2011 is a makeover year for health industry organizations reacting to and preparing for new rules and payment models. Continuing cost pressures and new customer demands require a fresh look at existing roles of industry players.
This issue is one of six health industry issues for 2011. For the full Top Health Industry Issues of 2011 report, please see www.PwC.com/us/TopIssues2011
Deal activity in all health sectors is on an upward trend that will continue into 2011. Companies will be looking for growth as well as to fill in services along the continuum of care. With continued low interest rates and more cash on hand, healthcare organizations will be encouraged to discuss deals that help them manage future risks and tackle costs. The activity could traverse unlikely terrain as suppliers buy providers, as health plans team with providers, and as pharma/life sciences companies get into more services along the care pathway. However, healthcare organizations could have competition for acquisitions. The number of private equity funds interested in healthcare is on the rise. Here's the outlook by sector:
In pharma/life sciences: Revenues in various sectors of the pharma/life sciences industry are expected to decline 1% to 12% from 2009 and 2014 depending on the subspecialty, prompting companies to scramble for new products. Medical device companies are expected to make deals that will consolidate lines of business, improve revenues, and increase market coverage. Strategic midmarket buys, characterized as deals of $100 million to $500 million, also are likely to be the focus in 2011. Over-the-counter growth trends also will extend to transactions in emerging markets.
In provider/payer: The lines are blurring between provider and payer sectors as they formulate post reform strategies. Two deals got the industry buzzing about what could be: Humana agreed to pay $790 million for Concentra, a Texas-based provider of 300 stand-alone medical centers , and McKesson, the nation's largest medical supply distributer, said it would pay more than $2 billion for US Oncology, a company that manages 1,300 physicians.
On the plus side, consumers may be open to new relationships brought on by provider mergers. For example, HRI's consumer survey found that 78% of consumers said they prefer to use a retail clinic partnered with a local hospital for primary care services compared with 22% who prefer an independent company owned by a retail pharmacy.
However, consumers have some concerns as well. For example, when asked their top concerns if their local hospital was acquired by a larger health system, 44% said they thought costs might increase, and 36% said they thought wait times would increase (See Figure 5). Approximately one in five consumers said coordination of care and quality of care would decrease, although over half don't anticipate any changes in these areas.
Look for more discussion in the full Top health industry issues of 2011 report www.PwC.com/us/TopIssues2011
US Healthcare Provider Practice
US Pharmaceuticals and Life Sciences Practice