Driven by factors such as the Patient Protection and Affordable Care Act and the push to contain ballooning costs, the U.S. healthcare industry has been consolidating at a rapid rate in recent years. These mergers increasingly include deals struck between providers and payers.
In the 1990s and early 2000s, the telecommunications industry underwent a similar frenzy, with content providers and media distributors merging together, according to a report from Lincoln International's healthcare division, a mid-market healthcare investment banking practice. The telecom industry consolidation was spurred by various regulatory and marketplace forces — such as the consolidation of voice and data services — that led to notable mergers including Viacom-Paramount, Disney-ABC, Viacom-CBS and NBC-Universal.
However, despite the fact that these mergers made sense at the time, some of the deals failed and resulted in bankruptcies after the technology bubble burst in 2000. According to Lincoln International, there are three key lessons healthcare executives can take away from the rise and fall of telecom industry consolidation.
1. Manage culture. Executives must be aware of the cultural gap between healthcare providers and insurers. Telecom industry leaders found the differences between the cultures of consolidated organizations were more difficult to overcome than they had anticipated. That dissonance can lead to the unraveling of a deal, according to the report.
2. Adopt an "all-of-the-above" approach to technology. The telecom industry struggled with news organizations looking to provide information in various formats, rather than simply in print or video form alone. Similarly, healthcare information can no longer be specific to one platform. "Healthcare organizations need to adapt to provide the right information, at the right time, to the right people, with the right device whether that is via the cloud, smartphones, tablets, or desktops," according to Lincoln International.
3. Prioritize transparency. Media companies that didn't adequately meet customers' needs didn't succeed. Likewise, according to Lincoln International, healthcare organizations that ignore consumers' growing demands for greater transparency will sink rather than swim as the industry continues to transform. "Having solid customer service is no longer a luxury in the new reimbursement paradigm," the report states.
More Articles on Healthcare Consolidation:
5 Things to Know About the Merger of Health Systems and Insurance Providers
Commonwealth Fund: 8 Strategies to Prevent Price Hikes From Provider Consolidation
Key Issues in Mergers and Acquisitions: Is Ownership a Downward Trend?