This year demonstrated continued growth in the number and size of health systems in the United States. Consolidation has remained a top trend for 2019, as the healthcare industry continued to consolidate as it moves toward value-based care. In 2018 alone, there were 803 mergers and acquisitions and 858 affiliation and partnership announcements, with similar numbers expected this year. In the previous 5 years, the number of IDNs has increased by 30%; and up to 70% of medical claims now flow through IDNs and physician networks nationally. As IDNs grow in number and size, they have the potential to bypass payers and contract directly with employers. That said, IDNs still have not demonstrated the ability to impact prescribing behavior compared with non-IDN physicians.

Payers are also pursuing vertical integration in order to increase purchasing power and tap into new revenue streams. Consolidation by insurers, such as Aetna/CVS and Cigna/ESI, has included acquisitions of specialty pharmacies and clinic providers, directly competing with health systems for the patient’s healthcare dollar.

There are conflicting views on what all of this means. According to a March 2019 article in Definitive Healthcare, some see the consolidation trend as a movement toward lower costs and better care, while others are concerned about the growing power of healthcare industry giants. Either way, this trend is here to stay—and it appears that it will accelerate over the next few years.

Expect to see health systems continue to evolve and behave more like payers. With cost savings a top area of focus, health systems are becoming more cost conscious, particularly around pharmaceutical and supply costs. Other areas of focus impact health system revenue, including the shift to value-based care and payer site-of-care programs. With the increased focus on cost-cutting, the use of newer, more expensive agents may slow, especially where the alternatives are inexpensive.

In addition to cost sensitivity, health systems are increasingly measured clinically and financially through various quality measurement programs. The federal government, through the Affordable Care Act and Medicare, is increasingly driving quality measures for improved population health, patient experience, and total costs of care. Integrated delivery systems play an integral role in quality measurement programs, because they either participate with an accountable entity (eg, plans and ACOs) or their stakeholders (hospitals and physicians) participate with an IDN. Although more alignment is still needed, quality measurement programs are synchronizing measures so that physicians, hospitals, ACOs, and health plans are working together to improve performance in the same areas (eg, readmissions). The performance on many of these measures also impacts payments in value-based reimbursement programs.

Slow progress continues to be made toward value-based reimbursement. Currently, providers share minimal risk, primarily through accountable care organizations (ACOs). Shared-savings and risk models consider hospitalizations, emergency department visits, readmission rates, timely follow-up visits, and performance on certain quality metrics. Market conditions need to be just right for a viable contract. Providers must be large enough to spread risk and to manage with proper physician incentives, as well as an integrated system to provide clinical and claims information. Payers must have the bandwidth and capabilities to measure and report on the parameters. Innovative treatment and/or therapies must be available that align with outcome- or value-based approaches.

Each health system is unique in its strengths and opportunities, as well as its progress toward value-based care. In order to effectively partner, it is important to understand how health systems are adapting to these trends and focus on what their unmet needs are. Knowing how products align with the health system’s strategically relevant quality metrics and quality performance challenges will go a long way to partnering and providing valuable solutions.