Part 2: Predicting Healthcare Trends of 2019

Part 2: Predicting Healthcare Trends of 2019

In the last blog we looked at 2019 healthcare trends in IT. As exciting and pervasive as the convergence of healthcare and IT are, there are a number of other trends that will shape the healthcare industry in 2019 and beyond. We’ll take a closer look at some of them here.

Healthcare and High Cost Are Inextricably Linked

Talking about healthcare also means talking about cost - rising cost that is. Every year it gets more expensive to treat patients and for patients to receive healthcare, even if the services they receive remain the same. The last few years saw annual cost increases of around 5 to 6% - unsustainably high in the long run but nevertheless a vast improvement over the low double digit or high single digit increases we saw 10 years ago.

For 2019, PWC predicts a cost increase of around 6%. The question is: what drives these increases and what is in the pipeline that might lower cost or at least keep cost increases at bay?

Systemic Issues that Increase Healthcare Cost

The percentage the nation spends on healthcare has steadily increased since the 1960s and is now at 18%, roughly triple of what it was then. The problem, therefore, is nothing new and a number of long-term cost drivers contribute to the increases.

Among those healthcare cost drivers are increasingly innovative and therefore expensive drugs, specifically biologics, which can cost hundreds of thousands of dollars per year. Similarly, drugs treating orphan diseases are very expensive and since the passage of the Orphan Drug Act in 1983 the number of orphan drugs has dramatically increased.

Demographics are an issue, just like in other industrialized nations. Aging Baby Boomers require more healthcare services and increases in life expectancy stretches out the period during which people often need intense medical services.

Unsurprisingly, the third major contributor is lifestyle: our increasingly sedentary lifestyle – both for adults and children – leads to expensive, long-term diseases such as diabetes, heart disease and obesity.

Current Healthcare Cost Drivers

On top of those long-term cost drivers come more current drivers, according to PWC. Among them are:

1. More choices for consumers of healthcare: healthcare is now available in many more settings than before, from grocery store retail clinics to video chats with healthcare providers. These choices are believed to ultimately reduce the cost of healthcare delivery by shifting patients from expensive settings like emergency rooms to cheaper ones, e.g. retail health clinics. The hope is, also, that increased availability and therefore easier access of healthcare will help detect and treat diseases before they become expensive chronic or acute conditions. However, in the short term more choices come at a higher price: easier access means increased access and with that higher cost.

2. Big mergers are often touted as a way to save cost by eliminating redundancies as well as leveraging synergies and economies of scale. While this might be true, mega mergers tend to be expensive in the short term: there is the cost of integrating the companies and less competition drives prices in the market up. The last few years have seen a number of mega-mergers in the healthcare space from the CVS – Aetna deal to the Cigna -Express Scripts and UnitedHealthCare - Optum deals.

3. Similar to mergers, physician consolidation also drives up healthcare cost. Over the last few years we have seen the number of physicians who opted to give up their independent practices in favor of employment by hospitals, health systems and medical groups, increase. While in 2012 26% of physicians were employed, the number rose to 42% in 2016, according to a study by the Physicians Advocacy Institute. Physician consolidation should, eventually, lead to cost savings due to scale and increased efficiency. In the near term, however, the price tag is higher because the consolidated practices often adopt the higher fee schedules of the acquiring company.

4. Another trend that will affect healthcare cost in 2019 and beyond is increasing momentum around value-based care. The focus on outcomes is not new in the US and other developed countries but is expected to increase. Frost & Sullivan estimates that roughly one third of healthcare payments are already tied to value and outcome-based care. According to a national survey of 120 payers, value-based care has already succeeded in reducing cost by 5.6% and improving care quality by 77%, a trend that should continue in 2019.

Curbing healthcare cost remains a formidable challenge for the foreseeable future with the systemic issues not helping. Actual savings from mergers and physician consolidations will begin to materialize and with value-based care continuing, healthcare cost might start to finally approach more sustainable levels.

Why H1 is the Best Place to Work in Healthcare in NYC

Why H1 is the Best Place to Work in Healthcare in NYC

Part 1: Predicting Healthcare Trends of 2019

Part 1: Predicting Healthcare Trends of 2019

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