How Healthcare Business Leaders Can Navigate the Advent of the Payvider

There’s a convergence happening across the healthcare ecosystem. One that aims to improve outcomes for patients, even as it dramatically tilts the axis of the healthcare landscape for boards and CEOs. The advent of the payvider fundamentally shifts how payers, providers, and more broadly, healthcare businesses interact. In many instances, payviders may be interchangeable with or closely mimic value-based care business models, forcing healthcare executives to reimagine how traditional payer and provider models can collaborate to best serve patients, reduce healthcare spend, maximize outcomes and redistribute risk.

As alluring as this shift is, it is not without challenges for corporate leadership. Changes abound, including how M&A pipelines may be constructed, and the necessary skill sets of your board and C-suite. It’s a robust opportunity for investors and executives—understanding the new market dynamics and how to navigate them is critical for success.

The Opportunity

The new paradigm of payviders presents an opportunity for healthcare businesses to get outside of their core competencies. This meeting of two distinct ecosystems, payers and providers, presents endless possibilities for mergers and acquisitions with new rules of engagement. Deals and engagements are more open-ended now—they no longer have to be payer-to-payer or provider-to-provider. Whether providers are creating their own health plans, payers are seeking to acquire provider groups or joint ventures and partnerships are being formed between the two, payviders are emerging rapidly and in various forms that best align with business goals and market opportunity.

The opportunity across the payvider sector can be further expressed through the increase in deal volume and size. The 2018 merger between CVS Health and Aetna blurred the traditionally distinct lines between payers and pharmacies. At $69 Billion this mega-merger brought the payvider opportunity to the forefront. Since then, other payviders have headlined the industry news wires. In 2021, Humana acquired Kindred at Home and became the nation’s largest home health and hospice provider. In addition, Humana has acquired Partners in Primary Care, Family Physicians Group and OneHome, among others, solidifying itself as a frontrunner in the Payvider space. More recently, Walgreens Boots Alliance’s investments in VillageMD and CareCentrix and the expected acquisition of Change Healthcare by Optum/UnitedHealth Group have further exemplified the diversity of growth opportunities across the healthcare ecosystem.

While the structures may vary, all of the above deals validate the vast market opportunity for payviders. And with endless business models, M&A pathways, and execution styles in play, there are just as many opportunities for failure. However, executives and investors who successfully navigate these opportunities can emerge as industry leaders with first-mover advantages. Having the right leadership in the C-suite is necessary to steer the company, ensuring execution and maximizing long-term success.

Fortify Your C-Suite

So how do you use the growing momentum in the payvider space to your advantage? How might you steer your company towards an acquisition or merger that benefits both shareholders and consumers alike?

Healthcare businesses now have to start with the end in mind and fill their C-suites accordingly. The right C-suite executive who brings an integrated mindset can set your business up for success and make it attractive to many types of buyers. For example, say you are the CEO of a provider business who is getting more into the payer hemisphere or contemplating an exit strategy that includes payers. Does your board or C-Suite include individuals with experience in the payer realm? If not, you may be missing an opportunity to create even greater value for your shareholders.

A real-world example may shed some light on the subject. Consider a $1 billion hospice company that, on paper, looks extremely attractive to certain providers. A major caveat may be that all of the hospice company’s referrals traditionally come from hospitals and doctors—a vital pipeline for creating new opportunities for the whole business. What if the referral sources for this business were more balanced between payers and providers? What if the business included leaders among its board and C-Suite who had successfully scaled payer businesses? If executed well, these actions could serve to increase the types of options for exit and positively impact exit multiples.

By having your finger on the pulse of value-based healthcare and being thoughtful about the drivers behind this fast-evolving sector, boards and CEOs can harness tailwinds. With the right executive leaders in place, the stage can be set to reap the advantages of the growing payvider space.

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