After three years of upheaval, 2023 may be the year when the healthcare industry regains its footing. Doing so, especially during continued economic uncertainty, will require all parts of the industry pulling in the same direction — whether its further adoption of value-based contracting, more creative use of advanced analytics, or zeroing in on administrative efficiencies.
While predicting the future is always tricky, Oliver Wyman partners issued their 2023 forecast for the industry during two recent webinars. Here are five issues they identified as areas to watch:
With valuations normalizing after two years of record highs and ongoing worries about a global recession, investors will steer funding towards high-quality companies and assets. Companies seeking funding need to have a solid business plan, a strategic vision, and a proven innovation. In life sciences, areas expected to gain attention include cell and gene therapy, neurology, obesity, and oncology. The infectious disease market will likely go back to pre-pandemic levels.
The digital landscape will remain hot as well. But investments will be targeted at technologies that have a proven impact and that can be scaled. And funding rounds will undoubtedly be smaller from what occurred during the past couple of years. Startups will need more reasoned expectations and pursue multiple rounds of funding to support their efforts.
Hospitals have been hit especially hard by the workforce crisis. Clinicians are burned out and leaving the profession, resulting in spikes in the use of temporary staff. That model is not sustainable and hospital leaders need to use 2023 to not just rebuild their workforces, but build a better, more sustainable workforce model. This is an opportunity to truly reimagine how work is done. Hospitals can — and should — utilize technology to free up staff from tasks that can be automated, allowing them to spend more time at the bedside. Payers and providers should also evaluate how upticks in use of self-directed care can help them redeploy human capital. Additionally, non-physician clinicians will continue to gain ground in delivering care to patients.
Digital as an enabler
In 2023, organizations will leverage technology to not only help with daunting issues like workforce, but to push advances in care delivery and drug development. Pharmaceutical companies have started tapping into machine learning and artificial intelligence to improve their understanding of biology and disease states, and to design more targeted therapies. Using AI in research and development can hasten the time it takes to get drugs into clinical trials.
On the provider and payer side, Oliver Wyman expects to see great use of AI and data analytics to enable clinicians to be more efficient and drive better patient outcomes. Virtual care 2.0 will also take shape in 2023. The appetite for telehealth and other virtual care offerings has cooled somewhat since the height of the pandemic, but the tools offer greater convenience allow organizations to gain efficiencies. At the same time, consumers expect virtual care to at least be offered alongside in-person visits.
Payers and providers faced a slow and inconsistent history in implementing value-based contracts. But there aren’t many more levers to pull as a means of addressing costs and utilization. As such, payers and providers are likely to not just pursue more value-based arrangements, but they’ll lay the groundwork for more nuanced preferred provider relationships. This doesn’t mean carving out narrow networks, rather, it’s about using existing networks in a different way. For instance, new referral patterns within a specialty, entering a joint venture around a specific service line or technology, and creating a differentiated patient experience. Considerable growth will also continue in Medicare Advantage as beneficiaries move out of fee-for-service Medicare.
New and innovative contracting models should also start showing up in pharmaceuticals. Value-based contract has been inconsistent here as well, but companies continue to look for ways to minimize risk and get therapies to patients. Oliver Wyman is optimistic about the use of a warranty approach as one way to achieve that goal.
A slew of external pressures in 2023 will force healthcare to be more adaptive and resilient. Macroeconomics will not only impact access to capital but could lead to a resurgence in merger and acquisition activity in life science, for instance, in the second half of the year. New rules in the United States, Germany, China and elsewhere will force pharmaceutical companies to develop new pricing strategies and adjust their budget allocations. Similarly, as more research emerges about the impact of climate change, healthcare organizations will need to quicken efforts to reduce their carbon footprints.
It takes a village
Every constituency in healthcare wants to create a better, more affordable, and more accessible system. As we saw throughout the pandemic, the sectors are interconnected. Change in one area influences action in another. Although major challenges abound, 2023 affords healthcare leaders an opportunity to come together in unique ways.
The Oliver Wyman 2023 Healthcare Outlook webinars hit on several other areas, including consolidation and changing ownership models, particularly as retailers and insurers keep buying providers; curtailing administrative costs; and improving the supply chain.
Partners participating in the two webinars included: Rolf Fricker, Marie-Lyn Hecht, and John Westwood on life sciences; Patrick Barlow on payers; Dan Shellenbarger on providers; Akshay Agarwal, MD, on private equity; and Shivani Shah on innovation. The sessions, which can be viewed here, were moderated by Sam Glick, Global Leader of Health and Life Sciences.