M&A Insights: The Future of Healthcare and Cost Savings

M&A Healthcare Insights Podcast hosts Mark Thomas and Andre Ulloa spoke with Terry Wang, Partner with Regal Healthcare Capital Partners, to forecast the future of the healthcare industry. Significant activity is happening from an investment and acquisitions standpoint.

Wang pointed to several significant trends occurring in healthcare today: Making healthcare more affordable, accessible, and convenient is critical. One is finding ways to shift healthcare services outside the hospital.

“We spend a lot of time at Regal thinking about, what are the different types of services or delivery mechanisms that can shift care out of the hospital,” Wang said.

Moving to a more value-based care system is the second big trend in the healthcare sector.

“Healthcare historically has reimbursed our providers on a fee-for-service,” Wang said. “It didn’t matter whether you delivered quality care or not. It didn’t matter if the patient got better. It didn’t even matter if the patient came back to you; in fact, sometimes it was better if they came back to you because you could bill them again. We’re seeing slowly but gradually and persistently; the system is moving more towards value-based care.”

These trends appear to counter movements of the past 20 years with hospital consolidations and services moving internally into hospital healthcare networks and subsequent rate increases.

“I think it’s gotten to a tipping point now,” Wang said, “where payers, whether it’s Medicare or commercial insurance payers, are fed up paying these high prices. So, a hospital system can still succeed acquiring and merging, but they’re not going to be able to continue raising rates as they have in the past.”

Forward-thinking hospitals are proactively moving to risk-based arrangements, such as accountable care organizations.

“It’s not going to be just about, let me gobble up the local doctor groups and raise the rates; it’s going to be, how do I thoughtfully manage costs in the given population.”