January 20, 2021
Watching hospital and health system mergers and acquisitions in 2020 was a bit like watching a tennis match. While in the past more traditional M&A activity typically revolved around providers merging with other providers, and Deloitte Consulting perhaps best states the intent of these activities: “The main driver is the pursuit of economies of scale, the ability to decrease unit costs, or to improve productivity and outcomes through increased volumes.” But we’re seeing some shifts this year in M&A activity within the healthcare industry, and I’d like to outline what I’m seeing and hearing about on a more regular basis.
Many experts have predicted even more consolidation within the healthcare industry to diversify as shifts in care settings, heightened expectations for cost management, and a better consumer experience emerge. Hospitals and health systems, as well as payers, are making bold moves to extend offerings beyond their core strengths and access new profit tools, especially for those seeking relationships with entities that have a natural synergy with their own core strengths.
What is emerging is the rise of the “Payvider” as hospitals and health systems merge with health plans. To me, it feels like a natural progression between entities that manage their patients’ care and payers coordinate the payment of care. Combining these core competencies can potentially help develop better community health initiatives and achieve better care outcomes. Consolidation also offers organizations the ability to spread out costs and adopt more best practices, which will help everyone develop more value-based care initiatives, streamline expenses, and create greater efficiencies and scale.
One area that will need to be closely watched and monitored is post-acute care. While new Payviders can operate as integrated delivery networks with acute and ambulatory care, other healthcare settings, such as nursing homes, home health agencies, and others, give them less visibility into post-acute care. And with a rising Medicare population, this is a key consideration and competency that Payviders will need to develop.
Having a strong financial system can dramatically help emerging Payviders with embedded financial management, predictive analytics, executive dashboards, and accounting software that helps them make insightful strategic decisions. Additional ways to manage post-merger, regardless of the type of M&A activity, are to:
- Guide and analyze treasury and cash management
- Understand accurate service line and departmental profitability
- Enable capital investment decisions based on ROI and payback calculations
- Assist in determining appropriate growth opportunities for development and investment while highlighting unprofitable business lines to divest
- Manage M&A activity fluctuations
- Leverage accurate cost data to support value-based initiatives
- Automate manual tasks
- Monitor governance risk and compliance
- Provide fraud management
I believe that M&A activity that creates Payviders is more than merely a passing trend. While the success of the Payvider isn’t guaranteed, I look forward to discussing this concept in more detail with leaders in hospitals and health systems to continue to gain an even better perspective. Infor’s strengths and deep background in healthcare position us to help make hospitals and health systems as successful as possible with this emerging movement.
To hear more about our thoughts on tracking and managing costs, I encourage you to read Four ways to track and manage costs during a crisis.
Anthony Hare, Industry Solution & Strategy Director, Financials