For Patient Engagement solutions looking for an exit, 2023 could be their year

For Patient Engagement solutions looking for an exit, 2023 could be their year

After a fraught 2022 that saw a significant slowdown in acquisitions from 2021’s volume and valuation highs, product companies view M&A as a potential strategy in 2023 to enhance their value proposition and achieve efficiencies of scale. Deal volume may rebound moderately from a slump in the latter half of 2022 while lower valuations are likely to result in reduced average deal size. Kx took the opportunity to validate industry signals at events in Q4 2022, gauging deal sentiment through conversations and a survey.

Amidst the record-setting number of attendees from across the healthcare ecosystem at HLTH Conference 2022, health tech leaders were abuzz with 2023 growth plans, key concerns, and areas for excitement. Kx’s Digital Health team met with dozens of solution company C-levels, corporate development, and strategy leaders who expressed one common sentiment with surprising frequency: “we are ready to do a deal, or two.”

To further gauge the Mergers & Acquisitions sentiment expressed by leaders on the show floor, in the networking lounges, and even at the puppy park, Kx surveyed over 350 HLTH attendees. The results confirmed Kx’s ingoing hypothesis: technology providers are cautiously optimistic on M&A for 2023 due to both sell- and buy-side dynamics. On the buy side, some vendors prefer inorganic growth while others view acquisition as a quicker route to enhanced offerings and improved efficiencies. On the sell side, cash constraints and the possibility of a down-round may motivate start-ups to consider an M&A exit.

Digital health leaders interpret M&A in 2023 as a potentially attractive option to augment their offerings and address the market forces that are top-of-mind concerns to their customers, including staffing shortages & provider budget shortfalls, inflation & the looming economic downturn, and increased emphasis on patient experience and engagement. Customer requirements continue to grow, demanding tangible proof of efficacy, demonstrable ROI soon after implementation, and options for meeting patient/member expectations for convenient consumer experiences. The market continues to prefer multifunctional platform options – ideally those that perform as well as individual point solutions. Vendors see the need to position themselves as an “enterprise, end-to-end” solution that reduces the burden on their customer to stitch together disparate systems & data sources and engage with their patients/members.

Vendors with aggressive product roadmaps may find that they prefer a buy-and-build approach vs. de novo build to bulk out their offerings. This is especially true for revenue-generating acquisitions with at least some penetration in the market and further expansion potential.

More specific Kx Survey findings include:

  • Over 83% of respondents anticipate their organization will complete at least one acquisition this year.
  • Of survey respondents whose organizations closed at least one deal in 2022, two-thirds anticipate no change in the size of deals while the remainder foresee a slight decrease in size
  • Regardless of their company’s size, respondents indicated three main acquisition drivers:
    1. Nearly two-thirds indicated growth via acquisition is their organization’s preferred growth strategy;
    2. 20% indicated that more favorable valuations enhance the attractiveness of pursuing an acquisition;
    3. The increase in companies open to acquisition was the key motivator for the remaining 15% of respondents

Trends in Health IT, Digital Health mergers and acquisition for 20232

  • Respondents view acquisitions in 2023 as a tactical opportunity to execute within their core markets or expand into a closely adjacent market rather than expanding into new markets
  • While many more organizations expressed intent to complete deals in 2023 vs. 2022, respondents expect the same amount of or a slight decrease in competition
  • One area where significant competition may arise is Patient Engagement/Digital Front Door solutions
    • 80% of respondents that intend to complete an acquisition in 2023 indicate Patient Engagement and/or Digital Front Door companies as their top priority
    • Solutions in Screening, Monitoring, and Diagnostics ranked first for the remaining respondents

The heightened appeal of patient engagement/digital front door capabilities can be attributed to the coalescence of several macro-environmental factors, including:

  • Labor shortages necessitating a shift to self-service workflows such as online scheduling;
  • Consumer demand for personalized digital interactions prompting the implementation of algorithm and “AI”- driven chatbots and automated messaging
  • CMS patient/member experience requirements encouraging streamlined intake, claims, and complaints processing tools like “digital front doors”
  • Reimbursement & cost savings opportunities from Remote Patient Monitoring & Hospital at Home programs impelling user-friendly mobile apps integrated with EHRs

When compared to H2 2022 deal volume, it appears the 2023 digital health market is poised for some M&A uplift. Companies intend to face the current headwinds by focusing on their core markets and driving tangible value via enhanced capabilities for end users. Time will tell whether anticipated M&A activity materializes in 2023 as digital solutions continue to evolve and their impacts drive positive clinical, financial, operational, and experiential outcomes. Either way, Kx is already looking forward to the discussions about it at the 2023 HLTH Conference puppy park.


How Kx Can Help

Is your organization considering M&A to enhance your value proposition to customers? Is the decision made and you’re ready to move forward with landscape mapping, target identification, and due diligence?  Kx’s Digital Health team supports clients throughout the process with tailored solutions informed by dialogue and reinforced by data.

Want to learn more? Contact Rachael England via e-mail (  or LinkedIn.


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Digital Priorities of the C-Suite

Digital Priorities of the C-Suite

How Vertical Solution Providers Can Support Health System Competitiveness  

Since the onset of COVID-19, health system C-Suites’ view of “digital” has rapidly evolved from latest buzzword to cause for concern, then call to action, and ultimately exciting, but existential, imperative. Health system leaders recognize the myriad of new entrants vying to “own” the patient relationship as serious competition. As evaluations continue of the direct-to- consumer, virtual-first options, and omni-channel capabilities offered by big-box stores, leaders are comparing their own internal capabilities and options for next steps. With this emergence of digitally enabled competitive threats, Kx wanted to better understand the prevailing approach(es) of health systems to vendor evaluation and solutioning. We recently conducted in-depth interviews with CIOs, CMIOs, and Digital Strategy executives from some of the nation’s most progressive enterprises. Compilation of our findings revealed a nearly unanimous perception of opportunities and boundaries regarding horizontal vs. vertical options in healthcare digital technology.

Environmental Shifts

Almost overnight, the pandemic shifted consumers’ ideas about digital experience in healthcare. Consumers now expect convenient, personalized, tech enabled care, and providers must adapt their processes, adopt new tools, and transform their mindset to more closely mirror other industries that focus on the consumer. With nearly $30B in U.S. venture capital funding introduced in 20211, upstarts, larger solution providers, and Big Tech (e.g., Microsoft, Google, Amazon, Apple) are all well-capitalized and rapidly mobilizing to introduce consumer-friendly tools and capture market share.   The proliferation of both vertical solutions and horizontal (Big Tech) offerings is prompting health system buyers to commit to a vision of their digital transformation end-state and whom they will partner with along the way. There’s broad acknowledgment of the imperative to pursue digital strategies that progress the quality and efficiency of care and strengthen their connection with the patient beyond and in between each episode of care. Nothing less than convenient, consumer-friendly experiences will suffice in our digitally saturated post-pandemic world. Given these requirements – which match so closely to some of Big Tech’s core competencies – Big Tech seems like the obvious answer. However, despite the variety of foundational capabilities that Big Tech brings to the health system enterprise, we uncovered a tech partnership “line in the sand” in the minds of health system leaders.  

Necessity of Specificity   

Apart from Microsoft (due to the Nuance acquisition), our conversations found that health systems leaders generally preferred vertical vendors over horizontal technology providers for impact areas such as the EHR, clinical workflows and patient engagement. The lack of explicit enterprise strategy from Big Tech in healthcare is a significant detractor, characterized by one health system leader as “[the company] floating around like a rudderless ship, with no commitment, support, or strategy around healthcare.” Other reasons include the overall lack of expertise, the perception of healthcare opportunities as potentially lower-margin than other industries, and likely pushback from EHRs to interact with Big Tech solutions.  Even so, horizonal tech players remain a contender in the areas where they lead across industries. The key drivers of health systems considering a Big Tech purchase or co-development partnership include the following:   

  • Proven and well-regarded cloud infrastructure and data migration capabilities from Amazon and Microsoft that are trusted in regulated industries (Google’s solution in this space is negatively perceived across the provider market) 
  • Stated interest and initial positive results from Amazon, Microsoft, and Google to create the necessary data ecosystems for developing and running analytics, and deriving actionable insights to support the delivery of efficient, high-quality care  
  • Broad success in the consumer wearables market (Apple’s Watch, Google’s FitBit) and the acknowledgement that patient-generated data will become more relevant and useful over time   

Implications for Vertical Players  

This conclusion from health system enterprise decision makers – that vertical solution vendors are better positioned than horizontal tech players to support their digital transformation initiatives – is good news for Digital Health companies but comes with caveats.  An academic medical center CMIO stated “there are plenty of interesting startups that offer more intricate solutions, but they may go out of business and leave us without a solution.”  Despite the risk factors, digital health solutions are instrumental, highly visible components of health systems’ enterprise strategies and are typically considered on a different plane than Big Tech.  To capitalize on the positives and mitigate some of those negative considerations, digital health companies can understand and prepare for expectations that health systems have of them, including:  

  • Configuration Flexibility: Flexibility and willingness to configure the solution to meet unique health system needs  
  • Security Commitment: Readily available security documentation and a willingness to meet enterprise-specific security and compliance requirements 
  • Clear ROI Story: A competitive pricing model and the ability to speak to both near-term and downstream ROI implications of the product (including being able to “sell” this storyline to a variety of health system stakeholders – clinical, IT, Finance, etc.) 
  • Understanding of Competitive Implications: A thoughtful analysis of the health system’s competitive landscape and perceived advantages gained via user adoption of the solution 
  • Credible Implementation Plan: A thorough implementation plan that forecasts a reasonable timeline, strategies for end-user change management support, and EHR integration plans  
  • Team-wide Subject Matter Expertise: Consistent exhibition of deep expertise in the subject matter addressed by the solution – credentialing and reinforcing trust in the solution’s capabilities throughout the sales, implementation, and stabilization cycles 
  • Ability to Measure Impact: A plan to show impact through easily digestible, configurable, self-service reports accessible upon go-live 

Our interviews concluded that as long as vertical vendors continue satisfying the true needs of health systems, health system leaders will continue preferring to partner with vertical solution vendors. Keeping pace with morphing buzzwords and emerging external threats are daily challenges faced by every health system C-Suite. By reliably performing as expected, vertical solution vendors will maintain their preferred status with health systems, simplify aspects of each organization’s digital transformation journey, and support the overall goals of the health system business.  

How Kx Can Help You  

Kx Advisors’ Digital Health and Health IT team partners with digital health solutions companies so they can outshine the competition, delight their customers and end users, and maximize their growth potential. Ready to start winning against your competition and achieving your growth goals? Contact Rachael at to learn more. 

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