PwC: 'New Health Economy' finding its feet, but challenges remain
- The U.S. healthcare industry can expect more stability in 2019 as FDA and CMS streamline regulation and healthcare investors strike deals with cash from last year's tax reform law, but challenges remain, PwC's 2019 health industry issues report says.
- Political wrangling over U.S. healthcare won't be resolved in 2019, leaving states to set policy directions. Organizations operating in more than one state may be hard pressed to develop comprehensive business strategies.
- Meanwhile, consumers want more choices in how they receive care, with 78% saying they would opt to receive hospital care at home if it cost less than an inpatient stay, according to a survey by PwC's Health Research Institute. More than half (54%) of consumers also said they would try an FDA-approved app or online tool to treat a medical condition, and 47% would be comfortable getting healthcare services from a big tech firm like Google or Microsoft.
Providers are also embracing digital treatments, with 77% saying they have suggested an app or digital program to a patient. Of those, 66% said the technology improved the patient's treatment.
PwC expects to see more digital therapeutics and connected devices in 2019, with a focus on "demonstrable outcomes for patients, providers, insurers and employers." New billing codes for remote patient monitoring and digital consultations — proposed by the American Medical Association for 2019 — could help speed provider uptake of connected health services, the report says.
Overall, PwC says the "New Health Economy is kicking into gear."
The coming year will also see companies targeting employees for new or additional training in artificial intelligence, robotic process automation and other technologies. Such technologies will be key to helping companies shift to telehealth-based 24/7 care models, as well as reducing manual entry and analysis tasks. Among provider leaders HRI surveyed, 45% said workforce capabilities are a major barrier to organizational change.
Depending on the business, tax reform could be a boon or a challenge in 2019, according to the report. For-profit companies are seeing lower tax rates on earnings and more favorable repatriation of foreign cash, yielding savings that can be put to competitive advantage. Nonprofit hospitals and other tax-exempt organizations could face more tax liability due to requirements around fringe benefits and elimination of an incentive for certain people to contribute to charitable groups.
The industry — especially drug and medical device companies — also faces uncertainties from tariffs and evolving trade pressures from foreign trading partners, including China, Mexico and Canada. Drug and device makers could face steeper prices for materials and chemicals, while hospitals could see costs of medical supplies rise and the potential for shortages, according to the report.
While the Affordable Care Act remains law, the Trump administration and GOP lawmakers have succeeded in weakening or altering a number of provisions. Those changes will create winners — e.g., healthy individuals and small employers seeking low-cost premiums — and losers, consumers who want to purchase comprehensive coverage in ACA exchanges. Also on the short end are providers and payers in red states that rely on Medicaid and the ACA to reduce charity care.
Also on the horizon, according to PwC:
- Healthcare will be pressed to develop a "value line" of products and services, akin to Southwest Airlines or Costco Wholesale, to meet the needs of the uninsured and underinsured while staying profitable.
- More investment in healthcare by private equity firms.
Last year saw 672 private equity deals, up from 200 in 2009. In the first nine months of this year, private equity firms completed 487 deals. "HRI expects this trend to accelerate in 2019, giving traditional healthcare companies opportunities to sell all or portions of noncore assets and double down on their core competencies," the report says.