From Jack-of-All-Trades to Master of One

The dominant business strategy in all sectors of the healthcare industry over the last decade has been consolidation to grow market share. There are more dollars to compete for, and by getting bigger, companies hope to be able to compete better. That’s how a once-focused enterprise can become a jack-of-all-trades over the years.

Health plans have put this strategy into practice aggressively, growing their market share predominantly through acquisition. Aetna-Humana and Anthem-Cigna are just the most visible transactions, but not the only ones by far. Health plans also have grown their footprint by acquiring other assets, including health technology, data, and analytics companies. In fact, between 2007 and 2014, there were 86 health plan-related transactions, with 21 totaling more than $500 million, according to a presentation by Joshua Raskin during our 2015 ReviveHealth Summit. What were once highly focused insurance companies are now diversified health services companies with insurance as a small part of their offerings.

Healthcare providers have taken the same approach. Health systems have been purchasing hospitals and physician groups to grow their footprint in their markets. Many of them have also launched their own health plans and population health strategies. For a quick recap of 2015 healthcare M&A, check out Healthcare Finance’s running list.

By growing for the sake of size, and offering every service they can deploy, healthcare organizations are embracing a jack-of-all-trades strategy that considers every company a potential customer and tries to be all things to all people. In some sectors this works well – for example, hospitals need to offer multiple clinical services to meet the needs of the communities they serve – but in other sectors we see companies that are good at many things but not truly great at anything.

Bill Woodson couldn’t have said it better in a recent Fortune article, “In healthcare, bigger and better are not two words that go together…yet.” Against this background of consolidation, we are beginning to see what may be the first big strategy shift from a major publicly traded health services company. We’re seeing the power of focus emerge from one company’s new business strategy, which could be a glimpse of things to come for the broader healthcare industry.

Over the years MedAssets, a publicly traded company recently purchased for $2.7 billion by leading private equity firm Pamplona Capital Management, had become a vertically integrated health services company with many different component parts, including supply chain management, revenue cycle management, and a host of other businesses.

Pamplona’s purchase of MedAssets, and its subsequent spinoff of the company’s supply chain management business to Vizient, points the way to a new vision. By paring MedAssets down to its core market-leading service and integrating it with Precyse, a Pamplona-owned healthcare technology and education solutions company, Pamplona will create an independent, industry-leading company with highly specialized offerings that provides end-to-end solutions to mission-critical challenges for health systems. The new MedAssets will demonstrate the power of focus in its business strategy.


Behind Pamplona’s bid to build a revenue-cycle giant, Modern Healthcare
At a time when healthcare organizations are vying to become all things to all people, Pamplona Capital Management has deployed a different strategy. Its spinoff of MedAssets’ supply chain management business and integration of MedAssets’ revenue cycle management business with Precyse will help create a focused, independent company with industry-leading, highly specialized offerings that provide solutions to mission critical challenges for health systems.


With its strategic pivot, the combined MedAssets-Precyse enterprise will have an opportunity to establish itself as a leader in end-to-end revenue cycle services, technology, and education solutions. With its highly specialized and tech-enabled services, the new company will be strategically positioned to meet the needs of healthcare providers who increasingly require clinically integrated revenue cycle solutions.

This is a huge departure from the jack-of-all-trades approach many health services companies take, one that instead focuses on combining a highly focused set of trades based on the changing needs of the core customer. And with the operational landscape of healthcare providers becoming increasingly complex, it may prove to be the right strategic approach.

Disclosure: ReviveHealth serves as agency of record for Pamplona Capital Management’s healthcare private equity Investments.

February 23, 2016
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