2018 M&A in Review
Looking Forward
“Hospitals used to compete with the hospital across town for inpatient business. Today, hospitals are struggling to hold onto large chunks of their outpatient business in the face of a new set of competitors that have scale and technological knowledge never before seen in healthcare.”
̶̶̶̶ ̶ Ken Kaufman, Chair, Kaufman Hall
Although healthcare’s new landscape is still taking shape, the general outlines of that landscape are emerging. Looking forward, hospitals and health systems should expect:
  • Increasing competition to control healthcare’s “front door.” Hospitals and health systems will be competing against new market entrants—including tech giants Alphabet, Amazon, and Apple—which will look to exploit their scale and capital resources to quickly build a presence in the markets they decide to enter.
  • New combinations across healthcare verticals. Organizations are looking at how capabilities within one area of healthcare (e.g., health insurance) can complement, expand, or benefit from the capabilities in other healthcare verticals (e.g., pharmacy or retail clinics). Legacy healthcare organizations will seek out partners with strong capabilities in digital technology and consumer experience.
  • Continued growth of regional health systems. A variety of factors—including new competition, maturing markets, political and regulatory pressures, and the desire to improve operational or clinical capabilities—will encourage hospitals and health systems to look beyond their original markets for acquisition partners.
  • Decreasing relevance of tax status. Anticipate additional acquisitions and partnerships between and among for-profit and not-for-profit systems and converging strategies in pursuit of operational efficiency, clinical excellence, and targeted growth.
  • An emphasis on depth within markets as well as breadth across markets. M&A activity is not just about expanding geographically; it also includes gaining depth in a market through acquisitions or partnerships across the continuum of care. Successful integration of organizations that can provide a broad spectrum of healthcare services could result in care that is better coordinated, more efficient, and more relevant to consumer needs.
New competitors and new combinations are among the most striking features of the emerging healthcare landscape. These are also the forces that are compelling hospital and health system leaders to rethink their strategies as they prepare to compete on new ground.
©2018 Kaufman, Hall & Associates, LLC
2018 M&A in Review
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