The COVID-19 crisis exposed the high cost of fragmentation within the healthcare industry and will serve as the seminal event that ushers in an era of greater provider integration and concentration. COVID-19 will accelerate U.S. healthcare’s transformation toward a future characterized by the blurring of traditional lines between care delivery and financing. There will be no going back to the industry as it existed, only a going through to a stronger, more hardened, and, in some cases and in some geographies, a materially scaled healthcare system.
Three phases are anticipated as the industry moves forward:
- A turbulent restart through the remainder of 2020, marked by initially sluggish M&A activity as at-risk providers seek the shelter of cautious buyers.
- A shake-out will follow over the next couple of years, characterized by strong regional systems, insurers, and private equity-backed disruptors seizing the opportunity to drive performance and efficiency through scale.
- In a final phase, rise of the titans, national mega-systems will emerge, dwarfing today’s largest systems. These behemoths will compete directly with scaled, non-traditional, ambulatory-centric networks (e.g., integrated insurance companies) a marketplace that no longer adheres to traditional delivery vs. financing distinctions. These organizations will