According to PwC’s Health Research Institute (HRI), 2016 will be a year of firsts for players within healthcare as the industry adapts to the main forces driving the New Health Economy: the rise of consumerism, the focus on value, downward pressure on costs, technological innovation and the impact of new entrants.
In its annual report, “Top Health Industry Issues for 2016,” released today, PwC’s HRI highlights the top 10 forces that are expected to have the most impact on the industry in the coming year and looks back at how trends from the past decade have persisted or evolved. Leveraging results from a survey of 1,000 US consumers and interviews with health industry leaders, 10 issues stand out in the year ahead across three key themes:
Innovation:More and more, health technology in the palm of your hands will mean more than just monitoring – it will also mean diagnosis and treatment. Sixty percent of consumers are willing to have a video visit with a physician through their mobile device, while 58 percent of clinicians would rather provide a portion of care virtually. Additionally, new high-tech databases will allow industry players to analyze data from many sources in novel ways, finally unlocking new insights. Shouldering higher deductibles and rising out-of-pocket expenses, consumers expect to begin to manage their health spending like they manage their retirement savings.
Access to care:In 2016, the US health sector is expected to see a new class of products – biosimilars – introduced to the market, bringing potential savings with them. The New Year may also bring renewed attention to behavioral health, long relegated to the industry’s back burner. However, the issue will be access. More than half of US counties have no practicing mental health clinicians. Additionally, with mounting budget pressures, care may move to the community as health systems pursue lower-cost care settings more aggressively and creatively than before.
Troubleshooting issues in the New Health Economy: With 2016 being a presidential election year, industry issues such as drug pricing will be in the spotlight. Additionally, as insurers, consumers and purchasers are demanding better value, providers may be scrambling to unlock the medical cost mystery and calculate the true cost of services. 2016 should also be a year in which the industry is dramatically reshaped by consolidation, as the insurance market should inch closer to being dominated by three major players. Finally, with the rise of health technology comes the rise of cybersecurity Nearly 40 percent of consumers would abandon or hesitate using a health organization if it is hacked. More than 50 percent of consumers would avoid, or be wary of using, a connected medical device if a data breach was reported.
“After more than a decade of identifying the top health industry trends, we are finally starting to see the creation of a New Health Economy – a health system that is more connected, transparent and patient-centric,” said Kelly Barnes, PwC’s US health industries leader. “2016 will be marked by how well the sector balances greater demand with rising costs, and handles trends such as industry consolidation and the increase of consumer technology in healthcare. But there is much more work that needs to be done in forging new ways of receiving, paying for and delivering care, and it will be businesses that prioritize addressing consumer needs and increasing value that should succeed.”
Additional details on the top 10 business issues that HRI identified include:
PwC’s Health Research Institute (HRI) projects U.S. medical inflation will dip to 6.5 percent in 2016, capping a 10-year trend of slowing employer medical cost-trend growth in the employer-sponsored market. In the latest installment of its annual report Medical Cost Trend: Behind the Numbers, HRI identifies three factors that are expected to reduce the medical growth rate in 2016:
The Affordable Care Act’s looming “Cadillac tax” on high-priced plans which is accelerating cost-shifting from employers to employees to reduce costs;
Greater adoption of “virtual care” technology that can be more efficient and convenient than traditional medical care; and
New health advisers helping to steer consumers to more efficient healthcare.
Despite the year-over-year slowdown, HRI also reported that medical inflation still outpaces general inflation, underscoring the challenges ahead for the health industry. In fact, Behind the Numbers identified two factors that will likely exert inflationary pressure on health spending in the year ahead:
New specialty drugs entering the market in 2015 and 2016 will continue to push health spending growth upward; and
Major cyber-security breaches are forcing health companies to step up investments to guard personal health data, adding to the overall cost of delivering care.
“While the health industry has improved in efficiency over the past decade, the slowing employer medical cost growth is because of the increased role of savvy health consumers facing higher cost-sharing responsibilities and more complex decisions,” said Kelly Barnes, PwC’s U.S. health industries leader. “This will continue to impact the New Health Economy in the coming years.”
This is the reason that the Affordable Care Act is not going away, despite the continuing conversations about its demise: In its first five years, the Affordable Care Act (ACA) has already left an indelible mark on the $2.9 trillion health sector. By energizing five fundamental shifts, the law has accelerated the rise of a new health economy predicated on value, according to a new report from PwC’s Health Research Institute (HRI), “Five Trends to Watch as the Affordable Care Act Turns Five.”
“Although the ACA will continue to face crosswinds, it has already had a profound impact on the healthcare business,” said Kelly Barnes, PwC’s U.S. health industries leader. “The ACA has catalyzed major changes in an industry historically slow to change. Our report provides a roadmap that outlines what industry leaders should be doing as these shifts continue over the next five years.”
“Most striking, the five trends have led to the creation of more than 90 new companies that have entered the sector since 2010,” said Ceci Connolly, managing director of PwC’s Health Research Institute. “The ACA has opened gates for savvy investors and startups to take a piece of the $2.9 trillion industry.”
According to the report, although much groundwork was laid in advance of the law’s enactment, health industry business models and imperatives will likely never be the same post-ACA. These five key trends fueled by the ACA have ignited sector-wide transformation:
Risk Shift: Raising the stakes for all healthcare players. The ACA added force to new payment models that reward outcomes and penalize poor performance such as high rates of readmission and hospital-acquired conditions.
Primary care: Back to basics. Experimentation in new payment models and expansion of insurance coverage are making primary care once again the critical touch point.
New entrants: Innovators in the New Health Economy. New entrants are rushing into the market to meet the demand for lower-cost, consumer-oriented care options in the post-ACA era. More than 90 new companies have been created since 2010, according to HRI analysis.
Health insurance: From wholesale to retail. Rapid enrollment in the ACA’s public exchanges has demonstrated the potential of retail-style health insurance and spawned renewed interest in private exchanges.
States: Reform’s pivotal stage. States have emerged as key players in the reconfigured healthcare landscape, as the ACA gave states notable discretion in how the law could be implemented.
The report includes a web-based interactive innovation scorecard to assess medtech companies based on leading innovation practices. Only 14 percent of medtech executives say that they formally manage innovation activities, which is essential to creating new services and business models.
Just 17 percent of med tech executives believe their companies are innovation pioneers. The PwC’s Health Research Institute report outlines how medtech companies need to expand their approaches to innovation outside traditional R&D to remain competitive.
“Historically, medtech innovation has relied on incremental improvement,” said Christopher Wasden, managing director and global healthcare innovation leader, PwC. “But ‘innovation’ needs redefining for an environment that rewards value – measured in affordable patient outcomes and customer satisfaction – over volume. True innovators learn from failure – fast, frequent, frugal failure. Medtech leaders need to change their business models, their corporate DNA, to embrace lean innovation beyond their core operations.”