Challenges Facing Healthcare Leaders in the U.S. and Globally
The biggest challenges for healthcare leaders in the US include transitioning to value-based care, increasing healthcare costs, shortage for a talented workforce, complying with regulations, and achieving revenue growth. The biggest challenges for global healthcare leaders include over-regulation, adoption of digital technology, virtual health and cybersecurity, consumer-centric care, and industry-related pressure. Lastly, some drivers of change for the healthcare industry include climate change, antimicrobial resistance, use of disruptive technologies, change in consumer behavior, and others.
Biggest Challenges: US Healthcare Leaders
Transition to Value-Based Care
- A recent study on CEO perspectives by Deloitte highlighted that CEOs have admitted that progress towards value-based transition was much slower and harder than they had anticipated. The gradual change can also be attributed to regulatory mandates and "high cost” of compliance. Additionally, about 19 of 27 CEOs considered quality-based payments to have a significant impact on the healthcare industry.
- Providers and hospitals have huge concerns about transitioning their business models to a value-based system because they need to redesign workflows, create new clinical pathways, develop new front line management strategies, revamp provider contracting and compensation models, and need to manage entire episode of care successfully.
- A recent survey by Managed Healthcare Executive states that only 30% of respondents reported that their compensations were value-based, and 40% said that they had taken value-based initiatives.
- Jay LaBine, CMO at naviHealth, stated that changing from the fee-for-service model to value-based care can be complicated, expensive, and intimidating for most payers and providers. Additionally, there is a risk of profit dilution if the system is not appropriately structured.
- According to a recent report by PwC, transitioning toward value-based care requires skills to address social determinants of health. Further, about 41% of providers said that challenges with data and analytics to estimate accurate costs are holding them back from succeeding with value-based models.
- The 2019 report by JP Morgan Chase stated that healthcare system transition in the US would pose challenges like lower reimbursement rates for Medicare and Medicaid patients, higher labor costs, and increased competition among pharmaceuticals and technology investments.
Rising Healthcare Costs
- According to a recent survey by MHE, about 15% of respondents considered rising drug prices as their top concern. Additionally, pharmaceutical drug spends by patients with high deductibles has been growing due to increased use.
- Another challenge relates to expensive biopharmaceutical products, as it rarely faces competition from alternative products, resulting in high copayments for consumers.
- According to research by Kaiser Family Foundation, the cost of a family health insurance has increased to $20,000. Some reasons include escalating drug prices, high-cost therapies, and industry consolidation.
- To mitigate the impact of rising costs, employers are narrowing networks, promoting medical tourism, establishing centers of excellence, designing reference-based pricing models, and offering bundled pricing offers.
- Specialty drugs to treat complex and rare diseases cost about 50 times more than conventional medications. Increasing prices have directly affected the affordability of medicines; the trend is up by 9.4%.
- Health insurers also find it challenging to determine coverage for new biopharmaceutical products and whether to use prior coverage authorization or limitations to reduce inappropriate use.
- According to a recent report by JP Morgan Chase, the talent shortage in healthcare is considered a significant concern by 92% of healthcare executives. Additionally, about 35% of respondents found the talent shortage as one of their top three challenges.
- In 2019, the top struggles for workforce management included staff turnover cost at 47%, overtime and premium labor costs at 36%, and the impact of staff-flexibility on patient volume at 41%.
- It is noted that the most challenging positions to fill include physicians at 52%, nurses at 46%, and mid-level management at 29%. Further, about 76% of executives planned to increase workforce compensation over the coming year, and 37% of respondents felt that high compensation expectations could lead to a talent shortage.
Complying with Policy Changes
- In MHE’s recent survey, about 32% of respondents reported navigating through government regulations as their top concern. Further, President Trump's efforts to get rid of the ACA can lead state agencies to change the rules of Medicaid each year.
- It is reported that CMS issues more than 400 memorandums for the Health Plan Management System (HPMS) each year. Sometimes, CMS also issues National Coverage Determinations, requiring payment by health plans for uncovered procedures and prescription drugs. Additionally, these communications may require reporting, operational, and IT changes.
- Integrated healthcare systems and hospitals are challenged by change in regulations only pertaining to medical institutions, like billing requirements. Further, insurers offering federal or state-regulated plans are directly impacted by regulatory changes.
- According to a recent survey by the Health Care Advisory Board, revenue growth remains the top priority for CEOs at 21.1%.
- The CEOs of healthcare systems are seeking new strategies to generate revenue growth. The top-scoring areas for revenue growth included focusing on ambulatory care at 57% and strengthening primary care alignment (hospital-physician partnership) at 52.6%.
- Partnering with physicians for growth is among the top priorities for hospital CEOs. Still, demand from private equity firms, retailers, health plans, and technology companies competes for physician talent from hospitals and health systems.
- The CEOs believe that revenue growth in the future will come from focusing on diversification and non-traditional sources.
Biggest Challenges: Global Healthcare Leaders
Over Regulation and Policy Uncertainty
- According to PwC’s recent Annual Global CEO Survey, optimism for organizational growth has plummeted over 2018, majorly because of over-regulation and policy uncertainty. Further, about 88% of CEOs are extremely or somewhat concerned about the impact of over-regulation on organization's growth.
- According to a recent survey on 387 C-level executives, about 61% of respondents reported that reimbursement and pricing pressure are one of the top-3 strategic challenges for the healthcare industry.
- It is found that 70% of healthcare services executives considered the quality and cost of healthcare as the top challenge. In comparison, pricing and reimbursement were recognized as the top challenge by 62% of biopharma and 51% of Medtech executives.
- Some therapeutic segments that offer the most significant pricing pressure include cardiovascular at 22%, oncology at 28%, and rare diseases at 15%.
- Governments are focusing on Population Health Management (PHM) programs for preventative health and improved cost efficiency through pricing controls on pharmaceuticals and devices. Further, governments in Australia and the UK are encouraging value-based investments with social impact bonds.
Big Data, Artificial Intelligence, Machine Learning, et al.
- It is found that 76% of healthcare leaders believe that competition from non-traditional competitors like Amazon, Apple, or Alphabet will impact the healthcare market over the coming 3-5 years.
- The impact on the healthcare services industry will be generated by technologies related to virtual health at 46%, clinical decision support at 35%, value-based care at 40%, integration of therapeutic algorithms at 32%, and physician benchmarking at 23%.
- It is found that about 44% of Medtech executives consider that top challenges are offered by the advancement of technologies like therapeutic algorithms, biopharma research, and clinical decision support. Alternatively, about 46% of healthcare services executives reported that big data is not being utilized in the current environment, and only 20% of executives reported having technology that enabled them to achieve success with AI.
- PwC's recent survey on global CEOs revealed that top concerns about AI technology include cyber threats at 40%, speed of technological change at 38%, and talent requirement at 38%. Additionally, 31% of healthcare CEOs and 34% of pharmaceutical CEOs are not planning to pursue AI initiatives at the moment.
Cyber Security and Virtual Health
- Consumers are increasingly monitoring their health with devices and look forward to virtual health for addressing their concerns. Alternatively, 72% of US consumers are concerned about the security of healthcare information stored on mobile health apps.
- It is noted that only half of the 150,000 available health apps have more than 5,000 users. Hence, fragmented adoption of health apps and regulatory barriers for usage is a concern for the healthcare industry.
- Internet-connected health system networks are at-risk for cyberattacks, such as the WannaCry malware attack that affected 300,000 computers in 150 countries. In 2018, about 40% of global CEO's considered cyber attacks as a serious concern, compared to 24% in 2017. Further, about 76% of executives cite cyber attacks as a threat to an organization's growth prospects.
- The World Economic Forum lists cyberattacks among the top five global risks for governments and international organizations. In 2018, the number of cyberattacks on health systems and medical devices increased by 525%.
- Many companies lack in-house cybersecurity expertise, and only 36% of payers and providers have established access management policies and cybersecurity audits in place.
- An increasing number of payers and providers are concerned about data privacy, as 63% have performed a risk assessment of devices, 55% have implemented security controls, and 43% have contacted device manufacturers to understand risks.
- Top medical device leaders are considering the inclusion of consumer perspective with their healthcare offerings. It is found that 45% of leaders believe their device to offer better value than competitors, 50% incorporate feedback in their product designs, and 60% carry post-marketing surveys to improve their offerings.
- PwC Health Research Institute (HRI) estimates that about $102 billion is lost as direct medical costs annually due to health disparities. Further, about 93% of healthcare CEOs are somewhat or extremely concerned about the rising cost of healthcare, while 68% are worried about addressing the social determinants of health.
- Consumer demand is exerting pressures on the health care industry to become more predictive, proactive, and focused on well-being with better transparency, access, convenience, and service personalization.
- According to a survey by Deloitte, respondents from eight countries reported similar consumer demands, such as sharing of personal health information with doctors, access to personal health records, usage of tools to stay healthy, engage in preventive behaviors, and demand more transparency, access, and convenience, among others.
- Emerging competition from technology-savvy yet consumer-centric companies like Amazon, J.P. Morgan Chase, and Berkshire Hathaway partnership to launch a non-profit health care company for one million employees in the US. Further, Amazon launched private-label over-the-counter medicines for consumers and medical supplies for doctors, dentists, and hospitals.
- According to PwC's recent survey on global CEOs revealed that the healthcare market is prone to some unique challenges due to the nature of the industry. For example, about 71% of CEOs agree that healthcare businesses face increased pressure to deliver business results under shorter timelines.
- It is noted that about 65% of executives are concerned about holding individual leaders responsible for any organizational misconduct, and 56% feel worried about taking a political or social stance for employees or customers, higher than the global average of 38% across industries.
- The PwC's global CEOs stated that over the next five years, about 68% of executives consider changes in customer behaviors and core technologies to be the top two trends driving the healthcare industry. Some other disruptive trends include an increase in many direct and indirect competitors at 66%, changes in distribution channels at 57%, and changes in industry regulation at 53%.
Future Drivers for the Healthcare Industry
- According to a recent survey by BSR on top industry leaders, some drivers of change for the global healthcare industry in the next 20 years include climate change, antimicrobial resistance, and disruptive technologies.
- Climate change will have significant impacts on global healthcare due to rapidly increasing occurrences of noncommunicable diseases like respiratory diseases, depression, heart disease, and mental disorders.
- The rising temperatures will alter the distribution and burden of vector-borne diseases (like Zika, malaria, and dengue) and water-borne infections. Additionally, water will become increasingly scarce and precious for all pharmaceutical companies.
- According to the World Economic Forum, the number of CEOs who “strongly agree” that green initiatives can boost a company’s reputation has doubled to 30%. Further, about 25% of executives feel that such efforts will generate significant product and service opportunities.
- There are about 700,000 deaths related to antimicrobial resistance (AMR) globally. Further, the challenge is growing exponentially with estimates suggesting a growth to about 10 million annually by 2050.
- According to the Deloitte's 2019 Health Care CEO Perspectives Study, the top three drivers of change in the coming decade with a significant impact on profit margins include a shift in care settings, the transition to value-based care, and rise in proactive consumers.
- The rise of disruptive technologies from tech companies create new competition to disrupt the healthcare industry drastically. Further, the growth of artificial intelligence (AI) in treatment plans and patient monitoring may influence the standards of healthcare positively. Some concerns associated with disruptive technologies include informed consent, privacy, or even discrimination.
- According to David S. Muntz, principal at StarBridge Advisors, the top technologies in healthcare will be augmented by intelligence, natural language processing, machine learning, and predictive analytics over the next 5-10 years. Further, the technology will allow data to remain at a single source but still provide real-time information.
- Muntz further states that CIOs will support clinicians at virtual reality labs to perform complicated surgeries or work through treatments. CIOs will help chatbots for administrative and clinical care functions, such as electronically scheduling appointments or connecting with physicians easily.
- According to a recent survey by Lazard, about 36% of executives stated that the adoption of value-based/risk-sharing pricing models would drive the industry over the next ten years.