors

As with any digital strategy, assessing internal talent, resources and capabilities is a major driver behind build vs. buy technology decisions. Strong technology and product due diligence to assess proprietary IT integrations, product capabilities against needs, digital governance and other standard IT considerations are also essential steps. Other factors include:

  • Choose a regulatory path: An array of regulations such as HIPAA, PHI/PII, HITECH and CEHRT govern health data and must be considered when choosing a digital strategy. For example, some applications for patient engagement may not need regulated data, and these can be simplified.
  • Take an ecosystem view: Develop a full view of all resources required to create a technology portfolio and achieve digital goals, including internal capabilities, software and service providers, and external partners.
    • Align leadership on investment choices
    • Explore M&A and strategic partnerships
    • Remain agile as conditions change
  • Conduct technology and product due diligence: Make sure you have people with strong technical knowledge, as well as clinical and insurance expertise to ask the right questions. Diligence needs to include:
    • Assessing proprietary IT integrations
    • Assessing product capabilities, roadmap and mapping against needed capabilities
    • Evaluating the technology stack, appropriate architectural patterns, governance around third-party or open-source software, and overall architecture
  • Design for user-centricity, interoperability and scalability: Effective digital health considers the needs of different populations, such as simplicity to ease adoption by seniors, as well as busy clinical staff. Aligning to the latest interoperability standards and accessing health information exchanges (HIEs) is also an imperative for digital platforms in value-based care, as having complete patient data can improve care coordination, quality of patient analytics and member experience. Design for scalability in value-based care includes aligning to the latest standardized record formats and APIs and developing a secure yet flexible platform that can be reconfigured as standards and regulations change.


As market and regulatory forces keep pushing the health care industry to adopt value-based care models, many health care organizations are accelerating their M&A and other investment activity to help make the transition. Payers and providers that are slow to act risk having their business models disrupted.

To keep pace and succeed in this new way of operating, health care executives can move forward by:

  • Defining their value-based care strategy
  • Identify the required capabilities, which may include financial risk management, care coordination, telehealth and digital communications, population health, advanced analytics to model savings opportunities and revenue cycle management
  • Choosing the right mix of investment vehicles to fill the gaps
  • Managing careful execution on their strategy

Joon-Woo Song, Matt Kraay, Shashi Shrimali, Rob Morgan, Ariana Engles and Shivam Jaitly contributed to this article.


Health care leaders are accelerating both organic and inorganic investments to get the capabilities they need to succeed as the US market transitions to a value-based care payment model that rewards high care quality and better health outcomes instead of fee-for-service quantity.