Post-Acute Care Providers Have Two Paths To Navigate Healthcare Reform

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Healthcare leaders need to develop a strategy to maximize capabilities, opportunities, says Wyatt Matas analysis

Post-acute providers are standing at a critical crossroads in terms of their business strategy. The pathway that a provider chooses will have serious ramifications for its fate and its future value.

Post-acute providers navigating the healthcare reform marketplace have two strategic options to survive, according to a new analysis released today by investment banking firm Wyatt Matas. Published as part of a panel discussion held at the Home Care 100 conference, the report outlines two strategic pathways – becoming a vendor of services or becoming a specialized solutions provider – that organizations can take to survive a changed healthcare landscape.

“Post-acute providers are standing at a critical crossroads in terms of their business strategy,” notes Wyatt Matas managing partner Chip Measells. “The pathway that a provider chooses will have serious ramifications for its fate and its future value.”

According to the analysis, providers who choose to become a vendor will essentially continue operating in a fee-for-service environment, understanding that their margins will shrink or disappear, and scale their businesses to accept much higher volumes. Choosing the vendor path means that providers will not only accept running high volume-low margin businesses, but they will also be challenged to see any value expansion for their companies, as low margin operations represent a lower rate of return for investors.

The report defines specialized solutions providers as those organizations that leverage their current competencies to take advantage of opportunities created in the health reform legislation. These providers either identified a current capability in their business that allows them to better control costs through complex care coordination solutions, or they have made a conscious decision to build that capability to solve a particular problem for the system. Although solutions providers will see significant growth of their valuations – in some cases up to 10 times that of a vendor provider – there are also significant challenges. Providers who choose this path must be flexible, sophisticated and innovative enough to adapt to the new environment as it unfolds – it is a rapidly changing, evolving marketplace, and the companies that succeed in this environment must remain limber.

In addition to outlining the strategic processes that a post-acute provider should follow to determine the best path forward, the report also lists the steps necessary to evaluate a company's capabilities and how best to maximize opportunities found in health reform legislation. Benefits and risks of each option are included, as well as an explanation of the issues every provider should consider.

About Wyatt Matas
Wyatt Matas is a healthcare investment banking firm providing strategic advice on mergers and acquisitions, capital raising and market intelligence to healthcare service providers, private equity groups and vendors to healthcare providers.

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