The U.S. healthcare provider landscape is being transformed by a consolidation wave that began in the 2010s and will continue into the next decade, according to a new survey.
The trend is driven by “progressives”—large diversified health systems that have embraced value-based payments, integration of acute and non-acute care, and large operational scale, according to L.E.K. Consulting’s 10th Annual Hospital Survey: A Retrospective Analysis and a Glimpse into the Future. The study surveyed health system and hospital executives about their strategic priorities and relationships with suppliers.
“The arrival of value-based payments (VBP)—a major force in the drive for accountability—is causing these systems, and their competitors, to seek M&A partners as they drive for scale; expand into non-acute care in a quest for referral traffic and revenue, and spend heavily on healthcare information technology in order to generate the data and analytics that the VBP environment demands,” says Ilya Trakhtenberg, managing director at L.E.K. Consulting.
While in 2010 the provider landscape was still in many ways dominated by independent hospitals and small local health systems competing for market share, that is no longer the case, according to Jonas Funk, managing director at L.E.K. Consulting.
“The 2020s will see an explosion in the use of data and analytics, expanded use of telehealth, and the creation of centers of excellence as the next step in service line expansion,” Funk says. “Economic pressures and the pace of technological change are such that the present—and the future—are likely to belong to large, diversified health systems that are equipped to provide an end-to-end array of services to a wide range of patients, across acute and non-acute care settings. A more accountable, data-driven, networked world is the future of U.S. healthcare.”
The findings reflect current trends and the industry leadership’s highest priorities, according to Monish Rajpal, managing director at L.E.K. Consulting.
“They indicate what hospital executives are grappling with and how they are responding to competitive pressures from consolidation as well as economic pressures caused by the arrival of VBPs and the end of the fee-for-service era,” Rajpal says. “Healthcare executives can see what their peers are thinking about and what they are doing—and get a window into the progressive systems that are driving consolidation and that increasingly represent the future for U.S. providers, either as competitors or, more likely, as an example to be followed.”