Vital Signs December 2023: Healthcare Sector Outlook

Given the importance of scale for controlling costs, negotiating contracts with payers, and establishing a diversified market footprint, we’ve seen growing conglomeration in the healthcare sector.

Ford Health and Ascension Michigan announced a merger that will create a $10.5B entity totaling 50,000 employees and over 550 locations. Elsewhere, other hospital mergers have been eyed but have yet to move forward. Meanwhile, several notable retailers have made significant investments into primary care providers. Perhaps the most notable was CVS’ acquisition of Oak Street Health and Signify Health in back-to back months during Q1 2023. This continued the vertical integration strategy that the ‘payvider’ (insurers/payers providing direct healthcare through their own clinical teams) entity of CVS and Aetna had begun to build over the past several years. Through the Oak Street acquisition, CVS enters almost 170 locations across 21 states for $10 Bwith the Signify Health acquisition totaling $8B for a home-based primary care provider at scale. This follows earlier M&A activity from

Amazon and Walgreens listed below. In many of these cases, buyer entities sought to build out a substantial platform that could synergize with any healthcare offerings, retail / medtail platforms, and any payer affiliations. CVS’ partnership with Aetna plans to convert portions of CVS retail outlets to medical office under the branding of HealthHUB— combining this with the shuttering of 900 stores to drive traffic to key locations. In addition, UnitedHealthcare’s Optum Health vertical acquired Kelsey-Seybold Clinic, enabling regional growth in the Texas market, with further potential targets on the market. Continued cost pressure on healthcare systems will likely drive continued agglomeration into 2024, with buyers ranging from well-capitalized health systems to payviders to institutional capital with existing medical partnerships.

Major Acquisitions

Conglomerate Target

Price Date Locations Target States

CVS

Oak Street Health $10.6B May-23 169

AL, AZ, CO, GA, KY, IL, IN, LA, MI, MS, NC, NJ, NM, NY, OK, OH, PA, SC

Kaiser Permanente

Geisinger Health $5B May-23 289

DE, ME, PA

Amazon

One Medical

$4B Feb-23 188

AZ, CA, CO, CT, DC, FL, GA, IL, MA, NC, OH, OR, TX, WA

Walgreens / VillageMD

Summit Health

$9B Nov-22 370

CT, NJ, NY, OR, PA

UnitedHealth / Optum Health

Kelsey-Sebold Clinic $2B Sep-22 40

TX

Source: The Advisory Board, Cushman & Wakefield Research

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