EDITOR’S NOTE: Looking at the regulatory, technological, medical and market changes converging to re-invent healthcare, the thought leaders at Manatt identified 10 megatrends that will impact how industry leaders need to manage their organizations in the decade ahead. The article below summarizes the top-ten forces that are re-shaping the healthcare landscape—and re-defining how all the players, from payers to providers to life sciences companies, must adapt to drive growth. To download the full paper on healthcare industry megatrends, click here.

The American healthcare system is undergoing massive change. From transformational policies to disruptive technologies to groundbreaking medical advances, powerful forces are coming together to re-create the healthcare environment. To guide their organizations through a new market landscape, industry leaders need to understand and prepare for 10 critical megatrends that will shape the next 10 years in healthcare. An informed and effective strategy demands considering the ramifications of these game-changing developments—and ensuring organizations are ready to seize the opportunities and overcome the hurdles of a radically different healthcare model.

Megatrend #1: Consumers Take Charge

Diego Miralles, MD, Head of Janssen Healthcare Innovation, points out that “Empowering and trusting consumers with their own information could unleash huge efficiencies in healthcare.” As patients have both more information about health issues and better tools for monitoring their own behaviors and health status, they are gaining more control over their care. Consider that in the U.S .alone more than 75% of healthcare costs result from chronic diseases—many of which are preventable with the right behaviors—and the importance of consumers taking charge of their own health is clear. Sub-trends supporting “consumers in charge” include:

  • The birth of insurance Marketplaces, resulting in the “Insured Consumer.” Healthcare Marketplaces will result in new shoppers comparing plans and prices. At the same time, high-deductible and cost-sharing plans will lead to a new awareness of care costs—and new options, such as limited provider networks, for lowering expenses.
  • The “information everywhere” phenomenon, leading to the “Engaged Consumer.” Transparency is the word of the decade. From the prices of drugs and hospitals to the clinical facts about conditions to the scoop on doctors and treatments shared on social media, any information we want will be readily available.
  • The explosion in self-care, creating the “Responsible Consumer.” Consumers will be increasingly responsible for managing their own health. As a result, we’ll see fast growth in home-based self-care, as well as self-monitoring technologies. Initiatives such as “pay for performance” and “patient-centered medical home” will further spur the self-care trends.
  • Health communities, supporting the “Active Consumer.” Community action will be the new foundation for building better consumer behaviors, including improved diet and exercise habits. From employers to social services to public health to providers, organizations and individuals will join together to encourage healthy lifestyles and reduce the costs of chronic, preventable diseases.

Megatrend #2: More with Less: From Volume to Value

Doing more with less is an over-arching theme of our revamped healthcare system. Across the board, stakeholders will need to support higher quality, better outcomes and greater patient satisfaction —all while reducing costs. “Value” will be a central focus, as we seek to improve the results we achieve for every dollar we spend. Six “sub-trends” will support the megatrend of delivering the best performance with the least expense:

  • The demise of fee for service. As we move from a volume-based to a value-based system, payers—whether private insurers or states--will transition to more innovative payment mechanisms, including bundling agreements, risk sharing and capitation arrangements.
  • A changing care delivery environment. The focus on cost effectiveness will drive the growth of integrated delivery systems, such as ACOs (Accountable Care Organizations). In addition, it will lead to reforms in medical education and medical malpractice.
  • A reduction in physician incomes. Primary care will once more be primary, as referral systems are improved, specialty use becomes more targeted and specialty services are re-priced. Lower physician incomes also will result in rising hospital employment, generating more practice acquisitions.
  • The emergence of risk-based healthcare. Providers and suppliers will need to become risk-sharing organizations, while consumers will have to accept more cost sharing, particularly for specialty products.
  • The expanding role of non-physician providers. With a shortage of 45,000 primary care physicians predicted by 2025, non-physician providers, such as physician assistants, nurse practitioners and pharmacists, will step in to fill the gap. Models will move to expanded team-based care, including lower-cost providers playing larger clinical roles.
  • The increased importance of quality metrics. Reimbursement will be based on quality metrics, with sophisticated tools weeding out providers falling below quality and efficiency standards.

Megatrend #3: Healthcare Everywhere

Driven by the rise of new technologies, experts anticipate that, over the next decade, as much as 50% of healthcare will move from hospitals and clinics to homes and communities. From smartphones to social media to sensors, new tools are empowering consumers with more information and control over their healthcare decisions—and physicians with more options for where and how they treat their patients. Sub-trends driving the “healthcare everywhere” phenomenon are:

  • The rise of ubiquitous connectivity. From interoperable electronic health records to cloud-based computing and data storage, continuous innovation from private sector startups will keep us connected and informed, everywhere we go.
  • The power of smartphones. Smartphone technology has put health information—and applications—into everyone’s hands. With what Eric Dishman of Intel Corporation calls “the medicalization of consumer devices,” smartphones are monitoring vital signs, measuring calories and helping consumer manage their own health in every possible setting.
  • The new right care, right place, right time approach. Care delivery will transition from acute care settings to local clinics and retail environments. A new system of care will mean treatment by the lowest-cost providers, including pharmacists, nurse practitioners and physician assistants.

Megatrend #4: Mega Health Systems

Experts are predicting that 20% of the nation’s hospitals will seek to merge in the next five to seven years, driven by increasing pressures to lower costs, increase efficiency and improve quality. Hospitals say that mergers allow them to focus more resources on care, technology and patient services. Others argue they lead to decreased competition and higher prices. A study last year from the Robert Wood Johnson Foundation shows that hospitals merging in already consolidated markets can send prices soaring by more than 20%. Sub-trends behind the rise of the mega health system include:

  • The consolidation of healthcare. Mergers and acquisitions across and within stakeholder groups—including payers, hospitals and health systems, pharmaceutical suppliers and other healthcare entities –will create mega-healthcare entities managed by mega-sized organizations. As mega-systems grow in market power, the day of the independent practitioners and stand-alone hospital will come to an end.
  • The “take off” of systems re-engineering. Clinical systems will embrace population health, with a tidal wave of provider-sponsored health plans, payer/provider joint ventures and direct contracts with employers and employer coalitions. Proactive medical models will mean reaching out to patients not meeting clinical guidelines, focusing on prevention and supporting patient-centered care and self- management. Advanced analytics and predictive modeling will help identify and treat high-risk populations. Provider compensation will increasingly be tied to performance.
  • The optimization of information technology. Paper will be abandoned, as providers seek to meet federal standards. As they integrate new electronic tools, providers will struggle to realize their full value and protect themselves from the risks of poor implementation.
  • The growth of a multi-billion dollar HIT and services industry for risk management. Lack of expertise in population health management will give birth to a multi-billion dollar HIT and services industry that will provide an infrastructure of care coordination and analytics.
  • The increase in limited networks. Marketplaces will move toward narrow networks to contain costs, testing consumer acceptance of limited options.
  • The vulnerable will present key challenges. In an environment where the ability to change will determine success—and the funds to support that change are essential to implementation—the safety net of not-for-profit healthcare, as well as small, community hospitals, will struggle to remain intact. The declining role of these providers will leave gaps in both charity care and rural access.

Megatrend #5: The Centrality of States as Payers, Public Health Agents and Innovators

States will play an increasingly important role as payers, public health agents and innovators. According to the National Academy of State Health Policy, “Much of the failure or success of federal health reform will depend on the ability of states to implement its key provisions.” Key sub-trends include:

  • The transformation of Medicaid into a proactive provider. An aging population, federal and state budget deficits and the potential addition of 16 million lives to cover are among the trends coming together to drive major Medicaid reform.
  • The convergence of Medicaid, Medicare, Marketplaces and other private insurance. Expanding Medicaid enrollment, increasing reliance on Medicare, growing numbers of dual eligibles and the emerging Marketplaces are leading to a closer alignment between public and private insurance.
  • The coming together of medical care, behavioral care, public health interventions and social determinants of health. Healthcare stakeholders at every level are seeing the importance of taking an integrated approach to medical, behavioral, public health and social issues.
  • Extending managed care to high-cost beneficiaries. The aged, blind and disabled will move into managed care plans and be included in integrated care initiatives. This will demand a shift in how we deliver care to populations with functional vs. medical needs. It also will drive new partnerships between acute and long-term care (LTC) providers, traditional and non-traditional providers and LTC providers and plans.
  • Increasing public health intervention and emerging rapid virus dissemination. Public health officials are increasingly committed to addressing both environmental and behavioral health issues—such as smoking, nutrition and fitness. Success would mean not just improving health but containing costs. In addition, the proliferation of cross-border viruses is creating a greater need for coordinated action.

Megatrend #6: Value through Data

According to IBM, healthcare organizations are leveraging big data technology to get more complete patient insights, supporting care coordination and outcomes-based reimbursement models, population health management, and patient engagement and outreach. Successfully harnessing big data helps achieve three critical objectives for healthcare transformation-- build sustainable healthcare systems, collaborate to improve care and outcomes, and increase access to healthcare. Important sub-trends include:

  • The dynamic use of information to improve decision making. Creating and analyzing huge data sets will support quality improvement and planning processes…more effective population health management…and greater opportunities for innovation.
  • The increase in data-driven discovery, evaluation and innovation for drugs and medical devices. Integrating and modeling clinical, molecular and demographic data sets will drive research and development for pharmaceutical and medical device companies…create new linkages between pharmaceutical companies, medical device manufacturers and providers with clinical data…identify safety concerns…and assess cost effectiveness.
  • The facilitation of clinical trials with big data. Data-driven patient enrollment will facilitate and accelerate clinical research trials and results.

Megatrend #7: Predict, Prevent, Personalize

Traditional medicine focuses on the symptoms of a patient’s illness. In contrast, personalized medicine directly examines and analyzes the genetic basis of a disease and stratifies the total population into subsets, each with common but unique disease characteristics. According to Bio-Medicine, the benefits of this approach are accuracy, efficacy, safety and speed.

Over the past decade, biomedical research has founded a series of new, predictive sciences that share the suffix -omics (i.e., genomics, cytomics, proteomics). These are opening new approaches to drug development, as well as the potential for significantly more effective diagnosis, therapeutics and patient care. Major sub-trends include:

  • The transformational impact of genomics, epigenetics and predictive diagnostics. Genomics may change the face of healthcare through personalized medicine, genetic manipulation and predictive diagnostics. As genome mapping becomes more prevalent, it will raise awareness around the importance of nutrition, lifestyle and preventive medicine. It also will cause new concerns about privacy issues—and new questions around how the statistical risk of a condition affects a person’s treatment and coverage.
  • The power of artificial intelligence-based clinical support. Evidence-based clinical support will be embedded in smart applications, become part of the clinical workflow and be incorporated into consumer self-management.
  • The shift toward personalized medicine. The next few years will bring continued development of cybernetics (i.e., artificial vision), cloning and regenerative medicine,
  • The continued emergence of evidence-based clinical support. Evidence-based clinical support will be built into the care delivery workflow, standardizing and supporting the provider decision process. New systems will ensure the timely integration of innovative drugs and procedures into clinical decision support tools.

Megatrend #8: Employers Recalibrate

In early July, the Obama administration decided to postpone until 2015 the ACA’s mandate that employers with 50 or more employees provide a minimum level of coverage or face potential penalties. Experts believe that the delay will have negligible effects as most employers offer coverage today and will continue to do so. As the mandate goes into effect, however, employers will face changes both in the ways they provide coverage and the administrative burden of complying with the reporting requirements of the new regulations. The sub-trends to watch for include:

  • The potential decline and reinvention of employer-based coverage. Employers will continue to drop coverage for retirees and shift them to the new Marketplaces. Many also will change how they provide support to current employees, offering vouchers with which staff members can purchase their own coverage.
  • The growing administrative complexity. Employers still purchasing health coverage for employees will struggle with greater administrative complexity and tighter regulations.
  • The rise of employer coalitions. Employers will pool their purchasing power to contract on a value basis with select providers.

Megatrend #9: The New Aging

Today, 13% of the U.S. population—40 million people—are 65 or older. By 2030, the over-65 segment will soar to 72 million or 19% of the total population. The 85+ population will be 6.6 million by 2020. Over the next 20 years, 74 million baby boomers will retire. All of these stats point to a healthcare system that will need to cope with a dramatically growing group of older Americans—and find innovative ways to deal with the medical and functional needs of an aging population. Major sub-trends are:

  • The new aging modalities and the increasing prevalence of chronic diseases. From self-care to connected care to monitoring devices, the focus will be on helping people stay in their homes longer. In addition, it will be more important than ever both to manage chronic disease and to integrate behavioral health methods to promote better choices.
  • The skyrocketing demand for caregivers. The need for family caregivers will increase, along with the impact on their health and well-being.
  • The new Medicare. State and federal governments will need to think outside the box. The shift to managed care will continue, along with the need to focus on behavioral health initiatives and transition to care management models.
  • The preparations for end of life. The expansion of palliative, hospice and related services will lead to new approaches for helping people face the end of their lives with dignity.

Megatrend #10: Healthcare Goes Global

From patent and IP issues to access hurdles to pricing complexities, pharmaceutical companies will face an array of challenges as they seek to bring their products to emerging markets. While large populations and a growing middle class in many emerging countries pose new opportunities, they come with the need to understand different regulatory, cultural and payment structures.

In addition, while we are used to people from other countries coming to the U.S. for treatment, new trends in medical tourism have many Americans traveling abroad for less costly care. Globalization is opening up new options but also presenting new risks. Critical sub-trends include:

  • Complex market access issues. Many emerging markets have complex access issues and regulatory structures. The pharmaceutical industry will need to create clear strategies for selecting the most productive markets for their product lines and achieving access in those target countries. They also will face pressure to make branded products available and affordable in low-income nations, if generics are not yet an option.
  • The expanding middle-income opportunity. Countries, such as Brazil, have an expanding middle class willing to pay cash for specialty products, making them attractive markets for pharmaceutical manufacturers. Some of these markets also are starting to see pharmacy benefit management emerge.
  • The globalization of delivery. With globalization, many Americans may seek to save money by getting tested, diagnosed and cared for through medical tourism—or remotely via telemedicine. The top-five categories for medical tourism are cosmetic surgery, dentistry, cardiovascular, orthopedics and cancer.

Conclusions

From health reform to scientific advances to technological innovation, a range of forces are converging to cause a seismic shift in the way we deliver and pay for healthcare. Over the next decade, our health system will be re-invented. The goals of the radical changes are to improve quality, care and outcomes while keeping costs in check. Will we be effective? The thought leaders at Manatt will continue to monitor our progress and keep you up to date.