Despite increasing consumption of healthcare services, the immediate future may include decreasing or flat profit pools for many industry players. Many expect that roughly $70 billion and $100 billion in funding may leave the healthcare system over the next two years due to coverage shifts out of employer-sponsored insurance, product buy-downs, Medicaid rate pressures from states, and other economic headwinds. However, healthcare providers who develop new and innovative business models will have the opportunity to create disproportionate value in this environment. Despite continuing long-term challenges, these providers can flourish by adhering to core tenets of value-based care: greater alignment of risk-bearing incentives, better integration of care, and increased use of emerging technology.
Reimagine Care Delivery for Financial Success
Leading organizations in the healthcare industry proactively and fundamentally reshape how the industry operates and how care is delivered. Providers who want to be included in this group must reimagine care delivery beyond the hospital. In the recent past, ownership and integration of alternative sites of care has demonstrated greater financial returns. According to McKinsey * Company, the volume of transactions executed by health systems for outpatient assets increased by 31 percent, physician practices by 23 percent, and post-acute care assets by 13 percent between 2013 and 2018. During this same period, the volume of hospital-focused deals declined by 6 percent. This data suggests a critical opportunity for providers to pursue diversified business models that include a greater range of care delivery options. By offering diverse settings to receive care, these provider groups will be able to lower costs, enhance coordination, and improve the patient experience while maintaining or enhancing the quality of the services provided. That is a formula for financial success and increased market share.
Harnessing Technology: Healthcare Providers Unlock $250 Billion
Emerging technologies provide healthcare players with a new vision of care delivery. In the past few years, consumer adoption of telehealth has skyrocketed, from 11 percent of US consumers using telehealth in 2019 to over 50 percent in 2022. McKinsey & Company estimates that up to $250 billion of US healthcare spending could be virtualized, dwarfing the $3 billion pre-Covid. The healthcare system is trending toward an innovative tech-enabled care model that unlocks value by integrating digital and non-acute settings into a comprehensive, coordinated, and lower-cost offering. The opportunity for providers who successfully ride this technological wave is enormous.
Questions for Providers
In advance of the impending changes to the healthcare industry, provider executives can pose the following questions to their organizations and themselves:
- How does my business model need to adapt to create value in the future healthcare environment?
- How do I need to allocate resources to future-proof my business model?
- How do I need to redesign my organization to allow it to adapt to coming changes quickly?
The future of healthcare will require providers to embrace innovation and new perspectives. Those that desire to answer that call must reimagine the way healthcare is delivered.
The future of healthcare: Value creation through next-generation business models
Telehealth: A quarter-trillion-dollar post-COVID-19 reality?