Bottle of green pills


Life sciences & health care M&A update: Q1 2018

As the life sciences & health care (LSHC) sector continues to converge, insurance organizations are adapting to the changing health care landscape through M&A transactions focused on managing health care delivery costs, driving positive patient outcomes, and increasing company scale¹. This life sciences & health care M&A update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the life sciences & health care industry.

Integration trends driving M&A by payors

M&A for insurance organizations continued during Q1 2018, driven by key trends such as direct patient care.

Competitive pressures driving payor integration

  • Limited horizontal growth options: After the influx of newly insured customers generated by the Affordable Care Act, many insurers have had difficulty driving growth organically. Anti-trust concerns have pushed insurers to seek vertical acquisition opportunities in other sub-sectors of health care rather than within their vertical2.
  • Reimbursement challenges: Medicare Access and CHIP Reauthorization Act (MACRA) mandated reimbursement incentives have caused insurers to explore new service markets in order to control delivery. As a result, many insurers are looking toward health care providers to gain a cost advantage in the marketplace3.
  • Rising administrative and commercial costs: Economic pressures such as lower reimbursements, rising IT and regulatory compliance costs, and higher drug costs, have caused many insurers to vertically integrate to increase cost efficiency4.

Benefits of payor integration

  • Greater cross-selling opportunities: As insurers integrate across the LSHC delivery system, they can drive value creation through direct offerings including clinic and physician networks, ambulatory surgery centers, and pharmacy services, resulting in higher patient touch points and revenue generating opportunities5.
  • Manage health care delivery costs and patient outcomes: In response to the changing reimbursement environment and trends favoring value-based care, insurers can drive value through M&A that expands their range of more cost-effective, value-based healthcare delivery models6.
  • Increase scale: The increased scale insurers gain through M&A often carries greater negotiating power with large hospitals and drug companies. The added scale can force drug makers and hospitals to comply with lower rates to ensure that they are covered by the insurer7.

This newsletter is a periodic compilation of certain capital markets information. Information contained in this newsletter should not be construed as a recommendation to sell or a recommendation to buy any security. Any reference to or omission of any reference to any company in this newsletter shall not be construed as a recommendation to sell, buy or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. This newsletter is published solely for the general information of clients and friends of Deloitte Corporate Finance LLC. It does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known risks, uncertainties and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this newsletter. We and our affiliates and related entities, partners, principals, directors, and employees, including persons involved in the preparation or issuance of this newsletter, may from time to time have “long” and “short” positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein. The companies mentioned in this newsletter may be: (i) investment banking clients of Deloitte Corporate Finance LLC; or (ii) clients of Deloitte Financial Advisory Services LLP and its related entities. The decision to include any company for mention or discussion in this newsletter is wholly unrelated to any audit or other services that Deloitte Corporate Finance LLC may provide or to any audit services or any services that any of its affiliates or related entities may provide to such company. No part of this newsletter may be copied or duplicated in any form by any means, or redistributed without the prior written consent of Deloitte Corporate Finance LLC.


1 Laura Dyrda, “Healthcare transactions in the era of megamergers and vertical integration: Q&A with Jeff Swearingen,”Becker’s Hospital Review, February 12, 2018,, accessed April 4, 2018.

2 Alex Kaclik, “Hospitals pressured as insurers pursue more vertical integration,” Modern Healthcare, February 24, 2018,, accessed April 6, 2018; Charley Grant, “Anthem may win by sitting out wave of health insurance deals,” The Wall Street Journal, April 6, 2018,, accessed April 7, 2018.

3 Marc Scheinrock, “Provider consolidation: Competing in a market with new rules,” Modern Healthcare,, accessed April 5, 2018.

4 Dyrda, “Healthcare transactions in the era of megamergers and vertical integration.”

5 Beth Jones Sanborn, “Moody’s warns hospitals to beware of payer growth strategies on Margins, Bargaining Power,” Healthcare Finance, February 23, 2018,, accessed April 4, 2018.

6 “Healthcare payer mergers and acquisitions,” West Monroe Partners,, accessed April 5, 2018.

7 Kacklik, “Hospitals pressured as insurers pursue more vertical integration.”

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