Welcome to 2018. As we enter another new year, let’s take a look at how the healthcare ecosystem might advance. What will be the most powerful drivers of change this year, and how will they impact health care, stakeholders, and consumers? I won’t pretend I have any better lens into the future than you do. My father was an economist and practiced for more than 40 years. He would admit he was going to be wrong in his predictions, but always hoped he would at least be directionally correct.
There is one overriding and powerful force that continues to shape the healthcare market and the overall economic environment in the U.S.—the privilege of having access to affordable, high-quality healthcare. Healthcare costs have been a concern for at least thirty years, but the acute issue for us today is affordability.
In 2016, healthcare comprised 17.9% of our gross domestic product (GDP). While we know it can’t exceed 100% of the GDP, no one knows exactly how much is too much, and the cost is hitting many households in dramatic ways. Households finance 28.1% of the nation’s healthcare bill—just two tenths of a point less than the federal government. In December, the US. .Centers for Medicare and Medicaid Services (CMS) reported that overall health costs increased an average of 4.3% in 2016 from the prior year—more than double the consumer price index (2.1%).
GenX is most concerned about health costs
A growing number of people are feeling less secure about their ability to finance future healthcare costs. According to Deloitte’s 2016 Survey of Health Care Consumers, this discomfort appears to be hitting Generation X the hardest. More than 70% of people born between 1965 and 1980 say they are not comfortable with their ability to pay for healthcare costs. While seniors tend to view themselves as being financially comfortable in general, only 49% of seniors say they have the resources to feel comfortable with future healthcare expenses.
Bill Copeland
The financial pressure on consumers will likely put greater pressure on healthcare financing and on care delivery stakeholders. This is likely to prompt constrained margins and maybe even reductions in profitability among the players across the healthcare ecosystem. As information about healthcare costs and outcomes become more transparent and available, many savvy consumers will base more of their decisions on value.
Four trends poised to shape health care in 2018
The financiers of healthcare—government, households, and employers—have different levers to pull when it comes to costs. As a result, we will likely continue to see a variety of approaches in the way spending and purchasing are managed. While each of these purchasers abide by different rules, policies, regulations, and operating models, they are all focused on the same thing: costs and outcomes.
This leads me to believe that the following trends will be highly evident in 2018:
- Convergence of healthcare sectors:This will likely occur through mergers, partnerships, affiliations, and collaborations as many stakeholders seek to eliminate redundancies, improve fixed-asset efficiencies, match costs to patient clinical needs more effectively, build scale economies, and align incentives across industry sectors.
- Acceleration of value-based payment models: A fundamental shift in the clinical model should gain momentum this year. However, this typically isn’t happening because alternative payment models are required under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Instead, this change will likely occur because taking on risk in exchange for potentially higher payments breaks the constraints of fee-for-service. For providers, the transition to value-based payment offers the potential for greater margins, and it also can greatly enhance their ability to outperform peers as outcome data becomes publicly available.
- Greater emphasis on consumers: The consumer-centric health care imperative will likely continue to take shape this year. Even as health plans and providers become more closely aligned on patient outcomes, they likely won’t experience the full benefits until patients are fully engaged and enlightened.
- More reliance on emerging technology: Enabling technology is a lever that can help health care stakeholders leapfrog the performance boundaries of our current system. Technology that reduces health care costs while expanding access is likely to see rapid adoption this year. These emerging technologies include data analytics, cognitive analysis, artificial intelligence, interoperability, and collaboration tools. Tapping into technology can be essential for the health care system to progress and transform. As an aside, I encourage you to check out our January 17 Dbriefs webcast where we’ll be talking about technology trends for the year ahead and their potential to transform life sciences and health care. This will be the first in a series of webcasts, following our January 17 webcast we’ll be deep diving into the specific technology trends and their applications to the industry. Hope you are able to join us!
To put these four trends in context, I offer this from Microsoft Corp. co-founder Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.” I don’t have to be an economist to be directionally correct about healthcare costs, and these four trends can offer an opportunity to break the existing constraints that may will allow us to provide greater value at lower costs.
Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte Consulting LLP where this blog originally appeared.
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