Tech Finally Gets Serious About Healthcare
Expect more health system layoffs in 2018, as only those systems proficient at value-based care will succeed. As the Medicare population is growing at several times the rate of the commercially-insured population, most systems cannot afford to use commercial revenue to subsidize unprofitable Medicare patients. Entitlement reform is at the top of 2018 Congressional agenda. Thus, health systems will not survive without slashing cost across payer segments, and better meeting Medicare patients’ needs.
Managing Partner, Health & Life Sciences
Traditional Delivery Systems Continue to Face Economic Headwinds
Healthcare is hot – which is a good thing. But healthcare is also a complex, highly-regulated industry, offering a product most people only think of when they become sick, with incumbent players who have a lot to lose. Those innovators who approach the market with technology-first solutions are destined to fail. In 2018, good money will continue to chase bad ideas, perpetuating the froth of 2017.
The Funding Froth Continues
Healthcare Google searches that include the phrase “near me” are up 60x in the past 5 years, as most Americans now use Google to answer health-related questions. The convergence of retail, financing, and technology – like CVS-Aetna and Amazon-Whole Foods – now provides technology companies with new consumer data and touchpoints, ready capital, plenty of digital health companies ready for an exit opportunity, and traditional players in search of new partnerships. We’re nearing the inflection point.
Six healthcare predictions for 2018
Partner, Health & Life Sciences and Director of OWHIC Leaders Alliance
It’s the Year of the Consumer
The old game of blockbuster profits for drug companies, competition for prescription volume among drugstores, and PBMs being a black box will fade. Drug companies will test the waters in value-based pricing, preparing for a move away from fee-for-service pricing. Startups like Capsule (and potentially Amazon) will redefine the “neighborhood” pharmacy. And PBMs will play a meaningful role in managing the total cost of care, from the exam room to the mailbox.
The Pharma Business Model Starts to Change
With average deductibles for 2018 individual policies nearing $4,000, most consumers will pay for care themselves. As a result, they will shop for value and convenience, consider needs versus wants, and do their research. Meaningful touchpoints with consumers will earn their trust (and dollars!). With 83% of Americans living within 10 miles of a CVS and 50% of households subscribed to Amazon Prime, traditional healthcare providers will fight for brand loyalty.
We expect 2018 to be an active year for drug company M&A. Late 2017 saw announcements of many major deals, and there will likely be even more provider consolidation in 2018. The traditional structure of siloed insurance and care delivery simply does not meet consumers’ needs. Nonetheless, the industry will continue to make vertical integration and value chain a leading priority in the year ahead.
M&A Will Be the Order of the Day