Healthcare M&A drops in volume, value for Q3, PwC says

https://www.healthcaredive.com/news/healthcare-ma-drops-in-volume-value-for-q3-pwc-says/540679/

Dive Brief:

  • Healthcare deal activity in the third quarter of this year continued the streak of at least 200 deals each quarter since the end of 2015 and at least 250 quarterly deals since Q3 of last year, PwC said in a new report.
  • However, the quarter saw the fewest number of deals in a quarter since Q1 2017. There were also declines in value compared to both the previous year and quarter.
  • Long-term care remained the most active sub-sector with 102 deals. Payers have increasingly seen potential in long-term care companies.

Dive Insight:

Healthcare M&A activity saw a dip in Q3, but that doesn’t mean it’s the start of a downward trend.

Thad Kresho, U.S. health services deals leader at PwC, told Healthcare Dive on Thursday that interest remains high among “historical acquirers.” Those purchasers are looking to “further their connection points with their constituents,” Kresho said.

“Further buoyancy is fueled by increasing private equity interest (with their available capital) as well as non-traditional entrants, such as retail and tech-enabled companies. Interest of these participants range across many sub-sectors,” he added.

There were 261 healthcare deals in Q3 of 2018, slightly lower than the average of the past seven quarters (264). Deal volume increased 0.4% compared to a year ago, but dropped almost 11% compared to Q2 2018.

The total deal value plummeted to $15.9 billion, which is a drop of nearly 36% compared to the previous quarter and 10.1% year over year. It’s also a far cry from Q4 2017 ($100 billion) and Q1 2018 ($72.6 billion). Of course, one or two megadeals, such as the proposed CVS-Aetna and Cigna-Express Scripts deals, can be the difference between an OK quarter and a blockbuster, so quarterly value isn’t always the best gauge.

Kresho said volumes remain strong across multiple sub-sectors. PwC expects that to continue through the rest of this year and into the next.

“The industry’s major ongoing themes of regulatory uncertainty, income pressure, technological innovation and consumer-centricity continue to drive interest in deals,” PwC said.

The largest deal of the quarter was the RCCH HealthCare Partners purchase of LifePoint Health. The $5.6 billion transaction continued the hospital sub-sector’s average of one megadeal per quarter, which stretches back to 2015.

Another billion-dollar transaction in the hospital sector was HCA Healthcare’s purchase of Mission Health for $1.5 billion. Hospital deal volume overall dipped about 12%, but its value increased by 4,711% thanks in large part to the billion-dollar deals.

A different recent quarterly report by Kaufman Hall also found that M&A activity is down for hospitals and noted 18 deals in the quarter. The total was a 38% decrease from a year ago. Transactions for the first nine months of the year were also down, though value was up, according to that analysis.

Meanwhile, in the PwC report, another notable transaction over $1 billion was UnitedHealth Group’s purchase of 80% of Genoa Healthcare. The deal will help OptumRx’s behavioral offerings.

The sub-sector that saw the most deals was long-term care with a volume increase of about 33%, but value fell by 35%.

On the other end, PwC saw the largest value declines in physical medical groups and managed care. Physician medical groups volume dropped 30% and value fell by 97%. The sub-sector saw its fewest deals since Q4 2016. PwC doesn’t think the slow quarter is the start of a downward trend in that sub-sector, though. It’s likely an outlier.

Managed care volume, meanwhile, dropped 25% and value plummeted 95%. The slowdown in managed care purchases come as health insurers explore vertical integration rather than merging with other payers. Regulators have been leery of horizontal mergers over the past couple of years, but there are fewer roadblocks for vertical deals.

The managed care M&A activity will likely be in growth areas, such as Medicaid and Medicare Advantage. Otherwise, expect insurers to continue to look beyond their sub-sector and seek out opportunities in areas like pharmacy benefit management and long-term care companies.

 

 

Top seven healthcare leadership problems

http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/top-seven-healthcare-leadership-problems?cfcache=true&rememberme=1&elq_mid=394&elq_cid=876742&GUID=A13E56ED-9529-4BD1-98E9-318F5373C18F

 

 

The New Healthcare Imperative: Building a Consumer-Centric Culture

https://www.forbes.com/sites/scottdavis/2017/10/02/the-new-healthcare-imperative-building-a-consumer-centric-culture/#4f51f8587e19

 

Consumers today have unprecedented power. And, until recently, the healthcare industry had little incentive to react to this newfound power. However, pressures from consumers to meet ever-rising expectations, primarily driven through experiences in other categories (think Amazon, Uber, Sephora, Nordstrom) and cost pressures from employers and governments, means that redefining how healthcare organizations interact with people is no longer a luxury. To this point, Prophet recently conducted in-depth interviews with more than 50 executives at health systems, payers, pharmaceutical companies and digital health companies around the globe to better understand how the healthcare industry can best evolve to better engage consumers.

Based on these conversations, Prophet identified several changes healthcare organizations have begun to make and published the report, “Making the Shift: Healthcare’s Transformation to Consumer-Centricity.”Everything from becoming more digital to learning how to be more empathetic to taking cues from companies in other industries to create world-class experiences. However, the overriding theme from the interviews, from CEOs to CMOs, was how critical culture is for organizations trying to make a consumer-oriented shift.

This is not new news to most industries, but to an industry where medicine, physicians, evidence-based decisions and protocol rule, worrying about developing a first-class, consumer-centered culture was not seen as a requirement to providing topnotch healthcare. That has changed. Forever.

 The good news is that healthcare leaders already know what needs to be fixed. At some point, every hospital CEO, physician, nurse practitioner or administrative staff member has personally engaged with the healthcare system outside of their job. Quite often, when they are on the “other side of the fence” they better understand why healthcare is among the least liked industries in the U.S. according to a Gallup poll. With a more consumer-centric mindset and culture, everyone in the healthcare value chain will be able to stay focused on why they come to work each day – to help the sick get better and the healthy stay that way – and work toward making the changes needed to improve the overall consumer experience.

Mayo Clinic has taken this ambition to heart. It has built and strengthened its organizational culture around a common mission of patient-centered care. Mayo Clinic President and Chief Executive Officer Dr. John Noseworthy said, “At Mayo Clinic, we put patients first – that is the foundation of our culture, it is in our DNA.”

In examining Mayo Clinic, it is clear how setting the powerful common purpose can create a self-propelling culture, where everyone is bought in and all decisions are informed by that purpose. As Dr. Noseworthy told us, “Every step we take, every tactical or strategic decision we make is based on what is in the best interest of the patient – and that is the only interest to be considered.”

When we talked to leaders at organizations like Geisinger, Intermountain Health, Eli Lilly and Company and Aetna, the drumbeat was the same. As Novant Health’s Chief Executive Officer Carl Armato put it, what enabled his organization’s shift toward consumer-centricity “was our ability to mobilize our employees around a common and clear vision. At Novant Health, we don’t look at the patient experience separately from the physician/team member experience; they are blended together. We need to create a remarkable experience for our patients and our team members.”

In both the Mayo Clinic and Novant Health examples, several ideas aimed at kick starting a consumer-centered culture surfaced that may help others launch their own efforts. These include:

Co-create a consumer-centered vision with employees that the entire company can stand behind. When employees are engaged in developing the vision, they are more invested in both the vision and bringing it to life. “It is critical that team members are a part of the development of the promise and vision; if you want them to live it and love it, then you have to create it with them,” said Mike Yost, VP of Marketing at IU Health.

Be bold, declarative and explicit about your consumer-centricity and cultural ambitions.When Dr. David Feinberg, MD, became Chief Executive Officer of Geisinger Health System, a regional health system in Pennsylvania, he set out to shift the organization from provider-centric to patient-centric. To take the first step, Geisinger launched ProvenExperience, a refund program under which consumers who are dissatisfied with the care they received can request a refund for their co-pay. Geisinger Health System’s Chief Informatics Officer Alistair Erskine told us, “Everyone talks about putting the patient first and that’s great, but to make it actually happen we needed to take a big step that would force us to change.”

Tie compensation to consumer-centric metrics.Anthem has tied 10% of all employees’ incentive plans to Net Promotor Scores. Doug Cottings, Staff Vice President at Market Strategy & Insight at Anthem, found that “once consumer satisfaction and promotion affected everyone’s bonus…everyone wanted to understand what actions each department can take to improve customer satisfaction.” Lasting cultural change requires that employees have a clear understanding of specific performance objectives, behaviors and metrics.

Look outside the category for inspiration. “Our aspiration is to be the first digitally-enabled, consumer-centric integrated delivery system in the U.S.,” said Dr. Marc Harrison, President and Chief Executive Officer at Intermountain Healthcare. “We’re taking cues from Amazon, fintechs, Starbucks, and the like. We are going to inject that holistically into a real digital transformation of an integrated health system to truly understand and serve people the way they want to be served.” Intermountain is widely regarded as having one of the most consumer-centric cultures in the category.

Healthcare will continue to change. Consumers will continue to get smarter and employees will continue to expect more from their employers, who will in turn expect more of the health care system. Those that remake their culture to enable them to keep up with this pace of change and recognize the benefits to better consumer engagement are ultimately the ones that will win, and become examples for others trying to figure out their own consumer-centric journey.