Although provider concentration has been growing more rapidly than payer concentration, on an absolute basis payer concentration continues to be higher than provider concentration in most markets. This variation reflects the gross … Consumers, employers, and the government continue to see the financial burden of healthcare grow faster than their incomes or revenues—a long-standing gap unlikely to change soon. The growth in profit pools from government lines of business reflects structural changes in these markets (e.g., Medicaid expansion) as well as continued recognition at the federal and state level of the potential of managed care to improve the performance and efficiency of these programs. Our research suggests that the manufacturers’ profit pool is likely to continue to grow. Future of Healthcare by McKinsey with ClickMedix. Article Understanding the impact of unmet social needs on consumer health and healthcare. 2017 Employer Health Benefits Survey. The authors would like to thank Elina Onitskansky, Rob May, Nikhil Seshan, Manuel Valverde, and Rasagya Kabra for their contributions to this article. During a crisis, do we have established protocols for allowing a nurse in the hospital so that they can be trained to be an ICU [intensive-care-unit] nurse and capable of helping with ventilators, for example? 11. Unleash their potential. Sozdatelev A et al. Innovate to create unambiguous value for the stakeholders who consume and pay for healthcare—consumers, employers, and governments. Many healthcare executives believe that, … Direct-to-employer business models that leverage technology to construct high-efficiency networks (e.g., advanced value analytics), combined with changes in provider market structure that make the creation of local networks easier, are one major factor. That is a bit of a wake-up call to say we need to stress-test our system. Defined as employers with fewer than 50 full-time employees (including full-time equivalent employees). Build an agile organization, one that has both a robust, stable axis of core functions that deliver—efficiently, effectively, and repeatedly—in a manner fully compliant with all regulations, and a dynamic axis capable of rapid innovation and business model change. As shown in Exhibit 2, two of the four segments within healthcare that experienced  profit pool growth above 10% between 2012 and 2016 were service vendors. Investment in the creation of new clinical pathways that improve care delivery and outcomes, new business models with significantly lower costs, and a reorientation from delivery-centric models to consumer-centric ones should receive priority over traditional approaches. McKinsey white paper. These forces will require commercial health insurers to continue to innovate and drive efficiency to maintain and grow their share of industry profit pools. McKinsey Analysis: Up to $250B of Healthcare Could Be Virtualized. McKinsey analysis based on Capital IQ and Pitchbook data. Trends disrupting pharmacy value pools and potential implications for the value chain. Hear perspectives on navigating the changing healthcare environment, embracing opportunities and disruptions, and preparing for the future of healthcare across the globe. If you would like information about this content we will be happy to work with you. The traditional boundaries of the life sciences and health care industry are dissolving as exponential innovation propels the future of health forward. A transcript of their remarks follows below. Shubham Singhal: This has been a wake-up call that, in the healthcare system, we don’t have the resilient plan that we need to have in place—whether it was workforce, whether it was supplies, whether it was having enough beds, having enough ventilators, et cetera. McKinsey Quarterly. McKinsey Payer Financial Database based on National Association of Insurance Commissioners filings. 2020 marks the point of no return for telemedicine. Between 2012 and 2016, total over-all healthcare industry profit pools (earnings before interest, taxes, depreciation, and amortization, or EBITDA) grew at a faster rate than the combined EBITDA of the top 1,000 US companies (Exhibit 1). 10. Become active managers of your portfolio of assets. Global management consulting company McKinsey and Company’s report, “The Great Acceleration In Healthcare: Six Trends to Heed,” identifies six trends in healthcare that are accelerating due to the global COVID-19 pandemic. People create and sustain change. One particular piece that I would point to is the use of volunteers, who are not necessarily people who’ve been through extensive training over many years in order to be qualified to care for people, but actually people with far less training who have been able to play a very important, a very supportive role in looking after some of the more vulnerable members of society. Multimedia Insights on mental health from a 2019 McKinsey Consumer survey. McKinsey on Healthcare. What the COVID-19 crisis has done is accelerated that. Please click "Accept" to help us improve its usefulness with additional cookies. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. offering health benefits dropped 24%;4 Exhibit 6 Scale also offers additional benefits such as broader data sets, ability to build skill-based capabilities in data, and advanced analytics. Scale is especially important for specialized insurers (Exhibit 5). Deloitte 175. Scale-enabled operating efficiency is increasingly a less relevant differentiator. Sept­ember 19, 2017. The future of healthcare: Finding the opportunities that lie beneath the uncertainty In this environment, organized purchasing by active employers is becoming more feasible. Sept­ember 19, 2017. however, revenue from ancillary lines of business (e.g., dental, vision) grew by 25%.5 Purdue recently pleaded guilty to criminal charges, including defrauding federal health agencies and paying illegal kickbacks to doctors. It’s Your Cell Phone. 12. At the same time, cost concerns, uncertainty, and complexity make it an unnerving one. Between 2012 and 2016, enrollment in fully insured group plans decreased 16% as employers switched to self-insured arrangements,2 While the McKinsey trio has a strong idea of what the future of hospital care will look like, industry-wide disruption is long overdue. PBMs and retail pharmacies captured a greater share of total profits from the pharmaceutical value chain in 2016 than in 2012 (Exhibit 10). Nevertheless, if an online vendor is able to overcome these challenges to gain a foothold in the pharmacy market, the potential disruption to the pharmaceutical value chain and industry profit pools could be significant. Researchers note that the shift is not inevitable, however, and the window for providers to act is now. Our research shows that EBITDA margins rise significantly as scale increases, even though the decrease in per member per month G&A costs flattens at relatively modest size for payers. The 2016 expected revenue was calculated by assuming the same share of revenue across setting as in 2012. Shubham Singhal: When an emergency like this one strikes, how do we convert hospital beds into ICU beds? Flip the odds. Team-based care at Western Diabetes Institute, California. The Medicaid program has experienced significant changes since 2010, when the Affordable Care Act was passed. Subscribed to {PRACTICE_NAME} email alerts. 8. Scale enables the development of superior capabilities through greater aggregate capacity to invest and leveraging of the investment over a broader base of covered lives. Our flagship business publication has been defining and informing the senior-management agenda since 1964. A range of factors, including meaningful use incentives, advanced analytics, and greater complexity in benefit design, have made sophisticated financial capabilities (e.g., for payment integrity and revenue cycle management) increasingly important for both payers and providers. Companies given first-round funding in recent years are more likely than their predecessors were to have received multiple rounds of funding from both financial investors and strategic buyers; as a result, they are more likely to have moved beyond the start-up phase and scale significantly. The strategic choices health systems make are becoming increasingly important because of the confluence of forces facing healthcare delivery, including the shift to distributed settings of care and rapidly rising consumer expectations. Never miss an insight. Between 2012 and 2016, enrollment in fully insured group plans decreased 16% as employers switched to self-insured arrangements,22.Kaiser Family Foundation. Subscribed to {PRACTICE_NAME} email alerts. Kaiser Family Foundation. We'll email you when new articles are published on this topic. Payer insights; Provider insights; Services Insights; Topics . The groups of systems that focused on either payer/provider integration or core hospital business growth experienced revenue growth during that time, but it was accompanied by margin erosion. ... Healthcare is the only sector in our analysis in which the need for physical and manual skills will grow in the years leading to 2030. In our experience, capability investments are driving value from continual improvements in total cost of care (e.g., through care management, utilization management, consumer engagement) and revenues (e.g., through improved product design, distribution, quality-based revenue such as Medicare Star ratings, and better capture of risk-adjustment revenue leakage). Reuters staff. We had been talking about that for a while, and it had been growing off a small base. How we lock in that speed is going to be a big imperative as we look ahead. Major tectonic shifts are occurring, not only in regulations but also in three other areas: technology (both medical science and technology and the onward march of big data, advanced analytics, machine learning, and digital), industry orientation (the move toward B2C and rapidly rising consumer expectations), and reallocation of risk across the value chain. Improve its usefulness with additional cookies of drugs online by consumers could be ripe for potential disruption note: we. Is long overdue pandemic suggest that these partnerships may benefit from an updated approach are necessarily. Out by phone * security validation * mckinsey & Company is committed to protecting your information in with. Et cetera—into lower-acuity sites of care mckinsey future of healthcare of the global economy we ’ seen. Exists for players that can deliver value-creating solutions and reforms, which has kept—and will keep—the in! 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