Deloitte: By 2030, M&A will drive wellness over illness

NEW YORK, Dec. 10, 2020 /PRNewswire/ --

Key takeaways

• Based on updated modeling in 2020, Deloitte predicts in 2030:
• Inpatient hospital revenue will be 35% lower than it is today.
• The demand for hospital beds will be 44% lower (Deloitte's median estimate), meaning hospitals will be smaller and there will be fewer of them, which will in turn drive significant consolidation.
• Of the 390 metropolitan statistical areas (MSAs) across the United States, 61 are most likely to see consolidation based on Deloitte's forecasted 66% lower demand for hospitals beds in their MSA.
• Hospitals in the other 329 MSAs are also likely to consolidate, though perhaps to a lesser degree; Deloitte predicts demand for beds in these areas will decline between 21% and 56%.
• Consolidation was a bit slower than Deloitte's 2014 predictions, but health systems became larger:
• In 2014 Deloitte estimated that by 2024, only 50% of health systems would remain and independent hospitals would no longer exist;
• In 2020, the top 10 health systems now control 24% market share and their revenue grew from 2014 at twice the rate of the rest of the market.

Why this matters
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. In its latest report titled, "The potential for rapid consolidation of health systems: How can hospitals use M&A to innovate for the future?", Deloitte predicts health systems will likely be confronted with significantly lower revenue and decisions about where care can and should be delivered. Care in hospitals will likely become much more specialized. Those looking to innovate will likely seek consolidation to gain more capabilities, resources and relationships.

The future of consolidation
Deloitte believes that M&A is likely given the imperative for companies to compete in this changing world, the entry of disrupters and the broader push for care to be delivered in a more equitable, preventive and well-being-focused manner.

The adoption of virtual health accelerated dramatically during the COVID-19 pandemic. Greater scrutiny of disparities in care can also transform how hospitals will operate in the future with more focus on improving the health of those in the health systems' communities, with the consumer and equity at the center of efforts. The increasing presence of and opportunities for outside entrants and disrupters to the industry are a growing threat to incumbents. These trends are expected to result in care delivery becoming more virtual, prevention/well-being-focused, consumer-centric and equitable.

Fewer beds, fewer hospitals
Deloitte expects these trends to lead to a drop in demand for inpatient beds over the next 10 years with commensurate lower inpatient hospital revenue and demand for fewer hospitals, resulting in continued significant consolidation among hospitals and health systems during the period.

At the national level, Deloitte expects inpatient hospital revenue will be 35% lower and demand for hospital beds will be 44% lower (our median estimate) than today. Fewer beds means fewer and smaller-sized hospitals. In our vision for the future of health, hospitals will be smaller and much more specialized.

Key quote
"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. 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."
-- Ion Skillrud, principal, Deloitte Consulting LLP

Recommendations
Deloitte recommends health system executives consider the following approach to position their organization for the future:

• Determine an optimal asset portfolio - organizations will likely need a broader portfolio of non-inpatient care services — the right mix of hospitals, outpatient, virtual health and other care delivery settings that can ensure equity, prevention and well-being in its community.
• Develop a buy, build, partner analysis to fill in gaps - partnerships with technology companies, disrupters and others in the community may help develop innovative care delivery models or non-health care services and capabilities that an organization could not have done on its own.
• Maximize and integrate the organization's current assets - current assets should be aligned for technology, culture, branding, leadership and clinical delivery. Legacy acquisitions or newly built assets should be reassessed to ensure alignment.

To read more about the "The potential for rapid consolidation of health systems: How can hospitals use M&A to innovate for the future?" visit Deloitte Insights.

Connect with us on Twitter at @DeloitteHealth.

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people come together for the greater good and work across the industry sectors that drive and shape today's marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthier society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Now celebrating 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte's more than 330,000 people worldwide connect for impact at www.deloitte.com.

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SOURCE Deloitte

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