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2015 Health Care Providers Industry Outlook
Interview with Mitchell Morris, MD
Mitch Morris, M.D., vice chairman and US/Global Health Care Providers leader, Deloitte Consulting LLP, weighs in on the evolution of value based care, aggressive industry consolidation and the role of the consumer.
Where do you see the opportunities for growth in your sector?
A significant opportunity in the evolution of the US health system from volume- to value-based care (VBC) is under way, spurred by widespread efforts to control/reduce costs, improve outcomes, and obtain more value for money spent. While this evolution impacts all health care stakeholders, VBC’s future depends most heavily on physicians, due to their integral role in health care delivery.
It has become more common to hear the phrase “get big or get out” as it relates to health care. The need for health systems to aggressively grow, often by rapid consolidation of providers, seems critical to survival. Significant regulatory changes, technological innovations, financial pressures and market dynamics are setting the stage for this type of activity. From 2009 through 2013, hospital deal volume increased 14 percent annually.1 Physicians are rapidly moving from private practice to an employed model and are being acquired by health systems and health plans. Both vertical consolidation (health systems acquiring physician practices, ambulatory centers, diagnostic centers, home care services, and durable medical equipment and wellness companies) and horizontal consolidation (hospitals acquiring other hospitals) has been increasing, despite heightened regulatory scrutiny.
1Irving Levin Associates, Inc., The Hospital Acquisition Report 2014, July 2014, pg. 6, 7, http://www.levinassociates.com/sites/default/files/abstracts/hosp_abstract.pdf, accessed September 9, 2014
What should businesses be mindful of as they plan for growth?
As patient rolls lengthen and networks narrow, providers will need to adapt to a realignment of market forces. Smaller players (e.g., single hospitals, independent physician groups) may be in danger of exclusion from narrow networks. In contrast, market-dominant players are likely to be immune from exclusion and can negotiate from a position of strength. Dominance comes largely from being big, and the need to be big is driving sector consolidation.
Consumers are realigning the health care market, as well, using their increased purchasing power and access to information to drive health care decisions and purchases. Providers will need to identify and employ innovative ways to satisfy the unmet needs of these consumers, who want transparency, value, and convenience. In this way they can help strengthen their consumer relationships to build future brand loyalty and market share.
What’s the next big thing? What markets do you see emerging in the sector?
VBC is certainly on the horizon for our sector, but will likely take multiple years to play out. In 2015, both physicians and health systems likely will be just dipping their toes in the water; no one has yet invested heavily in the necessary systems and processes. Deloitte’s 2014 Survey of US Physicians reveals, however, physicians know that the shift to VBC is inevitable; as it becomes a more significant aspect of their income, physicians likely will choose to work with health systems that fully and fairly enable an equitable approach to compensation. Partners, therefore, will need to move quickly to attract and support physicians by providing them with the resources they need; doing so should enhance collaboration and, potentially, lead to market advantages over time.
In addition to consolidation between hospitals, cross-sector convergence is expected to increase. Health systems are investing in health plan capabilities and we also see plans buying providers. This convergence is occurring with the expectation that those who can better manage the risk of health care delivery and further reduce administrative waste will prosper. They also hope to create greater brand awareness and “stickiness” among consumers in order to better compete in an era of narrow networks and consumer choice.
The role of the consumer will likely gain more relevance over the coming years. How hospitals and health systems fare in a realigned market depends, in large measure, on their place within the health care hierarchy. Centers of Excellence (e.g., health systems focusing on children, cancer, hearts, and joints) likely will continue to proliferate. However, where there is acknowledgement that community hospitals can’t deliver similar outcomes to COEs or large systems, consumers may elect to go elsewhere for treatment.
2015 Health Care Providers Outlook–Full Report
A rise in consumer OOP will affect health care providers and other stakeholders along the care continuum, but it is just one of numerous challenges to revenue and market share growth. Among the critical issues that providers face in 2015 are: addressing costs of providing care; transitioning to value-based care; adapting to a realigned market; achieving scale; managing regulatory and risk.
2015 Global Health Care Outlook
Across the globe, governments, health care delivery systems, insurers, and consumers are engaged in a persistent tug-of-war between competing priorities: meeting the increasing demand for health care services and reducing the rising cost of those services. This report examines the current issues impacting the global health care sector, provides a snapshot of activity in a number of geographic markets, and suggests considerations for stakeholders as they look ahead to 2015.