Let's not repeat the mistakes of the '90s and other observations from the #WSJHealth Forum

On Monday, March 6, I talked about steak and bourbon with a roomful of healthcare industry veterans.

“You can give me a billion data points about how bourbon and steak aren’t healthy,” I said, “but that doesn’t necessarily mean I’ll stop enjoying them.”

Kidding aside, my larger point was this:

In my three decades in the healthcare industry, I’ve seen too many organizations invest in the newest and sexiest data capabilities and tools, yet never act on the mountains of data they accrue. Unfortunately, this is becoming even more common. And as I reminded that room of industry veterans, if you don’t have the corporate resolve to act on your data, you might as well not invest in the data.?

This was just one of the many topics my colleagues and I discussed at The Wall Street Journal’s Health Forum: a gathering of executives, experts and physicians. Alongside talented leaders from Ruth Williams-Brinkley from Kaiser Permanente and Dr. Ben Edelshain of Highmark Health, I talked about the changes and strategies that will make value-based care even more effective. There was plenty to unpack, and as proven by the rest of the forum, this is an exciting yet challenging time in the healthcare industry. As always, my goal is to foster productive dialogue while helping organizations manage the challenges they face.?

With that in mind, here are three key takeaways from this timely event.

?

Cross-business alignment is vital for value-based care

Every healthy organization has one thing in common: Its people buy in.

But as you know, buy-in can be hard to achieve — especially when your people are as strained as our healthcare workers. This is why it’s more important than ever to align incentives between insurance companies, hospitals and physicians, particularly when each of these three components are employed by the same entity.

At worst, these three components are working against one another to extract value from the healthcare ecosystem. Yet if you build incentives around increasing quality and decreasing aggregate cost, you can both remove that inherent tension and enhance value-based care in a way that’s meaningful for patients. This alignment will aid your buy-in efforts, too.?And enable to your organization to actually drive value to healthcare rather than just give lip service to the popular phrase value based care.

?

Investors must add value

The influx of private equity we’re now seeing in healthcare is nothing new. In fact, neither are the billions of dollars going to primary care practices. We saw this happen in the 1990s, but at that point, investors operated under the assumption that scale is always synonymous with efficiency.

Not so.

Rather, investors must realize they can’t increase margins the way they want without adding significant value. This could mean changing the operating model, revenue model, adjacent capabilities and many more considerations.?Without that added value, the healthcare industry could repeat the same mistakes of the ‘90s.

M&A activity will continue — partly driven by COVID’s endemic status

Some of my Grant Thornton colleagues recently penned a thoughtful piece on the state of M&A activity in healthcare. And their big takeaway – that activity will remain strong in 2023 – was echoed at the #WSJHealth forum. Here’s why:

The COVID-19 pandemic added more financial pressures to the healthcare industry. At the same time, government subsidies helped prop up organizations that may have otherwise faltered. But the federal government won’t be spending hundreds of millions of dollars on vaccines anymore.

As this virus becomes endemic, we’ll see some clear winners and losers emerge from a crowded and competitive healthcare field. Concurrently, we’ll see more M&A activity, with an emphasis on low-cost, high-quality outpatient services.

I believe the organizations who focus on more than extracting dollars will join the winners circle.