Medical cost containment acquisition for strategic buyer

Health Business Group has assisted many clients in developing their growth strategies, often tapping into new products and services in existing customer segments and assisting clients in expanding into new customer segments.   An outsourced health care services client was interested in expanding into a new market segment by providing medical cost containment solutions and asked Health Business Group to evaluate the market and perform due diligence on a potential acquisition. 

There are different approaches to medical cost containment, many of which rely upon claims analysis.   From a clinical perspective, this can be used for intelligent benefit plan design and risk stratification for disease management and wellness initiatives, screening for medical necessity/appropriateness, and other uses.  From a financial perspective, this analysis can be used for claims re-pricing, claims arbitration/negotiation, and fraud and abuse identification. 

In our assessment, we found that the market was slowly evolving from best-of-breed to one-stop-shop as a way to simplify the supply chain and minimize integration points of failure. The rate of evolution was constrained by the ability of the vendors to offer broad, fully-featured solutions.

We evaluated the needs of the self-funded employer market and how they were being met by TPAs and service/technology providers. We conducted primary and secondary research, which included speaking with TPAs, employers, brokers, and peers of the client.  We further segmented the target customer markets, determining the size, degree of outsourcing, level of satisfaction, and the target company’s competitive positioning in each segment.

Ultimately, we determined that the target was well-positioned for future growth and would be a complement to our client’s strategy.  The acquisition was subsequently completed.