Market Overview

Premier Inc. C-Suite Survey: Clinical Integration and Consumer Satisfaction Driving M&A Activity among Healthcare Providers

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According
to a new Premier Inc. (NASDAQ:
PINC) survey, health system leaders
say the strongest drivers of merger and acquisition (M&A) activity are
linked to the need to integrate and better manage care across the
continuum, and meet consumers where they want to be seen.

Premier®, a leading healthcare improvement company, surveyed
its established member C-suite panel to understand integration trends
across the industry. Nearly half of surveyed health system leaders said
they had completed a merger or acquisition in the past two years, and
most (77 percent) reported they expect to do so in the next two years.

"Healthcare providers are increasingly feeling pressure to form
coordinated, high-value networks with aligned payment models, care
delivery practices and financing capabilities," said Joe Damore, Vice
President of Population Health Management Consulting at Premier. "As
they work to establish connections with providers outside the hospital
to eliminate duplicative services and improve care for patients, some
health systems are merging and acquiring other providers."

Specifically, the desire to better integrate care across the continuum
and manage patient care more efficiently and effectively was ranked as
the strongest driver of M&A activity. The increasing prevalence of
consumerism and the shift toward creating more points of access (retail
clinics, outpatient centers, etc.) was ranked as the second strongest
driver of M&A activity.

Additional drivers of M&A activity reported by health system C-suite
leaders:

  • Competitive positioning: The need to improve competitive
    positioning in markets where large physician groups are
    self-organizing clinically integrated networks (CINs).
  • Achieving success in value-based care: The need to succeed in
    new payment models that hold providers accountable for cost,
    utilization, quality and satisfaction beyond their direct control was
    a very strong driver behind M&A.
  • Building a CIN: The benefits of becoming a CIN in order to
    participate in contracts for advanced Alternative Payment Models
    (APMs).
  • Market consolidation: Increasing consolidation among suppliers,
    pharmacies, pharmacy benefit managers and other private sector
    entities.
  • Competitive scale: Considering M&A in order to match the scale
    and capabilities of insurance providers.
  • Financial pressures: Capital and balance sheet considerations.

"These insights prove that competition in healthcare is becoming much
more dynamic and robust. Given the need for total, end-to-end services,
clinical integration isn't just nice to have, it's essential for the
future," said Steve Valentine, Vice President of Strategy and Advisory
Consulting at Premier. "Insurers, retailers and physician groups have
rapidly created a new playing field with their own high-value networks
that provide a range of choices and a focus on integrated,
evidence-based care delivery. To stay abreast of this trend, health
systems are evolving to meet consumers where they want to be seen, while
enhancing the care experience. For some, M&A initiatives are being
pursued to spread the significant costs of this work, such as data
management and the infrastructure needed to achieve economies of scale."

To navigate this terrain, Premier's industry-leading
consultants
assist hospitals and health systems in evaluating and
pursuing transactions and/or acquisitions, as well as with strategic
growth planning and implementing economic payment models to align
providers. They recently released a
blueprint for providers forming CINs
, which recommends strategies
for optimizing performance as these networks expand throughout the
country to accept two-sided risk, create new care delivery arrangements
for larger patient populations, and participate in advanced APMs with
commercial, employer and government payers.

Survey Methodology

The survey was conducted online, with the results based off responses of
45 healthcare C-suite leaders (CEO, COO, CMO, CFO, CIO or CTIO) from
April 24 – May 19, 2018. Participants were selected and invited to join
the panel by Premier prior to survey administration.

About Premier Inc.

Premier Inc. (NASDAQ:PINC) is a leading healthcare improvement company,
uniting an alliance of approximately 3,900 U.S. hospitals and health
systems and approximately 150,000 other providers and organizations to
transform healthcare. With integrated data and analytics,
collaboratives, supply chain solutions, and consulting and other
services, Premier enables better care and outcomes at a lower cost.
Premier, a Malcolm Baldrige National Quality Award recipient, plays a
critical role in the rapidly evolving healthcare industry, collaborating
with members to co-develop long-term innovations that reinvent and
improve the way care is delivered to patients nationwide. Headquartered
in Charlotte, N.C., Premier is passionate about transforming American
healthcare. Please visit Premier's news and investor sites on www.premierinc.com.

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