PA Consulting Group launches future of healthcare report; reveals steps organisations should take to compete and thrive in new market
US healthcare payers and providers have been desperately trying, but failing, to overcome the challenges thrown up by disruption in the sector in the past decade. Of the $2.8 trillion the US spends on healthcare each year, 30 percent or $840 billion may be wasted.
To help healthcare organisations embrace the industry transformation and tackle the new challenges they face head on, PA Consulting Group has launched its first ever future of healthcare report – Healthcare 2018: Creating Opportunity Amid Disruption – which outlines five major disruptors, and establishes four key foundations for organisations to succeed based on industry-leading experience.
The report takes a deep look at how the industry is transforming, revealing that healthcare delivery and payment as we know them are dead. Reports of declining revenues, missing quarterly earnings and mergers and acquisitions are signs that some of the largest companies are struggling to adapt to the changing landscape.
“The rate of change in our world today is undeniably different and faster than ever before,” said Bret Schroeder, healthcare expert, PA Consulting Group. “Volatility, complexity and uncertainty have become a permanent feature of today’s healthcare environment. This is the new norm. If healthcare organisations are to survive in this new environment they must respond and act now.”
A STATISTICAL LOOK AT HOW HEALTHCARE IS TRANSFORMING
- Healthcare costs are set to reach $5 trillion by 2022. (Centers of Medicare and Medicaid Services),
- More than one-third of US adults are using the internet to diagnose medical conditions. (Pewinternet.org)
- The number of patients accessing their providers’ electronic health records nearly doubled between 2011 and 2014, and at least 85 percent are using this service once per year. (National Partnership for Women & Families)
- 70 percent of healthcare organisations worldwide will invest in consumer-facing mobile applications, wearables, remote health monitoring and virtual care by 2018. (IDC states)
- By 2030, one in five Americans will be over the age of 65. Combine this with the fact that there are over 117 million citizens suffering from chronic disease, which means there will be a significant shortage of between 46,000 and 90,000 physicians by 2025. (IHS Inc.)
Now, fueled by the confluence of five disruptors – the situation is set to deteriorate further. The disruption brought on by these five forces will be the most significant healthcare has experienced to date. They are:
Economic - Companies are continuing to struggle with declining revenues and increasing costs. Reduced reimbursements and the shift to pay-for-performance are impacting revenue. Increased medical costs and high existing cost structures are diminishing performance, with no clear end in sight.
Regulatory - Regulation is still a challenge for executives. Not only is deciphering new and changing regulations tricky, but complying with these regulations continues to burden companies’ existing resources.
Digital - The healthcare world is increasingly digitising and patients have greater access to information. In order to stay relevant, companies need to adapt quickly.
Socio demographic - The population is aging and a greater number of citizens are faced with chronic conditions. The rate and volume of elderly and chronically ill people are putting additional pressure on providers and payers alike.
Consumer behaviour - Consumers have been empowered by their experiences in other industries and have adopted a “We’re not going take it” attitude to their healthcare. This has circled back in the form of regulation and economics as some payments are now tied to experience.
FOUR FOUNDATIONS FOR SUCCESS
PA Consulting Group’s experience working with clients on a wide variety of healthcare challenges spurred the development of four recommendations that will help companies take a more pragmatic and disciplined approach to survive–and thrive–in the disruptive environment. They are:
Be visionary and bold; rethink your business model - As payment models shift from “fee-for-service” to “fee-for-value”, existing business models will have to change. Aggressively evaluating new products and new markets will be more important than ever as current revenues shift.
Scrutinize existing cost structure - Insurers (both profit and not-for-profit) have large and inefficient legacy organisations. In future, processes, procurement, technology and organisational layers will all need to be tuned for efficiency, and incentives will need to be aligned to key performance metrics. A full view of costs in all areas from the bottom up is critical in understanding where opportunities are, as well as where there are gaps in accurate cost capture and reporting.
Move to an “innovation-as-usual” mindset - Healthcare companies that are surviving the current storm have one thing in common–they are innovating. Not all innovation will succeed, but having a disciplined, portfolio-based approach is critical as innovation is the key gateway to new customers and revenue streams.
Execute flawlessly - As the industry shifts with more customer-centric competitors entering the market, tolerance for missed deadlines and delivering program capabilities will not be acceptable. Once a business strategy is decided on, healthcare organisations must go to great lengths to effectively deliver the product on time and within budget. Companies will need to have a program management office that can deliver and, senior managers must set clear guidelines and hold lower management accountable for implementation and results.
Schroeder added, “The four foundations of success are critical if healthcare organisations are to succeed in this new environment. However, these are not achievable overnight nor are they unrealistic or to be ignored. As the thriving organisations cited throughout this report show, success is certainly achievable–but it will mean challenging convention.”
This report is the first in a series of annual insight projects that address the challenges facing healthcare companies. Drawing on PA’s global experience, these reports will examine issues within the industry including security, cost containment and integration, and detail best practice for how organisations can overcome these challenges.
To download the full report which provides detailed information on what healthcare organisations can and should be doing to succeed in this competitive landscape, please click here.