by
John R. Fischer, Senior Reporter | January 13, 2020
Partnerships across state lines or in different countries are also still strong, with providers seeking more opportunities to grow, diversify their bases of operations, and add more efficient assets to their existing operations. Four cross-state transactions were recorded in 2019, a similar figure to that of 2018.
The motivations behind these trends, however, are no longer solely financial in nature, but now partially out of a desire to answer the changing demands of consumers. Many are now questioning how they conduct their businesses, influenced by competitive approaches, such as that of CVS Health. The U.S. healthcare company launched last year the first of its HealthHUB locations and intends to create 1,500 in total. It also opened the first “Walmart Health” location to offer primary care, dental care and behavioral health services.
Another demand is friction-free, convenient and transparent experiences. Previous research by Kaufman Hall found that only 36 percent of consumers would choose a primary care physician for a minor injury or illness sustained by their children, while 72 percent reported wanting an alternative option if they had to wait more than one day for an appointment. In addition, legacy healthcare organizations are facing increasing pressures from changes by CMS in its 2020 Outpatient Prospective Payment System (OPPS) final rule, which mandates that "consumer friendly" price information be made publicly available by providers by 2021. This, along with a desire among insurers, risk managers and employees to change high and inconsistent costs of legacy systems, is contributing to M&A activity out of a desire to reduce total cost of care.
“Any of the observed transactions indicate more strategic rationale for partnerships, relative to acquisitions for additional scale or size,” said Singh. “The former include organizations entering entirely new markets, seeking partners with complementary resources, intellectual capital or capabilities. In other cases, the structures of the combinations themselves are exhibiting the desire of parties to collaborate in a manner that is most appropriate for their goals and that are breaking free from traditional acquisitions.”
Only 20 percent of sellers were reported to be financially distressed, the same percentage recorded in 2018, according to Kaufman Hall.
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