Healthcare Consolidation Will Lead to Corporate Winners and Losers
The healthcare sector has grown to an astonishing $3.2 trillion industry and is expected to climb to $3.7 trillion by 2018. The marketplace is expanding, driven by big changes in expectations for performance and an influx of an estimated 17 million newly insured individuals through the Affordable Care Act. And this is only the start – billions will join the global healthcare marketplace in coming years through technology. As they connect, they will fuel opportunity for many companies. But with all the growth, there’s also consolidation, driving some analysts to predict a winner-take-all marketplace and constriction that will limit the rate of industry growth.
Winner-Take-All Healthcare Consolidation is Already Happening
Healthcare had the greatest number of transactions last year of any other industry including technology. Hospital systems are consolidating. Pharma and biotech companies are consolidating and vertical integration is taking place as companies begin to manufacture, diagnose, and deliver care and medicine. CVS, for example, with multiple acquisitions and a change in strategy, is now on its way to becoming a health management company.
But the consolidation is bigger than the discreet deals. A new value chain is becoming increasingly visible as new metrics for success, including better access, outcomes and value, push companies closer to the front lines of patient care and accountability. Significantly, the disintermediating effect of emerging technologies in healthcare is eliminating the need for many companies. Digital health is taking over care coordination and a multitude of other healthcare functions. Personal health tools and tracking alone grew 223% from 2014-2015.
Patients are Ready for a Simpler System Which Healthcare Consolidation Might Achieve
A recent study indicated that 58% of consumers would be more likely to choose a healthcare company that partnered with others to improve services, and more than 75% of consumers want a single ID for insurance and provider. Likewise they want insurance companies and providers to share information. Consumers are also cost- conscious with less money to spend. Their preferences will force change in the marketplace.
What does this mean? While the competing forces of growth and consolidation reshape the industry, healthcare organizations will struggle to define where they fit and how they deliver value in this new system. It is going to be really important for companies to communicate their contributions to achieving the new healthcare goals of access and outcomes – and efficiency. These are not simple definitions, however, and many will face negative scrutiny. Many will win. Many will lose. While capitalism in healthcare will prevail because consumers have not given wholesale approval to a nationalized approach or a one-payer system (they still associate a premium with commercial healthcare), companies will have to fight for position and think global as the needs of varying markets are so radically different. Helping our clients find their voice and ways to connect with the bigger marketplace and movement is our contribution to this new era of healthcare.