Healthcare Mergers & Acquisitions 2018 Spotlight

HIMSS Analytics

In the first half of 2018, the healthcare industry has seen an uptick in merger, acquisition and joint venture activity across the U.S. market. Major, multi-million dollar deals, some of which were announced in 2017, are expected to close this year. Our most recent eBook, "Health Systems Mergers and Acquisitions Spotlight: Q1 & Q2 2018" dives deeper into this trend, reviewing the facts, demographics, EMRAM scores, vendors and financial information of the mergers and acquisitions expected to have the largest impact on the industry as a whole.

For example, the merger between Downers Grove-based Advocate Health Care System hospitals and Wisconsin's Aurora Health Care finalized on April 1, 2018, creating the tenth-largest not-for-profit hospital system in the country — with about $11 billion in combined annual revenue. The new system, now called Advocate Aurora Health, has a combined physician count of roughly 8,100 physicians.

Additionally, OU Medicine, Inc. announced that they would assume ownership and management of the Oklahoma City-area hospitals with the mission of leading health care. The buy-out, worth $750 million, began at midnight on Feb. 1. So far, they have hired 200 new employees and anticipate hiring as many as 100 more by the end of 2018. Both hospital systems were at approximately Stage 6 of the EMRAM in 2017, and both mainly work with Meditech and GE technology.

These are just two examples of a larger trend toward consolidation. Currently, there are about 2000 health systems in the U.S., but as more and more hospitals consolidate, that number is expected to drop in the next few years. Healthcare organizations who consolidate particular vendor solutions, enable better interoperability and take advantage of Medicare and Medicaid programs may come out on top — not, however, at the expense of the patient.

Although much consolidation activity is financially driven, there are regulations and stakeholders in place looking out for the consumer. Consolidation, therefore, has to be approached with caution. In the long run, the most tech-savvy organizations with better metrics both financially and clinically will be the ones innovating and improving patient outcomes.

The Trigger Event for Upcoming Vendor Consolidation

In our research, we've found hospital systems tend to begin looking toward vendor consolidation within 12 to 24 months of a merger or acquisition. That means it's time for vendors to spark the conversation with these systems early on — there are opportunities that come with the evolving healthcare landscape, and leading vendors need to take advantage of them.

Many times, mergers and acquisitions are the drivers for consolidation of technology vendors as well. It's not necessarily guaranteed that a vendor replacement will occur with a merger or acquisition, but from an operational and IT management perspective, it tends to be much easier to use the same system across the two businesses. This potentially a market for organizations who can help with archival and access of data, because the technology used in the different systems isn't always interoperable.

Ultimately, technology should enable providers to provider better, more efficient care. It should improve patient experience, safety and satisfaction, but in the case of mergers with different technology vendors, it can sometimes get in the way. These mergers and acquisitions are the opportunity for providers to think about upgrading their technology for better patient care and wider geographical reach, as well as the opportunity for vendors to step in and aid with these upgrades.

To learn more about recent merger and acquisition activity in the healthcare industry, read our free eBook, "Health Systems Mergers and Acquisitions Spotlight: Q1 & Q2 2018."