Healthcare Partnerships: Recent Trends in Industry Dealmaking


Download the full version of this article

GettyImages-571977919_opt.jpgTHE VOLUME AND PACE of dealmaking among U.S. healthcare companies remains high, as the industry wrestles with transformative change due to a confluence of disruptive factors. These factors include: passage of the Affordable Care Act (ACA) in 2010 and subsequent repeal and/or replace efforts; an aging American population with increasingly complex and costly medical needs; and evolving market and consumer demands of the healthcare system. Health insurance companies are particularly exposed to the financial and strategic pressures levied by that industry-wide flux, and as a result have been at the forefront of striking new JVs and other deals as a means to survive in a leaner and more competitive post-ACA – and potentially post-BCRA – landscape.

The purpose of this note is to outline a set of prominent deal trends among U.S. health insurance companies, including commentary on the drivers of payor  deal activity and implications for future healthcare dealmaking.


While stakeholders up and down the healthcare value chain feel the impact of the new industry dynamics (Exhibit 1), the core business of U.S. health insurance companies is especially at risk, and that threat has prompted a volume and diversity of deals and partnerships. Though the ACA’s individual and employer mandates arguably give these companies a more manageable customer group, the sweeping legislation also includes tighter regulations – on community rating, the medical loss ratio, pre-existing conditions, and coverage for essential health benefits – that have negatively impacted insurance company margins. Recent legislative proposals to repeal the ACA – including the American Health Care Act (AHCA) and the Better Care Reconciliation Act (BCRA) – promise to relax many of those regulations, but ambiguity over the bills themselves and their likelihood of passing have only injected further uncertainty into the insurance market.

 Download the full pdf version of this insight including exhibits >>

Health plans face other challenges beyond the purely legislative. To effectively respond to the increasing consumerism of healthcare, they need to provide greater transparency into healthcare costs and quality, which requires a focus on data integration and systems interoperability, as well as develop “B2C”-style capabilities like digital and mobile applications. Moreover, traditional insurance companies are fending off threats of disintermediation in various forms as providers and employers demonstrate an increasing willingness to take on risk.

With all that in mind, it’s no wonder that health insurance companies nationwide are facing an identity crisis that has driven them to intense dealmaking. While a subset of these transactions are consolidation deals – aimed at achieving greater scale and efficiency within elements of the core business – the majority focus on building new capabilities to both shore up that core business while also accessing new and sometimes less regulated revenue streams.


The highly publicized M&A attempts by some of the country’s largest health insurance companies – Anthem with Cigna, and Aetna with Humana – are the best examples of consolidation style deals, with both sets of parties arguing that the transactions would generate value through greater operating efficiencies. While both have been blocked by the Department of Justice, the motivations driving the proposed mergers remain present in the market, and may manifest in other deals moving forward.

For instance, the regionally dispersed Blue Cross Blue Shield companies have historically turned to joint ventures and other forms of partnerships to tackle a similar question of scale, and have announced a handful of more recent partnerships with the same aim. In years and even decades past, BCBS plans have banded together through joint ventures like Prime Therapeutics and Availity to consolidate core steps in their value chains. Arguably, the success of those and other ventures has fueled more recent partnership ideation among the Blues, including the launch of Echo Health Ventures to consolidate the corporate development functions of Cambia Health Solutions and Blue Cross Blue Shield of North Carolina. The BCBS owners of Prime Therapeutics have also engaged in a collaborative partnership with Walgreens, with the aim of consolidating buying power for drug purchases (executed via Prime) and steering the plans’ member populations into narrowed retail pharmacy networks.


Perhaps recognizing the limitations of optimizing an increasingly challenged core business, many health insurance companies are also charting their transformation into diversified health services companies, leveraging joint ventures and other investment vehicles to build and access new capabilities – and revenue streams – adjacent to the traditional risk management business. Thus far, the first movers to diversify are primarily for-profit, publicly traded health insurance companies like Aetna, Anthem, and United, along with a subset of the most progressive Blue Cross Blue Shield plans like Florida Blue, Cambia, and Arizona Blue. That said, the experiences and success rates of this initial cohort are likely to inform how the next generation of plans elects to diversify and innovate.

The most visible example of these new business ventures are payor-provider partnerships, in which health insurance companies seek to align incentives and exert greater control over an adjacent swathe of the value chain. The exact forms of these payor-provider partnerships vary substantially from company to company: for example, Cigna has elected to double-down on contractual partnerships, as evidenced by its announcement of a national partnership with Fresenius Medical Care North America to better manage the care of kidney dialysis patients. Meanwhile, Aetna has actively stamped out a portfolio of equity joint ventures with leading regional health systems (including Inova, Allina, Banner, and Texas Health Resources). There are also a number of consortium-style payor-provider ventures, in which an anchor health plan like Anthem (in the case of the Vivity JV) or Harvard Pilgrim Healthcare (with Benevera Health) organizes a network of hospitals or health systems as shareholders and preferred providers of healthcare delivery services to the JV. Structural variety notwithstanding, these payor-provider partnerships are usually market- or population-specific, and are predicated on the value of better coordinating the payment for and delivery of healthcare services.

To continue reading this article, download the pdf version below. 

Download the full pdf version of this insight including exhibits >>

Note – in keeping with industry jargon, we use the terms “health insurance company,” “health plan,” and “payor” interchangeably in this article.