CVS’s $69 billion acquisition of Aetna is the latest in a series of activities by major players in the health care space seeking greater levels of vertical integration.

Long-standing players in the health care market, along with a growing number of new market entrants – including tech behemoths and aggressive startups – have driven a flurry of activity in the health care space in 2018. And the pace of this activity has only increased in the last six months of the year.

Existing health care companies like CVS and Aetna, and Walgreens and Humana seek to gain scale and control of more of the health care continuum. At the same time, market leaders like Amazon, Apple and Google are expanding their health care footprints.

All of this activity is being closely watched by hospitals and health systems, who are seeking to address the same challenges and remove friction from the health care experience. Despite operating in complex environments with high levels of regulatory burden, hospitals and health systems across the country are looking to markedly improve health care by transforming themselves.

The American Hospital Association Center for Health Innovation recently released a report outlining the motivations of new market entrants and vertical integrators. The report’s findings were derived from a panel of experts in the field, including a number of AHA members and representatives from leading health care advisory firms. The report identifies 12 cultural characteristics of hospitals and health systems most likely to succeed in an environment of uncertainty and transformative change:

  1. Be comfortable and competent in blurring the lines between two or more traditional health care business sectors.
  2. Be willing to partner with nontraditional health care business sectors to pursue innovative solutions that solve a critical job to be done.
  3. Be comfortable and competent running two operating models—one based on volume and the other based value—at the same time.
  4. Be willing to move quickly to make the necessary changes and inno¬vations that lead to better patient-focused outcomes.
  5. Be willing to believe what the data is saying about what patients want instead of relying on instinct and experience alone.
  6. Be willing to base strategic business decisions on what patients and communities need rather than what financial needs dictate.
  7. Be willing to accept that change will be difficult but necessary to succeed in the new health care economy overflowing with new market entrants and vertical integrators.
  8. Be willing to take risks if they present genuine opportunities to more effectively serve patients and communities.
  9. Be comfortable with revenues and margins coming from new and different places instead of inpatient volume.
  10. Be willing to re-examine traditional objects of capital investments and redeploy capital in different ways.
  11. Be willing to embrace new digital health technologies and create a fully informed, pa¬tient-centered digital health strategy.
  12. Be willing to build a sustainable innovation infrastructure that’s well-supported by budget, talent and processes.

It’s organizations with these characteristics that are best positioned to capitalize on the great opportunity that presents itself to us today: to advance health and the health care experience. To download this report and view more from our Market Insights series, visit

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