Report: Healthcare Leaders Should 'Consider M&A a Key Part of Their Strategy'

In a new report, Deloitte looks back at the consulting firm's predictions about the future of M&A in 2014, updating it for 2020.

In 2014, Deloitte Consulting LLP released an analysis on hospital M&A trends where it estimated "only 50% of health systems would remain and independent hospitals would no longer exist" by 2024.

The consulting firm released an updated report Thursday, looking back at its M&A predictions from 2014 and updating M&A predictions through 2030, using new modeling.

"While we did adjust some of our predictions from 2014 to accommodate regulatory, technology and market dynamics in 2020, we were right in that consolidation would continue, although it was a bit slower than we had anticipated. And that trend doesn't look to be changing," Deloitte Principal and co- writer of the report, Ion Skillrud, said in a statement. "Care delivery is changing. Hospital business models are changing. The concept of scale is changing. To survive and thrive, especially post-pandemic, health care executives should look at their options and carefully consider M&A a key part of their strategy going forward."

By 2030, Deloitte expects that:

• Inpatient hospital revenue will be 35% lower.
• Hospital bed demand will be, on average, 44% lower. This will lead to smaller and fewer hospitals.
• Of the 390 metropolitan statistical areas (MSA) across the country, 61 are most likely to see consolidation. This is based on Deloitte's predicted 66% lower demand for hospitals beds in their MSA.

In a statement, Deloitte says: "Rapid consolidation of health systems will likely continue due to financial pressures, growth of non-hospital care settings, and the need for transformed care delivery.  … Those looking to innovate will likely seek consolidation to gain more capabilities, resources and relationships."

Moving forward, Deloitte recommends that health system executives focus on these strategies to position their organizations for success:

• Establish an "optimal asset portfolio," which includes having a broad mix of non-inpatient care services
• Develop a "buy, build, partner analysis" with tech companies and disruptors to fill in the gaps for care models or services that your organization doesn't currently offer
• Maximize and integrate your organization's current assets, ensuring alignment throughout the facilities