by Jane Anderson
The pace of health care mergers and acquisitions likely will
cool slightly in 2020, some industry experts tell AIS Health. Still, insurers
are likely to seek out companies with assets such as care management or
information technology solutions, while provider consolidation will continue in
certain markets.
"We expect that payer M&A will continue into 2020, with
a bias toward vertical rather than horizontal deals," says Michael Abrams,
managing partner of Numerof & Associates, Inc. "Payers will use such
deals to expand into adjacent market spaces to differentiate their offerings as
integrated platforms that can deliver superior value, customer experience and
innovation."
Joe Paduda, a principal with Health Strategy Associates, says he
expects less M&A generally in 2020, for several reasons. "There aren't
as many assets to buy after the multiple deals done over the last few years;
buyers are waiting to see results of the elections, which will drive their
future strategy; and asset prices have edged even higher, making transactions
more expensive and leaving less margin for error."
Dan Mendelson, the founder of consulting firm Avalere Health,
says he still sees plenty of potential targets for horizontal mergers, along
with more targets for vertical deals.
"Health plans are in a transformative phase right now.
There are three major areas of focus: government markets, care management, and
the information technology needed to support quality improvement and cost
reduction," says Mendelson.
"In government markets, there are a range of quality assets
that the larger plans could still acquire," he adds. "There are also
some non-profits that could engage in collaboration with for-profit
organizations to expand their scope and reach."
Medicare Advantage plans will be "a very strong target for
M&A" in 2020, says Ashraf Shehata, KPMG's national sector leader for
health care and life sciences.
Shehata says he also expects insurers to "amass
capabilities around their PBMs." This, he says, could include bolstering
their specialty pharmacy capabilities and building out technology.
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