Healthcare M&A: Mastering the 3D chessboard

INSIGHT DRIVEN HEALTH Healthcare M&A: Mastering the 3D chessboard Think like a portfolio manager or leave money on the table Record levels of mergers and acquisitions (M&A) are fundamentally reshaping the US healthcare landscape. But if healthcare providers don’t oversee these transactions with an investment portfolio manager mindset, Accenture estimates they could leave at least 10 percent of anticipated costs saving on the table. Healthcare M&A in the US reached $241B by the strategic growth opportunities holistically— quickly often means that horizontal deals May 2015, the highest year-to-date volume all three dimensions simultaneously—as are closed quickly, without rigorous planning ever recorded. Healthcare providers are making investment portfolio managers would. Doing so to achieve benefits in both the near- and these acquisitions to gain economies of scale; successfully means getting the most out of M&A long-term. As a result, substantial value is shift from volume-based to value-based care; transactions. Failure to do so means leaving lost: Accenture estimates that in traditional address local market characteristics to remain money on the table. horizontal M&A by healthcare providers, at competitive; better appeal to consumer wants least 10 percent of the anticipated cost savings and needs; and expand their digital health and From horizontal to are left on the table. ehealth capabilities. vertical and digital While this new tidal wave of M&A expands the set of strategic options available to Horizontal M&A represents the traditional ‘land healthcare providers, it also creates management grab’ of hospitals buying other hospitals to complexity comparable to a game of three- create an ever-expanding footprint. However, dimensional chess: In the current environment, horizontal acquisitions have generally failed providers must view opportunities and threats to generate the desired synergies, and some from both horizontal and vertical perspectives, have actually resulted in diminished operating as well as a rapidly emerging digital health performance of the combined entities. The dimension. The game can only be won by viewing desire to realize the perceived scale benefits