2016 Global health care sector outlook

Macro issues

The way forward for the global health care sector is clear: stakeholders must look for ways to decrease costs, given the consensus that the current upward trajectory is unsustainable and three macro issues are framing the cost discussion:

Sector defragmentation - The health care sector is moving from its traditional, fragmented approach to clinical and financial operations to one focused on consolidation, convergence, and connectivity.

Population health – Stakeholders are seeking to address the cost curve with innovative approaches to managing the health of a population and health and social care systems will need to join forces, and the public and private sectors will have to transition financial incentives from the “break-fix” model of care to prevention, predictive maintenance, and outcome optimization.

Volume to value – Due to concerns about rising costs and wide variations in performance and quality indicators, stakeholders are pushing for a transition to outcome- or value-based care (VBC) payment models, which align physician and hospital bonuses and penalties with cost, quality, and outcomes measures.

Demographics

Aging population

Health quality is not keeping pace with longevity, nor is the development of age-appropriate health policies and services.

Chronic and communicable diseases

The proliferation of chronic diseases is having serious repercussions in both developed and emerging countries. Meanwhile, the fight against communicable diseases continues, especially in developing countries. Also, population access to health care clinicians, facilities and treatments varies widely around the globe – from simplistic as infrastructure basics, to complex as issues with cost containment.

Access

Today’s consumers are also more informed, involved in, and financially responsible for their health care decisions and therefore have higher expectations for the services and products they receive.

Financial

Government spending

Health care is one of the largest industries in the world. However, challenging economic conditions are making it difficult for governments in many of the world’s regions to devote the necessary financial resources needed to handle expanding health care demands—especially when they are coupled with ever-rising costs.

Health care reform

To resolve this challenge, many countries are taking a broad approach to cost containment, including:

• Implementing comprehensive health care reform
• Exploring alternative financial models
  
• Looking at public-private partnerships to address these issues
  

Drug price controls

Amid the reform-driven shift to outcomes focused, value-based payment and reimbursement systems, numerous countries are instituting reform-driven drug price controls. Drug manufacturers will continue to be pressured to justify the cost of their products⁴² based on, among other things, the product’s comparative effectiveness against similar offerings.

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Operational

Providers may need to shift their operating model to one that addresses variations in care and that aligns clinicians around consumer/patient-centered care. They may also need to consider diversifying the care settings and types of services they offer to solidify control over patients as they move through the health system.

Waste

Stakeholders are continually trying to identify ways to drive waste out of the system. At the same time, cost pressures, changing staffing models, technology advancements, and consumer preferences are creating a business case for “everywhere care" through alternative care delivery and operational models such as retail clinics, home care, telehealth, and medical tourism. But as their populations and health care needs grow, countries all over the world struggle to match the demand for trained medical professionals.

Mergers and acquisitions

Spurred by market competition, reform-driven financial challenges, and persistent regulatory pressures, increasing numbers of health care providers, particularly in the United States, are using M&A, partnerships, and alliances to consolidate hospitals and are forming large health systems that offer economies of scale and broader service reach.

Innovation

Medical advancements

Medical innovation comes with a high price tag. Widespread adoption of personalized/precision care, shifting clinical offerings from mass generalization to mass customization, will likely be made possible through public and private investments in offerings that integrate drugs and devices with low-cost diagnostics, disease management programs, and clinical decision support. Personalizing care based on genetics and individuals’ health information also has the potential to generate new therapies that may radically improve outcomes.

Digital connected health

The demand for value and an increasingly competitive environment are prompting health care organizations to find new and more effective ways to improve care delivery including telehealth, mHealth, electronic patient records, wearables, and social media – which are growing rapidly in use and influence and, thus, hold considerable implications for the health care sector.

Data and analytics

As health systems continue to face shrinking margins, tightening budgets, and evolving payment models, the combination of data and analytics is also being touted as a possible missing key to unlock new sources of value.

Regulatory compliance

Patient and product safety

Much of health care’s regulatory focus is on patient and drug safety. Regulatory agencies continue to exert pressure on pharma, biotech, and medtech companies, with increasing focus on:

• Off-label marketing
• Failures to disclose safety risks
  
• Concerns about the clinical trial process
  

Cybersecurity

Health improvements are also being accompanied by pervasive, persistent cyber risks that can leave organizations vulnerable to debilitating business losses and reputational damage. Tracking and analyzing business relationships is an important part of minimizing fraud and abuse that may result from questionable relationships and improper influence.