1. An uptick in vertical integration
2017 ended with the announcement of a major merger between CVS and Aetna, and 2018 has already kicked off with an announcement of a major employer partnership between Amazon, JPMorgan Chase, and Berkshire Hathaway. Last year brought other examples of vertical integration, as well: UnitedHealth acquired Surgical Care Affiliates and DaVita Medical Group, Apple was reportedly in serious discussion with OneMedical, and Humana purchased part of Kindred Healthcare. (Editor's note: The Growth Channel is published by Advisory Board Research, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group.)
Our 2018 take:
This trend echoes one seen in other major industries, as well—with so much uncertainty on the horizon, vertical integration is one way to hedge one's bets in several potential futures. Regardless of whether the CVS-Aetna deal gets approved, the possibility of such an alliance could spur further vertical integration in 2018 and beyond. Large players such as Anthem, Blue Cross Blue Shield, and Cigna have been fairly quiet throughout this latest wave of mergers, but we expect to hear of more new-in-kind partnerships from larger and smaller players alike. Though M&A activity of this scale is rarely followed by quick, radical action, planners should prepare their organization for future impacts by streamlining internal decision-making and continuing to center their primary and specialty care services around consumers.
Look for more on the impacts of vertical integration—and what your organization should do about it—in the next few weeks.
2. Growing AI adoption
Artificial Intelligence (AI) technology is steadily gaining momentum in clinical settings, call centers, back offices, and supply chains. In radiology, for example, AI tools can help staff analyze routine results more quickly and accurately, allowing providers to see more patients more efficiently.
Our 2018 Take:
While AI has the potential to replace labor—for instance, by reducing the need for radiologists—demand for care and a shortage of providers means AI will likely supplement rather than replace staff. Adoption takes time, too: Just 20% of health executives say they have the technology to succeed with AI. Expect to see widespread AI investment across 2018 and beyond, but the most progressive organizations will be building out internal frameworks to support AI innovation and implementation.
3. Heightened competition for outpatient care
With CMS removing high-revenue procedures such as knee replacement from the inpatient-only list, the race is on to build outpatient capacity for these services.
Our 2018 take:
We're already seeing renewed interest in ASCs and lower-cost, multispecialty outpatient sites. Organizations are likely to critically examine their ambulatory footprint and seek opportunities to meet consumer needs and preferences through new investments and partnerships.
Provider organizations won't be the only ones making plays: This space will continue to attract interest from new market entrants, out-of-industry players, and as well as insurance companies—most of whom can use their deep consumer analytics to ramp up outpatient competition.