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Featured Article by Vanessa Whitehead
2020 was to be a banner year for Mergers and Acquisitions (M&A) in the healthcare space. In the early months of the year, announced mergers were among the highest seen in the previous four years. Then, in March, the global pandemic began. As a result of the effects of COVID, M&As were down from 92 in 2019 to 79 in 2020. However, they were still well within a historic range of activity over the last ten years.1
As organizations emerge from the pandemic and resume normal activity, we have started to see an increase in M&A activity. In 2021:
- 31% of CFOs plan to acquire physician practices
- 30% want to join a clinically integrated network
- 27% expect to merge with another organization
- 24% plan to enter a joint venture
- 20% may need to sell to another organization
- 17% expect to acquire another organization.2
Moving forward, systems with stronger balance sheets will be in a position to take advantage of other systems’ divesting and grow their capabilities in other markets and healthcare verticals, including:
- Physician Practices
- Home Health
- Behavioral Health
- Labs
- Post-Acute Care
Additionally, there will be more opportunities for partnerships between smaller hospitals and larger health systems in order to fill gaps in infrastructure, resulting in a fuller continuum of services for patients. Higher volume is associated with better quality, and consolidation can preserve access for patients to care in rural areas where a hospital’s only alternative may be closure. With limitations on fee-for-service payment structures, there will be increased payer-provider partnerships around payment and care delivery models.
In the near future, there will be fewer hospitals and fewer inpatient beds as care delivery models continue to change. Inpatient care will become more specialized in hospitals as consolidation occurs over the next 10 years. However, revenues will not fluctuate as much because specialized care will have a higher cost than inpatient care. As a result, physician groups will seek partnerships to provide greater financial security.
Continued Focus on Technology
COVID-19 led to early adoption and rapid acceleration of products and services, with telehealth being the most prevalent. As time goes on, health systems will continue to adopt new technologies and processes with a shift from acute to non-acute care delivery settings. Additionally, home health, in-home hospice, outpatient services, telehealth, AI, digital transformation, cloud, security, and data analytics will all continue to play a bigger role in the healthcare space.
What Does This Mean for You?
As things within healthcare organizations begin to shift, and M&As continue, it is important to consider whether new investments into HIT systems and business systems will require legacy support. As coders and staff are trained on the new systems, existing ones must be maintained. From there, business system implementations and conversions will follow. In HIM and Revenue Cycle, consider MPI clean up, record consolidation, DNFB, and ROI. Improving HIM and Revenue Cycle processes, CDI, risk adjustment, and revenue integrity have all become high priority post 2020 and the new healthcare delivery world.
However, as all of these new, exciting projects are arising, the staffing shortage in the healthcare industry continues. It is worthwhile to consider bringing on specialized support to guide you through new implementations, manage change, and train your staff so that resources are not wasted.
Citations:
- Singh, A. (2021, January 7). 2020 M&A in review: COVID-19 as catalyst for transformation. Kaufman Hall. https://www.kaufmanhall.com/insights/research-report/2020-mergers-acquisitions-review-covid-19-catalyst-transformation.
- Hackett, M. (2021, January 14). Healthcare M&A’s down in 2020 but analysts say covid-19 is a catalyst for future deals. Healthcare Finance News. https://www.healthcarefinancenews.com/news/healthcare-mas-down-2020-analysts-say-covid-19-catalyst-future-deals#:~:text=In%202021%2C%2031%25%20of%20CFOs,expect%20to%20acquire%20another%20organization.