Understanding and Navigating Healthcare M&A in the New World of Disruptors

BoardRoom Press August 2018

Anjana D. Patel, Member of the Firm in the Health Care & Life Sciences and Litigation practices, in firm’s the Newark and New York offices, and Zachary Taylor, Summer Associate, co-authored an article in BoardRoom Press, titled “Understanding and Navigating Healthcare M&A in the New World of Disruptors.”

Following is an excerpt:

The healthcare industry is facing an unprecedented increase in merger and acquisition (M&A) activity. Traditionally, these transactions involved provider-to-provider deals, such as hospitals and health systems merging or hospitals acquiring physician practices, nursing homes, home health companies, etc. More recently, however, there has been an increasing trend of new organiza­tions entering the industry creating new M&A models with a potential to significantly disrupt the industry. These new entrants consist of payers, retail­ers, pharmacies, IT companies, private equity funds, and large employers, and they are engaging in transactions not only amongst themselves, but also with providers. The actual impact of these activities on hospitals remains uncertain, but what is obvious is that the old way of doing business is rapidly changing. Hospitals and health systems need to understand, anticipate, and proactively react by creating business strategies to effectively compete in the industry.

Disruptors are entrepreneurial, innovative, and financially secure. They possess the ability to amass and analyze huge amounts of financial, clinical, and consumer data, as well as impact how and where healthcare products and ser­vices are utilized. Disruptors are invest­ing in companies that keep costs down by owning more of the supply chain, or they are employers looking to limit their costs and cut out the payer middleman by engaging in such strategies as direct contracting with providers. Like other industries, such as retail, disruptors are focused on the patient as a consumer. They understand that in order to truly meet the demands of a consumer, they will need to employ new strategies and technologies.