February 26, 2021
Health systems falling further behind the industry in size
Even though signs point to a post-COVID spike in health system mergers, retailers, insurers, and other healthcare industry players already far exceed health system scale. Even the largest of the “mega health systems” pale in comparison to other healthcare companies up and down the value chain, as shown in the graphic below. And with the exception of pharma, these other industry players have seen revenues surge during the pandemic, while health system growth has stagnated. According to a recent report from Kaufman Hall, hospitals saw a three percent reduction in annual total gross revenue in 2020. The majority of the decrease stemmed from a six percent decline in outpatient revenue, as volumes plummeted during the pandemic. The largest companies listed here, including Walmart, Amazon, CVS, and UnitedHealth Group, continue to double down on vertical integration strategies, configuring an array of healthcare assets into platform businesses focused on delivering value to consumers. To remain relevant, health systems will need to increase their focus on this strategy as well, assembling the right capabilities for a marketplace driven by value, at a scale that enables rapid innovation and sustainability.