Healthcare organizations are under pressure to stay competitive in a highly-dynamic market while meeting the demands of patients, payers, and regulations. Many in the healthcare industry are turning to mergers, acquisitions, and divestitures (M&A) to take advantage of the market and stay ahead of the curve.
The challenge for any M&A activity is time to value. And to succeed, organizations must have a clear strategic plan not just for the legal or business services activities, but for integrating business and technical processes. With a modernized, cloud-based M&A playbook, healthcare organizations can achieve greater M&A time to value while maintaining critical patient and organization data security.
The reasons behind rapid consolidation in healthcare
Several years ago, Deloitte predicted that M&A would increase. The increase would come from technology, market dynamics, and regulatory environments that make it harder for independent hospitals to remain profitable. As predicted:
- Virtual health usage is 38 times higher than in 2019. COVID forced many providers and systems to use telemedicine, but it will continue. The CARES Act expanded telemedicine, and 40% of patients surveyed by McKinsey reported they would continue to use telehealth. Those factors, combined with COVID overload in hospitals today, are driving care outside of the hospital walls and leveraging technology.
- Payer pressure to reduce costs is increasing. The focus of the Affordable Care Act on value-based care is pushing healthcare systems to lower the total cost of care. Smaller hospital systems often struggle to achieve cost savings goals at the level of larger organizations. They also have a harder time optimizing economies of scale in healthcare support services like IT and billing.
- Small and independent hospitals are struggling to meet revenue goals. High rates of uncompensated care and uninsured patients are compounded by an inability to match innovation at larger hospitals. This has fueled a target-rich acquisition pool.
Demand for healthcare isn’t declining. It will go up as more Baby Boomers reach Medicare eligibility between now and 2030. But care will shift away from inpatient facilities as payers and policymakers push value-based care (VBC) initiatives. Other factors influencing the need for M&A include:
- Technological advancements disrupt the status quo. Healthcare has been slower than other industries to adopt new technology, but the pace of innovation and change is rapidly increasing. Facilities unprepared to adapt will have to make changes to stay competitive. They will seek investment, acquisition, or place themselves for bid to fill the gap. Regardless of the direction, it will be a challenge to capture the synergy benefits and face technical complexities and debts related to legacy systems.
- Resource imbalances between small and large organizations. Larger organizations have more resources to invest and scale up technology, data security, and healthcare expertise. A lack of resources leaves smaller organizations with no way to catch up except to consider M&A.
Three ways to supercharge your healthcare M&A activities
Healthcare systems that leverage inorganic growth to create more innovative and effective care opportunities also need a solid plan to execute once a merger or acquisition is underway. Traditional strategic IT plans for integrations are often designed under a conservative timeline with many efforts executed serially; methodologies are loaded with supply chain and logistical challenges that require a high amount of capital spend and effort to deploy for a low value return with respect to time to value. This legacy playbook needlessly extends M&A timeframes, making it harder to achieve the full potential benefits of the deal value as it pushes more value capture activities toward the end of the integration timeline.
Three key concepts that modernize the M&A playbook to drive value in the healthcare market:
1. Transform access and scalability. Zscaler’s cloud-based platform can securely connect users, systems, and applications from any location to any location and make any M&A transition much easier.
- Provide seamless and secured access to providers, patients, partners, and other professionals by using zero trust architecture and start integrating critical systems on day one. This enables patient care to continue uninterrupted throughout integration activities.
- Allow applications, data, and processes to flow without the burden of addressing underlying technical complexities. The applications or users of a healthcare organization can access other organization’s applications or systems no matter where they are hosted without the need for network integrations or VPNs.
- Cloud-based SaaS platforms are infinitely scalable to accommodate spikes in demand during M&A. Just as important, the costs scale accordingly, only integrate what you need and only pay for what you integrate, meaning no more capex-ladened integration project spend for securing and connecting healthcare resources.
2. Enable a modern healthcare workforce and increase productivity. The Affordable Care Act shifted healthcare from fee-for-service to VBC. Improving the quality of care and reducing costs requires the ability to take advantage a diverse set of cloud and on-premises capabilities for things like telehealth.
- Move applications and systems to a more cost-friendly environment while maintaining a persistent security posture no matter where it is hosted.
- Extend that same flexibility to any future integration and mesh new acquired application ecosystems without skipping a beat or lowering your pulse on security posture.
- Remove the need for healthcare workers to navigate different experiences when they work remotely and when they work from healthcare facilities. This enhances both the worker and patient’s care experience.
- Give seamless and secured access to anyone in the healthcare network partner ecosystem without having to backhaul traffic for compliance.
- The entire Zscaler platform has improved many M&A time to value demands.
- Allow practitioners to gain great visibility across the entire co-joined ecosystem by granting access to all yet-to-be integrated systems on day one.
- Let them be productive as the integration activities begin.
3. Maintain security throughout M&A transitions. Healthcare providers must protect patient data or face financial penalties and a loss of trust. Cybercriminals know that legacy systems are vulnerable, and they often take advantage of these vulnerabilities after M&A announcements when IT teams are in transition.
- Zscaler can help avoid cybersecurity risks by quickly and securely integrating new providers and facilities without exposing applications, data, or ecosystems to anything or anyone not directly permitted.
- Zscaler can provide central and robust auditability tied to all access and internet traffic along with deceptive honey pots, allows quick identification and remediation of any potential internal or external threats starting day one, and remains shields-up during the entire integration lifecycle.
- As a cloud platform, Zscaler can overlay any network and provide a flexible and scalable manner to both protect and secure many diverse integration or separation scenarios. The Zscaler Zero Trust Exchange removes nearly all the complexities in connecting and securing disparate companies’ technologies, allowing integrations to move at the speed and security of cloud vs. speed of legacy IT approaches.
Learn more about the modern approach to integrate healthcare businesses
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Learn how the Zscaler Zero Trust Exchange modernizes and accelerates M&A by downloading our datasheet and scheduling a demo.