Healthcare: Survival of the Fittest

Posted on Mar 20, 2012 in Power of Women | 1 comment

By Archelle Georgiou, M.D.

According to Levin and Associates, mergers and acquisitions in the healthcare industry totaled over $227 billion, an 11% increase over 2010 and the fourth-largest year of the past decade. Even more interesting, is that the value of healthcare services deals increased 43% while technology decreased 2%. Hospital systems are moving into new communities, integrated health systems are acquiring additional delivery system assets, managed care networks are growing, and specialty care service businesses are expanding their footprint—to be well-positioned for survival in a post-reform world.

This is the type of data we shared with TripleTree‘s Health Executive Roundtable–the investment bank’s “think tank” comprised of a diverse group of health industry executives with backgrounds ranging from banking, medical device, education and life sciences; to food services, technology, human capital management, and compliance.

We asked each Roundtable member: “What are the key trends that will emerge from this consolidation?”

Their independent and unique perspectives are published in: “Viewpoint: A Kaleidoscope of Insights Regarding Growth Opportunities amid Consolidation in the Healthcare Industry.” You can view and download the report here.

As a preview, the following are the highlights and key themes from the report:

  • Healthcare costs will increase. It’s all about supply and demand. Market consolidation sets the stage for increasing healthcare costs as fewer, large, hospital and healthcare systems leverage their size and strength during unit cost contract negotiations with payors.
  • Contraction of the delivery system = expansion of demand for meaningful innovation to combat the pressures of #1. However, the only “new new things” that will survive are those that solve real problems with a scalable, cost-efficient solutions that integrate with the existing healthcare infrastructure.
  • B to C solutions require B to B revenue streams. Consumer adoption is critical for demonstrating relevance, but consumers don’t typically fund high growth enterprises.
  • ”Health and Wellness” will transition to Life and Well-Being.” Payers and employers will seek innovations that support life and well-being as the distinction between work, home and health become increasing blurred.
  • Healthcare gaming will emerge–actually, it will explode. Gaming platforms that integrate entertainment, interaction, and achievement will be a transformational solution for driving consumer engagement and behavior change as well as provider education, training, delivery, research and cost containment.
  • Electronic health records will evolve into smart health information technology ecosystems. These ecosystems will (finally) enable the coordination of care and drive shared accountability among healthcare providers.
  • Doctors will be loyal to a single system. (Smart) hospitals and health systems will attract and retain doctors with mobile and wireless software applications that enhance personal income and lifestyle.
  • The most disruptive solutions are likely to come from outside the traditional healthcare industry. The core assets and capabilities that fuel retail, consumer packaged goods, banking, and telecommunications, for example, can be translated into unique and meaningful healthcare solutions by companies and individuals not trapped in parochial “we’ve always done it that way” thinking.

A “perfect storm” is brewing where science and technology have no boundaries, and the convergence of reform and unsustainable medical costs are generating opportunities for change. I can’t think of a more exciting time to be in healthcare.