top health industry issues of 2014

Top health industryissues of 2014

A new health economy takesshape

December 2013

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About this report

Highlights top issues for insurers,providers, employers, pharma,government and consumers.

HRI surveyed 1,000 US adults in Fall2013 on their perceptions, beliefs, andactions regarding healthcare.

HRI Knowledge Sharing • Top health industry issues of 2014

Slide 2

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2014 at a glance

As implementationof the ACAreaches its peak in2014, innovativecompanies areempoweringhealthcarecustomers withnew solutions andforcing the entireindustry to rethinkthe way it doesbusiness.

HRI Knowledge Sharing * Top health industry issues of 2014Slide 3

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Table of contents

# Top issue for 2014

1 Companies rethink roles in the new health economy

2 Technology is the new workforce multiplier

3 Fail fast, frequently, and frugally for true innovation

4 Social, mobile, analytics, and cloud come together

5 Employers explore private exchanges

6 Industry picks up the pace on price transparency

7 States pursue Medicaid managed long-term care

8 Corporate funds invade healthcare venture capital space

9 Twenty-first century tools refresh clinical trials

10 New rules combat counterfeit drugs

HRI Knowledge Sharing * Top health industry issues of 2014

Slide 4

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Companies rethink roles in the newhealth economy


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Companies rethink roles in the new healtheconomy

Knowing the facts:

Healthcare organizations ought to considerreinventing themselves through controlledexperimentation.

Some insurers, like EmblemHealth, are acquiringprovider groups.

Some provider systems, like Sutter Health, are nowentering the insurance business themselves.

Retail pharmacies are expanding their productand service offerings, and growing their retailclinics.


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Source: HRI Consumer Survey, PwC, 2013

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Implications:

Be aggressive in seeking out opportunities to expand footprint,but consider potential impacts on current business.

Take calculated risks, but have a “fail fast” mentality. Earlyproblem identification is key.

Consider building service businesses to insulate the core brand -like UnitedHealth has with Optum population health services.


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Technology is the new workforcemultiplier


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Technology is the new workforce multiplier

Knowing the facts:

Technology is key to meeting the demands of up to 25million newly insured patients and an agingpopulation.

Bon Secours St. Mary’s Hospital uses a predictiveanalytics to help curb readmissions.

Health Partners’ “Virtuwell” technology usesalgorithms to diagnose and customizetreatment plans for 40+ routine conditionsonline— for $40.


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Implications:

Use technology to extend care and build a workforce that is skilledat engaging digitally with patients.

Deploy people and technology closer to consumers to protectrevenues from the growing threat of alternative providers, such asretail clinics.

Draw talent from technology, retail and hospitality industriesto meet consumer expectations.

With revamped scope of practice laws, physician extenders andpharmacists can help the newly insured get convenient primary care.


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Fail fast, frequently, and frugally fortrue innovation


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Fail fast, frequently, and frugally for trueinnovation

Knowing the facts:

Pressure for innovation is being driven byfederal budget cuts, new penalties for hospital-acquired conditions, and increased competition fromnon-traditional players.

Only 27% of health executives said their companiesformally manage innovation, which is criticalfor achieving breakthrough results and creating newbusiness models.

Companies like GE, Medtronic and KaiserPermanente are embracing failure.


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Implications:

Introduce time and money constraints that forceexperimentation and failure.

Look to customers, partners and competitors to widen thefunnel of ideas.

Compete or partner with consumer electronics, telecom, andretail companies.

Engage finance teams and insurers early and often todetermine how to track progress and who will pay for innovations.


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Social, mobile, analytics, and cloudcome together


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Social, mobile, analytics, and cloud come together

Knowing the facts:

Empowered consumers are demanding bettercustomer service through integrated social, mobileanalytics and cloud technologies.

Only 18% of companies are maximizing the use ofsmartphone apps to integrate patient data intoclinician workflows and EHRs.

Companies like Aetna and Partners Healthcare aremaking strides in fusing these technologies todeliver value to their customers.


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Implications:

Promote mobile technologies that help manage patients’health outside of costly care settings.

Consumers may be more willing to pay for technologies tohelp manage their health as they assume more financial risk fortheir healthcare.

Consider paying for non-traditional ways to reduce medicalcosts. Some insurers are reimbursing chronic disease managementin the form of prescribed smartphone apps.


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Employers explore private exchanges


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Knowing the facts:

A distinction between private and public exchangesis that federal subsidies to assist qualifyingindividuals buy insurance will be limited to productsbought on the public exchanges.

Employers see private exchanges as a step toward“defined contribution” benefits.

High profile companies like Sears, IBM andWalgreens, among others, are making the switch.


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Implications:

Evaluate all options, from continuing to offer employees limitedhealth plan choices, to private exchanges.

Benefits brokers and consultants are embracing privateexchanges as a new and alternative business model.

Some health insurers and new entrants are serving as the generalmanagers of private exchanges of their own.

Providers may see more patients with less robust insurance asemployees and retirees opt for less expensive coverage.


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Industry picks up the pace on pricetransparency


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Industry picks up the pace on price transparency

Knowing the facts:

Previous efforts at transparency werehindered by lack of meaningful data, fear of losingcompetitive advantage, and slow participation fromkey sectors.

Businesses are striking exclusive arrangementswith providers for high-value care.

The federal government has opened its bookson what hospitals bill for relatively commontreatments.


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Implications:

Consider shunning non-disclosure agreements that preventnegotiated prices from being shared.

New health insurance exchanges will fuel the transparency push.

As prices are disclosed, providers will feel the pinch, as was seenin California when CalPERS capped reimbursement on hip and kneereplacements.


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States pursue Medicaid managed long-term care


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Knowing the facts:

The number of Americans age 85 and older isprojected to triple by 2050 to nearly 18 millionpeople.

Medicaid to helps pay for long-term care needs for 4million people, at an annual cost of more than $130billion.

In 2014, 26 states are projected to have a Medicaidlong-term care program, up from eight 10 years ago.


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Implications:

Increased Medicaid enrollment under ACA provides addedincentives for states to contain LTC spending. Federal waivers anddemonstration projects provide states with a conduit.

Consider the unique health needs of this patient group.

Focus on community based care. Savings will come from healthplans that can keep people from entering institutions.

Health plans need to expand their networks to include newpartners such as transportation vendors.


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Corporate funds invade healthcareventure capital space


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Corporate funds invade healthcare venturecapital space

Knowing the facts:

Corporate venture arm investment in life sceincescompanies increased from $108 million in 1993 to$2 billion in 2012.

Corporate venture firms invested more money inbiotechnology than any other sector exceptsoftware.

Traditional VC investment is declining. VCfirms raised 11 life sciences funds in 2012, down from28 in 2008.


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Implications:

Start-ups should seek corporate partners to benefit fromrich networks and robust marketing, managerial, and compliancecapabilities.

Corporations should nourish healthcare product pipelines withcorporate venture arms.

Traditional venture firms should partner withcorporations or their venture arms.


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Twenty-first century tools refreshclinical trials


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Twenty-first century tools refresh clinical trials

Knowing the facts:

Drugmakers must incorporate new research methodsto meet efficiency and cost pressures.

Adaptive designs account for 20% of clinical trialstoday, and are expected to grow.

Genentech partnered with 23andme to use geneticanalysis to quickly identify patients for a recentcancer study.

Some drugmakers are recruiting patients, securingelectronic consent, and shipping trial medications topatients’ homes, shrinking trial start-up times.


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Implications:

As new trial methods take shape, companies will increasingly needskilled personnel design and run studies.

Trial sponsors must make trial participation less taxing,more transparent, and convey better information abouttrial options, results, and how patients can participate.

Virtual models and simulations may identify potential risks,outcomes, and biomarkers that can diminish setbacks andlower costs.


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New rules combat counterfeit drugs


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Knowing the facts:

The Drug Quality and Security Act,establishes a national track and traceprogram targeting counterfeitmedicines, and preempts state laws.

Counterfeit Heparin was linked to 149American deaths between 2007-2008.

Starting in 2017, the industry must useunique serial numbers to track druglots and document each time the drugschange ownership.


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For more information


www.pwc.com/us/tophealthissues

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top health industry issues of 2014

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