September 5, 2017
UnitedHealth Group’s acquisition of The Advisory Board Company’s healthcare business for $1.6B is the largest deal of its size for insurers, injecting the organization with new data resources, professional services, and research expertise. IBM’s 2016, $2.6B acquisition of Truven was one of the first signals of the epic, increasing value of healthcare data. Healthcare organizations struggle to derive actionable insights that enable more effective care and customer service. These acquisitions signal the desperate shift to close those gaps, and as the industry moves further toward fee-for-value, the barrier between payers and providers will continue to blur, and the health tech landscape will continue to disrupt. Here’s our take:
- United moves towards owning the full healthcare value chain. This acquisition is a sign of the growing importance for payers to be tightly connected with providers. United’s Optum already has an impressive data offering and robust physician network, but this move will improve their hospital capabilities and launches them into relationships with an additional 2,000 providers. The Advisory Board’s existing relationships with C-Suite stakeholders helps Optum grow its reputation as a trustworthy insight provider to the hospital space and gains a valuable new revenue stream.
- Advisory Board clients gains crucial insights. Crimson, The Advisory Board’s market intelligence tool for providers, gains access to troves of payer claims data from United. This will help Crimson’s hospital customers develop a deeper understanding of their provider performance. Hospitals need to refine their clinician engagement models to succeed in value-based care, and a Crimson offering integrated into Optum’s platform will deliver deeper insights to expose differentiation on provider performance.
- United may struggle to integrate contrasting value systems. United and Optum’s for-profit model has worked well with a range of providers. But they may struggle to advise clients with conflicting cultures as an onslaught of mission-driven, not-for-profit, Academic Medical Center (AMC) clients come with the deal. While United will want to bring The Advisory Board’s deep insights and tools into Optum’s services, they must find a way to maintain the objectivity of the Advisory Board’s research unit. The research unit is what enabled much of the Advisory Board’s success in developing trusted best-practice care models, and successful integration of that unit is necessary to maintain value to their AMC customers.
What It Means: Healthcare Organizations Enter An Insights Arm’s Race
Healthcare organizations are desperate for insights. And after years of unmet expectations from their systems of record, they are beginning to look elsewhere to gain a competitive advantage. Whether through investments in new technology, or through M&A, healthcare organization can no longer afford to wait around for their EHRs or claims systems to provide the insights they need. United’s acquisition is an aggressive move to expand its data and analytics resources while moving towards controlling the healthcare value stream, and it will certainly not be the last of its kind.