In The Break Room’s “2018: Year in Review” podcast, Privia Health CEO Shawn Morris explains how the desire to improve the patient experience while lowering healthcare costs has lead to consolidation. These concerns over expenses and effectiveness weighed heavily on patients’ minds, as evidenced by the midterm election exit polls that showed healthcare was the primary issue for voters. One way to analyze the year’s trends is through these consolidations, partnerships, and alliances. From these ventures, we extract a few key takeaways that summarize the current state of healthcare … and may even predict interesting future developments!
All right, time for a deep dive into what happened in 2018!
Mergers and acquisitions (M&A) dominated the private sector. While overall (M&A) activity took a double-digit dip in Q3, the overall number and value of these high-dollar partnerships remained robust. A closer analysis of the subsets showed that long-term care was the most popular and profitable category, while managed care and physician medical groups saw a decline.
It would be impossible to discuss 2018’s M&A activity without mentioning two mega-deals: CVS-Aetna and Cigna-Express Scripts. This union between the pharmaceutical giant CVS and insurer Aetna encapsulates four tenets of healthcare consumerism: accessibility, transparency, simplicity, and cost-reduction. This soon-to-close $69 billion merger will allow CVS to offer extended health services for chronic-care management and primary care shortly thereafter. Cigna’s recent acquisition of Express Scripts highlighted the overlooked value of pharmacy benefit management (PBM). The $67 billion merger emphasizes the value of PBM in a world of rising drug costs and bloated, inefficient services.
The trend is not limited to corporations either; consolidation among hospitals is another driving force in healthcare. There’s no better example than the Beth Israel-Lahey Health merger, which was approved in November with conditions involving a price cap and services for low-income communities. Maura Healey, the attorney general who approved the merger, said, “Through this settlement, Beth Israel-Lahey Health will cap its prices, strengthen safety net providers across the region, and invest in needed behavioral health services. These enforceable conditions, combined with rigorous monitoring and public reporting, create the right incentives to keep care in community settings and ensure all our residents can access the high-quality healthcare they deserve.”
Another disruptive factor in 2018 was the spread of unorthodox collaborations, including the unnamed joint venture between Amazon, JPMorgan Chase, and Berkshire Hathaway that signals the influence of healthcare consumerism. While not formalized like M&A, this partnership between consumer giants is a significant shift in the healthcare industry. Though little is known, experts speculate that the entity will leverage AI, cloud computing, and analytics to provide healthcare for the companies’ combined 1.2 million employees.
Walmart’s recent alliance with the Department of Veterans Affairs (VA) points to another trend: telehealth. The wholesale retailer and the second-largest federal department announced plans to beta test the service at several locations nationwide. The VA is the nation’s biggest consumer of telehealth with nearly 1,000,000 visits in 2017. Furthermore, the VA Mission Act of 2018 enabled providers to offer telecare across state lines, thereby overriding a legal loophole that had restricted telehealth expansion.
More recently, Apple hired approximately 50 doctors. While this development is very recent and no official statements exist, it is likely that Apple seeks to leverage these doctors’ expertise to perfect and enhance the Apple Watch, which was approved as a medical device by the FDA earlier this year. The landmark decision was a significant development for the Internet of Healthcare Things, which has grown to include devices that support remote patient monitoring, “smart” pills and medicine bottles, and even a Bluetooth-enabled pacemaker. Earlier this year, the Centers for Medicare and Medicaid Services finalized a rule that allows providers to bill for time spent analyzing data from remote patient monitoring devices.
- Long-term care is generating more M&A attention than all other sub-industries.
- The Department of Justice’s disapproval of payer mergers (such as 2017’s attempted Aetna-Humana and Cigna-Anthem deals) led to innovative new proposals, such as those between payers and pharmacies and pharmacy benefit managers.
- Telehealth continues to grow, bolstered by federal-private partnerships and fewer legal obstacles.
- Employers are realizing that employer-sponsored health plans are too expensive and limited for their employees and are seeking alternatives (perhaps by creating their own healthcare providers).
- The Internet of Healthcare Things is expanding and gaining credibility.
- Healthcare consumerism is motivating many of the decisions, prioritizing accessibility, transparency, and positive disruption.
What do you think the biggest trends were? Let us know in the comments!