nj hfma fact hot topics in healthcare finance...source: pwc health research institute consumer...

Top Issues in a New Health Economy

November 8, 2016 9:00 AM – 9:50 AM ESTPwC

NJ HFMA FACT Hot Topics in Healthcare Finance

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A brief glance at history

Top issues in healthcare from the last decade

Consumers indicate cost insecurity within healthcare

Introduction and implementation of the ACA

New healthtechnology builds up steam

2007: Drug PricesConsumer concern with drug prices peaked, with 72% of consumers worried about prescription drug costs regardless of insurance coverage

2009: WellnessProgramsEmployer sponsored wellness programs come into the stoplight. Participation of health-risk questionnaires grew significantly when incentives were offered

2010: Alternative CareMany consumers were willing to utilize alternative methods of care, including internet and telephone consultations

2012: Care Deferment46% of consumers noted that they deferred treatment because of cost – 10% said they deferred treatment 5 or more times

2013: InsuranceExchangesConsumers felt unsure about the exchange’s ability to make their shopping process easier

2014: Embracing technologyConsumers fully embraced using technology to communicate with clinicians

2015: Mobile AppsConsumers were using mobile apps to help them with healthy eating, weight loss, exercise and health education

2016 and beyond

PwC Health Research Institute

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The New Health Economy: Major forces shaping healthcare now

3PwC Health Research Institute

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US healthcare spending growth rate is slowing

The healthcare spending growth rate has flattened in recent years reflecting downward pressures on costs

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HRI’s projected medical cost trend over the years

Source: PwC Health Research Institute medical cost trends 2007 - 2016

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The five forces reshaping the US health industry

Surviving seismic change:


1 2 3 4 5

• Spread of virtual care and remote patient monitoring

• Embrace of alternate venues and resources for care

• Increased use of extenders

• Seamless sharing of data among stakeholders

DecentralizationMarch of

technological advances and digitalization

Shift from volume to

value

Rise of consumerism

Surge in interest in wellness

• Use of electronic medical records and other health data

• 3D printing

• The emergence of blockchain technology

• Development of –omics

• Spread of machine learning and AI

• Federal drive toward value-based purchasing

• Insurer push for value-based contracts

• Pharmaceutical and life sciences company push toward value-based contracts

• Consumer access and ownership of health data

• Consumer cost-sharing

• Price transparency and shopping

• Consumer interest in wellness

• Insurer incentives for wellness

• Employer interest in wellness

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Consumers want more for their health dollar

Responding to increased responsibility for overall health, consumers are looking for a return on investment with their healthcare services

82% are open to new, non-traditional

ways of getting medical attention

innovation

74% are open to virtual doctor visit

convenience

55% trust the Internet more than the doctor

empowerment

43% want to shop for healthcare

value

34% of consumers are willing to switch

providers upon receiving an ideal experience

experience


Rise of Consumerism

Source: PwC Health Research Institute consumer surveys

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$45.40B Natural &

organic food

$30.40B Vitamins and

nutritional supplements

$1.02B Nutrition

and energy bars

$16.80B Functional beverages

$59.20B for sporting

goods

$61.6B for

alternative healthcare

$11.25B for weight

loss

$40.33Bfor fitness

$1.30B for mobile

health apps

$93.62B for

nutrition

Wellness market$267B

US Healthcare system$2.9T

US total healthcare cost $3T

$25.27BGym

membership

$7.31B Personaltrainer

$6.85B Pilates &

yoga studios

$0.64B Boxing gyms

& clubs

$0.26B Fitness

DVD production

Increased interest in wellness


Source: PwC Health Research Institute analysis

U.S. consumers are spending on wellness

At ~10% of the total healthcare market, consumers are showing their willingness to pay for overall wellness

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Decentralization of care


Consumers are looking for care through alternative pathways

While those with chronic conditions are more reluctant, the healthy are ready to seek care outside of traditional settings

Source: PwC Health Research Institute consumer survey, 2016

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Commercial and government payers alike are making the shift from volume to value

Although pace differs, healthcare players are realizing the time for change is here


Embrace of value-based

models

• UnitedHealthcare to double value-based contracts by 2017 ($50 billion)

• Cigna and Aetna to pay Novartis based on performance of new heart medicine, Entresto

• Amgen and Harvard Pilgrim testing similar model for cholesterol drug

Public Payers Private Payers

• CMS strives to tie 50% of all payments to quality by 2018

• ACOs collectively saved the health system $411 million in 2015

• New value programs such as the CPC+ and CCM rolling out in 2017

70% of clinicians do not participate in a risk-based, incentive-based, or shared-savings reimbursement model.

Source: PwC Health Research Institute clinician survey, 2015

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One overarching goal, multiple paths to get there

Organizations will take different paths and make different choices depending on who they are today and who they want to become

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Embrace of value-based

models


Scaled population health programs will be rewarded in value-based deals

Change how care is delivered to improve quality and lower costs

Population level

ACOs, PCMH, Primary care initiatives

Episode / service level

Bundled payments, focus on episode of care

Stratification 2.0A full-service delivery network that engages

patients

Running a data-driven operation

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Forces that likely will dampen growth are moving more quickly than forces that will boost growth

The shift from volume to value likely will have the most impact on the system in the short term



Source: PwC Health Research Institute analysis

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Together, these forces are transforming the health industry

Sector-specific silos are crumbling and giving way to a plug-and-play ecosystem of collaborators with

interrelated value drivers


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Source: PwC Health Research Institute consumer survey, 2016, PwC Health Research Institute report, Primary care in the New Health Economy: Time for a makeover, 2015PwC Health Research Institute

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American consumers are open to change, but large gaps between desires and reality remain

Consumers sit at the center of this vast ecosystem and while many are interested in new ways of accessing care, some either do not understand their options, or the options are not engaging them

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2016: A year of firsts

Concerns over healthcare costs inspire new tools and services to launch across the New Health Economy


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Consumers are open to financing their prescriptions

Because of extremely high drug pricing and consumer concern over growing costs and affordability, over half of all consumers would be willing to pay the cost of their prescriptions over time – treating healthcare more like a lay away system

15PwC Health Research Institute Source: PwC Health Research Institute consumer survey, 2015

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More mobile, more accessible, more connected

Thanks to technology and shifts in financial incentives, care will begin to move into the palms of consumers’ hands, providing care anywhere, anytime

16PwC Health Research Institute Source: PwC Health Research Institute consumer survey, 2015 and HRI Clinician Workforce Survey, PwC, 2014 and 2015

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Openness to new ways to manage health expenses skews young

With concern over healthcare costs rising as they pay more out of their own pocket for care, the young are looking for ways to help them manage the cost burden


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New strategies to deliver lower-cost care

As healthcare becomes less centralized, innovative ideas are cutting costs and building efficiencies


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Price is the unspoken word

Talking about price has long been a subject left out of discussions with physicians – as consumers and insurers demand better value for their spending, this phenomenon will subside


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What does 2017 have in store?

With the results of an election pending, big changes could lie ahead for healthcare in the coming year and beyond


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Hillary Clinton seeks to build out her legacy on healthcare through a series reforms meant to expand access and reduce costs

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Family Glitch

Prescription Drugs Medicaid Expansion

Access for Immigrants

Public Health

Public Option

Likelihood of being enacted: Impact on spending: Sector Impact: Pharma/LSConsumer Impact:

Reducing the cost of prescription drugs

Likelihood of being enacted:Impact on spending:Sector Impact: Payers

Consumer Impact:

The public option

Likelihood of being enacted:Impact on spending:Sector Impact: ProvidersConsumer Impact:

Reinvestment in public health

H. Clinton Health Policy

Platform

Likelihood of being enacted:Impact on spending:

Sector Impact: Payers Consumer Impact:

Tax Credits for families

Medicaid Expansion

Expand access to immigrants






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Donald Trump looks to curb medical spending and contract the government footprint in healthcare

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Importation ofdrugs

Provider Transparency

Medicaid Expansion

Premium payment tax deductions

Multi-Stateplan sales

Expand HSAs

Likelihood of being enacted: Impact on spending: Sector Impact: ProviderConsumer Impact:

Increased provider transparency

Likelihood of being enacted:Impact on spending:Sector Impact: Payers

Consumer Impact:

Expanded use of HSAs

Likelihood of being enacted:Impact on spending:Sector Impact: PayersConsumer Impact:

Sale of plans across state lines

D. TrumpHealth Policy

Platform


Sector Impact: Pharma/LSConsumer Impact:

Importation of drugs

Medicaid Expansion or Block Grants

Premium payment tax deductions






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Outlook on the ACA health insurance marketplaces

Between 2014 and 2016, national growth of benchmark premiums was modest

Between 2014 and 2015, benchmark premiums decreased by 0.2% on average. Growth between 2015 and 2016 – at an average of about 4.2% – was higher than that between the first two years.

This means that from 2014-2016 benchmark premiums increased, on average, 4.0%. The median increase was 1.2%.

The increase compares favorably to employer premiums for single coverage, which have grown an average of 4.4% each year for the last five years. The growth also falls well below the double-digit premium growth observed in the individual market prior to the ACA.

23PwC Health Research Institute Source: PwC Health Research Institute analysis of publicly available ACA marketplace premium data and the 2015 Kaiser Family Foundation Employer Health Benefits Survey

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2017 did bring larger premium increases, and a few notable marketplace departures

With some growing pains in the marketplaces’ fourth year, lawmakers, regulators and industry will commit to fine-tuning them in the year ahead


Sunset of two risk programs

Sicker than expected enrolees in the exchanges

Under-priced premiums early on

Government Reaction to 2017 Rate Increases

• Increased focus on closing enrollment loopholes to reduce churn

• Making improvements to the risk-adjustment program

• Attracting more people to the exchanges

Benchmark premiums on the exchanges

increased by an average of 22%

for 2017

Contributing factors:

Source: HHS ASPE, Health plan choice and premiums in the 2017 health insurance marketplace, 2016

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Top issues for 2017

As the healthcare economy settles into this new value-based paradigm, staying relevant will demand greater agility and flexibility


Easing the training wheels off value-based payments

Drug makers respond to pricing pressure

Paging Dr. Drone: It’s time to prepare for emerging

technologies

Growing together: Alternative transaction models reign supreme

Charging healthcare: Modernizing payments

and billing

ACA marketplaces get a tune-up

© 2016 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Thank you!

How to find us

Gerard BielakPartner, [email protected]

Laura McLaughlinSenior Manager, PwC Health Research [email protected]: @LauraRMcL

Recent Publications

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Surviving seismic change: Winning a piece of the $5

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Population health: Scaling up

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