Mergers and acquisitions (M&As) have ebbed and flowed with the health care industry for decades. The economic downturn of the late 2000s brought with it an increase in M&A activity. But, while it’s still an important trend, another trend is emerging that may contribute to a slowing of M&A: provider alliances. In the latest Optum Trend Watch, we highlight how health system alliances are increasing in popularity.
Health care mergers and acquisitions continue, but not at the same rate the industry has experienced of late. M&A activity decreased 14 percent in 2014. And approximately 600 clinically integrated, single-system health entities exist in the U.S., most of which are not in alliances and are ripe for M&A.
Unlike mergers or acquisitions, where one entity is absorbed, health care alliances present some intriguing advantages. Alliances, which can include clinical partnerships, regional alliances, accountable care organizations and clinically integrated networks, encourage collaboration along a number of fronts, including best practices, cost reduction and better care coordination.
Alliances aren’t new to health care, but they are evolving as value-based care becomes ingrained in the way we deliver care. Alliances can be the vehicle through which care is coordinated and populations are managed. Participants share best practices in ways to deliver better care while jointly investing in clinical improvements. Clinically integrated alliances can better negotiate with insurance companies, while maintaining independence to prioritize their own growth.
But, like any partnership, alliances have their downsides. Members may be direct competitors. One individual member may choose to respond to industry issues in a way that doesn’t fit with the rest of the group. Another may choose to merge with another health system. It’s a delicate balance, but the potential is there for cost-savings and improved patient care.
Balance seems to be the secret to a strong alliance. Alliances that have been around for some time have found common ground for longevity. And the benefits of collaboration and economies of scale can be counted in millions of dollars. One example: BJC Collaborative, a regional alliance in Kansas, Illinois and Missouri, saved $65 million over three years by syncing IT services, supply chains and capital purchases.
In our next post, we’ll discuss the business impact of alliances and what takeaways health care leaders can expect when considering alliances with other health systems.
Learn more by downloading Optum Trend Watch: Health system alliances as a value-based strategy.