Trend in Focus: New Capabilities and Partnerships Drive Health Care Evolution

Over the last few years, the health care system has seen an increasing number of transactions that have resulted in consolidation across the delivery system and a changing marketplace. A number of factors have been driving this trend, including rising costs, evolving consumer needs, and an increasing need to stay competitive. The ability for one entity to serve their consumers end-to-end, and remain responsive to changing consumer needs, is a critical factor in these deals and serves as a differentiating factor when competing for business.

Whether through traditional mergers and acquisitions (M&A), vertical integration, or provider partnerships, these activities are meant to drive scale, harness new capabilities, and serve as a response to the external environment and the policy changes that are impacting the business of health care. And all of this activity influences the health care landscape, including the Medicaid system, from M&A of entities at different points along the health care supply chain to consolidation activities between provider systems.

Beyond these structural changes, there have also been and continue to be targeted activities by both traditional and non-traditional players focused on specific capabilities, influencing how the health care marketplace is evolving.

Increasing efforts to provide access to primary care

Primary care accounts for a relatively small amount — approximately 6% — of the overall spend on health care in the U.S.1 However, the ability to impact health outcomes by going upstream with care has prompted resurgence in primary care facilities and a focus on investing in this level of care and the primary care workforce. As a result, growth and expansion of the primary care space is occurring across all types of new and old health care players.

Developing accessible and flexible site of care options

Traditional retail players that have emerged in the health care space in recent years are leading efforts to redefine the idea of where health care services can be provided.2 Traditional players, in part through mergers and partnerships, are trying to stay competitive by also developing new ways of providing access to care. This trend includes efforts to bring care into one's home using digital platforms and by conducting house calls. Additionally, retail stores are adding more health care offerings, urgent care clinics are expanding the services provided on site, and neighborhood clinics and centers are being launched to move care into neighborhoods and communities. 

Changing focus on technology deployment

Technology continues to be a driving force behind changes in health care. And the growing influence of the tech sector, such as the continued expansion of health care capabilities and services by organizations such as Amazon and Apple, are all trends influencing the delivery of health care services.The development of new devices and applications to support health care assessment and access to services and medical Information will push the industry forward, as will the increasing utilization of current technological capabilities to allow for in-home health care delivery and remote monitoring.

COVID-19 amplifies trend’s focus

Despite the onset of a global pandemic, COVID-19 does not seem to have derailed this trend. Though a recent report shows that health care transactions are down in comparison to last year, there has continued to be M&A activity in 2020, which might signal that the slowdown will quickly be ramping back up.4 The public health emergency has also highlighted the value of partnerships, amplified some of the factors that were already influencing this trend, and emphasized the need for the capabilities that many health care players were already responding to (such as the ability to deliver home-based care and the need for technology to access services).

As consumers expectations continue to change, we can expect to see new entrants and continued capability adaptations by current system players. As we move into 2021, we should watch these activities and others yet to emerge as the health care marketplace continues to evolve to meet consumer needs.

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