Figure 1: A s traditional hospital acquisitions shrink, non-acute and digital acquisitions are on the rise 100% Other 2% Other 3% Digital 1% Digital 1% Digital 8% 90% Payer 0% Payer 1% Payer 2% 80% 70% Non-acute 60% Provider 64% Non-acute Provider 74% 50% Non-acute Provider 84% 40% 30% 20% Hospital 32% 10% Hospital 21% 0% Hospital 6% 2006-2010A2011-2014A 2015-2018P Hospital Non-acute Provider Payer Digital Other Sources: Accenture Analysis and S&P Capital IQ On the other hand, vertical M&A—when a Given the promise of digital health to reinvent The shift toward vertical and digital M&A in hospital acquires a payer or a non-acute healthcare, providers are also looking for healthcare will continue to gain momentum, care provider (e.g., retail clinic or physician digital M&A and investment opportunities, as market forces cause providers to seek practice)—has significantly increased. Vertical which are flourishing given the growing diversification and differentiation (Figure 2). M&A is driven by changes in payment models funding being made available to digital health Accenture predicts that acquisitions of non- and consumer expectations, and is evidenced start-ups. Acquisition targets are typically acute providers will reach 84 percent of the by the large share of patient volumes small or midsize companies providing health- total provider acquisition volume by 2018 while increasingly shifting to non-acute settings. related products or services in ehealth, purchases of payers will double. Digital health According to Accenture analysis, the share of telemedicine, population health management, acquisitions will expand by a multiple of 8 – non-acute acquisitions as a portion of total health analytics, remote monitoring, wearable from 1 percent of overall acquisition volume provider acquisition volume increased from 64 technology and other areas. But, digital in 2014 to 8 percent by 2018. Meanwhile, the percent in 2006-2010 to 74 percent in 2011- business acquisitions are likely to transform share of traditional horizontal acquisitions is 2014, while horizontal acquisitions decreased and disrupt the business model altogether. So expected to shrink from 21 percent in 2014 to from 32 percent to 21 percent in the same while making digital investments is essential to a 6 percent by 2018 (Figure 1). timeframes (Figure 1). provider long-term, it is daunting nonetheless. Figure 2: T he top 2 reasons to pursue vertical and digital deals Diversification: Providers can mitigate business risk by creating a broader investment portfolio that brings in revenue that is not necessarily tied to traditional hospital-related reimbursement limits. Differentiation: Providers can establish new categories of services to increase their competitive advantage.