A new report from HealthLeaders Media and Bank of America Merrill Lynch shows that strategic healthcare transactions continue to grow. Major drivers of the trend include the desire to improve financial stability and implement cost efficiencies.
1. HEALTHCARE LEADERS INCREASINGLY POSITIVE
As companies like Amazon and CVS enter the industry, the U.S. healthcare landscape is changing fast. Despite these potentially transformative competitors, a greater percentage of 2018 poll respondents expect healthcare merger, acquisition and partnership (MAP) activity to grow compared to the 2017 survey.
2. PHYSICIAN PRACTICES A POPULAR M&A TARGET
Three-quarters of respondents are very interested in pursuing physician practices and organizations. This suggests that the industry is moving toward a more patient-centric model, where care is provided at lower cost outside hospitals — a strategy that relies on top-quality physicians. For example, organizations like Optum, a subsidiary of UnitedHealth Group, bought physician groups at premium multiples across the U.S. in 2017.
3. QUALITY IMPROVEMENTS OFTEN SLOW TO EMERGE
Without a well-planned post-implementation execution strategy, clinical measures may not immediately improve after MAP activity. Poll respondents said some key measures remained unchanged, which suggests opportunities for improvement, especially when it comes to patient experience and outcomes.
4. GREATER EXPECTATIONS
73% expect their M&A deals to get bigger over the next three years, up from 55% last year. Only 15% of respondents expected dollar value to stay the same, down from 34% in 2017, suggesting they think big-ticket mergers will continue.
RECOGNIZE MAP TRENDS
- Most healthcare leaders expect MAP activity to grow over the next three years, despite facing potentially transformative competitors
- Physicians remain a popular M&A target, part of a move to more patient-centric care outside hospitals
- In a changing landscape, early planning, plus a focus on sustainable, consumer-focused models of care, may help organizations see early benefits from M&A