Mergers and Acquisitions Will Strengthen Payer Identity in 2020

December 11, 2019 - Payers will seek to strengthen their identities in 2020 and they will use mergers and acquisitions as the tools for transformation, according to a recent HRI’s PricewaterhouseCoopers (PwC) report.

“In 2020, organizations will make strategic deals not to just grow larger but instead to expand into new identities with platforms anchored in value, innovation, customer experience and population health,” the report stated. “As they weigh their options, health companies will need to ensure that the deals they pursue pass the sniff test of employers and consumers seeking more affordable care.”

Forty percent of healthcare executives from across the industry—including payers, providers, pharmaceutical companies, and others—are “somewhat” or “very likely” to work with or acquire companies from other sectors of the industry in the new year. When making these deals, 26 percent of payer executives prioritize finding partners that maintain or increase their companies’ competitive advantages.

The report highlights four identities that payers and other healthcare organizations can embrace in 2020 that may influence their deal-making decisions.

Some payers may choose to emphasize their strengths as product and innovation leaders. To achieve this, they will seek partnerships with providers and researchers who have acclaimed specialty skillsets. These payers may also focus on acquiring healthcare technology brands to support the payers’ technological superiority and advancements.

In step with this prediction, a KLAS report from earlier in 2019 revealed that payers are moving away from systems that they have relied on for a long time. Instead, they seem to favor partnering with new, disruptive technologies. These partnerships can help develop an innovative public image.

Cigna’s deal with Express Scripts is an excellent example of a payer making a deal to enhance its identity as a technology leader. Because of that partnership, the payer has been able to develop a new gene therapy payment model with Embarc.

Payers that strive to be population health and outcomes leaders will require strong relationships and excellent communication with provider and advocacy groups. These payers should also have an excellent grasp of community health and access to care challenges.

“Companies choosing this identity may look to acquire smaller organizations focused on key patient segments as they focus product portfolios and develop patient engagement services to ensure optimal outcomes,” PwC suggested.

PwC pointed to Clover’s Medicare Advantage plan and its Clover Therapeutics medicinal research branch as an example of a successful leader in population health management and patient outcomes.

Other payer may seek to become member experience and consumer advocacy leaders in 2020. In this case, finding partners that can improve access to care, ease, and healthcare payer services are key to elevating the patient experience.

Partnerships in this category are aiming for longevity with their members, with the goal of retaining members for their lifetimes. Facilitating worksite clinics can be one way to improve the member experience by making access to healthcare highly convenient.

Value leadership was responsible for some of the biggest deals of 2019, according to PwC, and it will continue to be a major driver in 2020. For example, Optum acquired DaVita Medical Group and CVS Health Hartford likely because they wanted to enhance their value leadership identity, PwC suggested.

However, as important as these categories may be, the report urged payers and healthcare companies to think outside of the box and potentially combine different identities to make a new one.

“The product leader in the future will be a much harder sell,” King Li, MD, dean of the Carle Illinois College of Medicine and chief academic officer of the Carle Health System predicted in the report. “It’s hard to say you are a product leader when people make decisions based on the same AI support. In this case, patient experience will become much more important in achieving a positive outcome.”

One trend that payers considering a merger or acquisition next year will need to keep in mind is the patient and employer perspective. These demographics are the most affected by payer mergers and are largely ambiguous on their sentiments toward healthcare mergers. Payers need to keep patient and employer communication lines open to inform them of changes in their coverage during mergers and listen to patients’ and employers’ needs.

Lastly, PwC proposed that payers and healthcare organizations looking to make deals and improve their identities find a private equity partner.