Hospital M&A: Non-acute care facilities, digital health in, 'horizontal' hospital acquisitions out

Competition and the transition to value-based care are two reasons for the dramatic increase in the number of health systems that have acquired physician practices, retail clinics and digital resources in the last nine years, according to a new report from management consulting firm Accenture.

Accenture analyzed more than 1,500 acquisitions involving healthcare providers between 2006 and 2015 and found deals surged during the period, based on several factors including:

  • The transition from volume-based to value-based care
  • The need to be more competitive in local markets
  • Efforts to gain economies of scale, a major driver of healthcare consolidation in general
  • An increased push to broaden digital and healthcare IT capabilities

Acquisition volume among healthcare providers reached an all-time year-to-date record of $241 billion in the first five months of 2015, according to the report. And analysts said momentum will only increase for "vertical acquisitions," in which providers acquire non-acute care facilities. Researchers project such deals will comprise 84 percent of total provider acquisitions by 2018, a 10-point increase from today. The share of acquisitions of companies focusing on digital capabilities will expand by even more, from 1 percent in 2014 to 8 percent by 2018.

Traditional hospital acquisitions by providers, meanwhile, are on the decline, falling from 32 percent to 21 percent between 2006 and 2014, and will fall even further to 6 percent by 2018. These "horizontal" deals have lost considerable value, according to the report, with at least 10 percent of the anticipated cost savings left on the table in traditional mergers and acquisitions, according to the report.

"Rather than viewing deals as one-off opportunities, the best-prepared executives will systematically manage a potential deal as a product of the whole," Kristin Ficery, managing director of health provider consulting at Accenture, said in a statement.

To learn more:
- read the report (.pdf)
- here's the statement

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