No stakeholder in healthcare is staying in their lane. Cost and margin pressures, in-market growth limitations, competitive threats to core business, and a growing MA population are driving payers, providers, and retailers to purchase assets or partner with organizations that exist outside of where they traditionally do business. The goal is not only revenue, but also the scale, negotiating power, and ecosystem effects that operating a wider array of healthcare assets can offer.
What are the impacts of all of this, and what comes next? We will be researching this topic throughout 2023. Below are the four biggest questions that we'll be devoting resources to answering. If you want to be interviewed on this topic, please reach out to firstname.lastname@example.org for a chat.
1. What strategies are market leaders pursuing in their deal activity?
Every sector is diversifying their revenues in some way. Some are looking for immediate boosts to bottom line, while others — notably, national payers, integrated health systems, and retailers — are more clearly pursuing ecosystems to better win government or employer contracts and increase profitability within them.
These ecosystems are still developing, and different ones may have different levels of success over time. We want to understand the capabilities and advantages that each one is built upon.
Hypothesis: Leading payers, providers, retailers, and tech firms are building distinct regional or national ecosystems — each of which has a specific set of capabilities and advantages that will help shape local and national market dynamics.
2. What maneuvers are incumbents pursuing in response?
Most of the industry doesn't have the capital on hand to buy the assets they might want. But doing nothing is not an option — organizations are making sense of the competitive maneuvers they have at their disposal to maintain their core mission and business. We're indexing all of these responses to understand the most promising paths forward.
Hypothesis: Incumbent organizations have four primary paths to growth in this environment — deepen geographic density where they already operate, expand geographic reach to new markets, partner regionally or nationally to achieve "synthetic scale," or specialize in a certain service area or population.
3. What is the outlook for medical group M&A specifically?
Investment in physician practices has been on the rise—with no signs of slowing down. In fact, medical group deals increased 33% from 2021 to 2022. We've seen new buyers, especially payers, retailers, and other corporate entities, become increasingly active in the physician space. They view physician ownership as key to winning patient relationships and controlling utilization.
As a result, most investment has been in primary care, but we're curious what services will come next, and what this ownership means for physician loyalty and downstream control.
Hypothesis: The next wave of physician M&A will be in specialty care—specifically those specialties and services needed to care for a growing Medicare Advantage population.
4. Does physician integration truly matter?
Buying assets is one thing. But what do you do after you close the deal? While much focus has been on M&A, integration is too often not considered until after new assets have been acquired. This is particularly the case for the integration of physicians — both for traditional employers (i.e., medical groups and health systems) and new buyers (i.e., health plan and retail).
With this research, we will unpack the different types of integration (financial, strategic, operational and cultural) and dive into what components of each are most critical for building a successful physician enterprise.
Hypothesis: Integration will become increasingly critical for a successful growth strategy. Meaningful physician integration is no longer optional – it is now a business imperative.
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