Healthcare industry trends point toward an evolving healthcare economy

Competing on quality, price and experience is rapidly becoming the new normal.

Up until a decade ago, most people received healthcare from local providers in traditional medical offices and acute care facilities. Employers and insurers picked up much of the tab.

But changing technology, federal regulations and consumer behavior point to an evolving healthcare marketplace that offers new ways to deliver and receive healthcare.

Consider that today, some states allow healthcare consumers to consult a provider anywhere in the country via an app, and it's increasingly likely that the provider may be employed by a large insurance company that has acquired primary care practices, or by a health system that also owns an insurance plan. Consumers can forgo office visits in favor of telehealth appointments or drop into a clinic at their local drug store.

Even care for some acute conditions such as heart failure, sepsis and pneumonia can now be delivered via hospital-at-home services. Meanwhile, high-deductible health plans and rising self-pay numbers mean consumers pay for more health services out of their own pockets. Therefore, they’re also more likely to consult quality and price data when choosing providers and health plans.

Technology innovations, federal regulations and changing consumer behavior have combined to drive these changes. No healthcare organization is immune from these forces and must adapt to the new industry ecosystem they are creating.

Here’s a rundown of key influential trends, how the industry is responding, and the capabilities healthcare organizations will need to thrive as the industry evolves.

Three trends reshaping the healthcare industry market

Three major forces have combined to disrupt healthcare business models and value propositions that have historically been based on proprietary data silos and opaque pricing data. These three forces are transforming the healthcare industry into a market-based system in which organizations compete on value, quality and convenience:

1. Rapidly advancing healthcare industry technology. Armed with ubiquitous computing power, from smartphones to laptops, consumers can access care and apps of their choice whenever it’s convenient for them. Large health systems built on open technology can become platforms for whole-person care, tapping into best-in-class applications and systems.
   
   Additionally, mature industry data standards should ultimately result in unprecedented data fluidity across the continuum of care. More accessible data, especially coupled with artificial intelligence, should drive further advances in how consumers access care.
   
   
2. Consumer-centric federal regulations. Regulations from the Centers for Medicare & Medicaid Services (CMS) are designed to empower consumers to make better healthcare choices. These include interoperability and price transparency rules, which are rapidly eroding business models based on proprietary networks and contract data.
   
   Quality and value are now competitive differentiators. The winning healthcare experiences today are those that put consumers at their center.
   
   
3. Consumer demand for seamless experiences. Consumers are accustomed to frictionless transactions with service providers outside the healthcare industry. They naturally expect the same from healthcare.
   
   And yet, the typical healthcare experience lags behind what’s offered by other consumer-focused services. That’s due to change. With CMS throwing its weight behind primetime-ready data exchange standards, healthcare organizations have the incentive and tools to deliver experiences that seamlessly coordinate services across the continuum of care.
   
   With readily available clinical data, patients wouldn’t need to remember and continuously repeat health information like their clinical histories and medications. Fluid, standardized data also should help providers and consumers make better care decisions.

The evolving healthcare marketplace

In this increasingly consumer-centric environment, many of the industry’s largest players are signaling that the way to control healthcare quality and value is to orchestrate the entire healthcare experience.

“Megahealth” brands—including Amazon, Cigna, CVS Health, Elevance Health, Humana and United Healthcare—are showing their desire to own the “front door to care” through their continuing investment and expansion into primary care. From that entry point, these organizations aspire to influence, triage and coordinate the full continuum of care a healthcare consumer requires.

Many of these players are executing vertical integration strategies. They are turning to mergers and acquisitions to assemble the entire continuum of care, from health plans to home health and hospice care. Others aim to orchestrate (rather than own) care across the continuum, a possibility made more realistic by data exchange standards like FHIR (which defines how healthcare information can be exchanged between different computer systems).

Investing to thrive in a market-driven healthcare industry

Whether an organization owns or orchestrates end-to-end healthcare experiences, eliminating payer/provider friction points will likely be the measure of success. Doing that will take considerable resources—a fact that plays to the advantage of the megahealth brands. Given the industry dynamics at play, here are some “no regrets” investments that stakeholders should consider positioning their organizations for advantage in the emerging industry landscape:

• Develop M&A integration capabilities as a core competency. Healthcare organizations must expertly align systems, operating models, cultures and people with a clear vision. Doing so will enable them to assemble a continuum of care with an M&A approach.
  
  
• Modernize the IT and data landscape, including AI. To prepare for a future of data interoperability and fluidity, organizations must rationalize and modernize applications and systems, retire obsolete systems and adopt modern cloud-based platforms with strong data orchestration capabilities.
  
  
• Deliver a winning experience. To deliver the experiences consumers expect today, healthcare organizations must thoroughly understand their consumers, and know how and when to meaningfully engage with them.
  
  
• Create a culture of continuous innovation. To compete in a continuously evolving landscape, healthcare organizations must embrace technological advances, including AI tools that unlock value in the industry’s deep data stores.
  
  
• Choose business and technology partners wisely. Given everything needed to deliver frictionless consumer-centric experiences, most organizations will need to augment their current resources with third-party expertise. With well-selected business partners, they can implement and coordinate the investments required to succeed in the new healthcare landscape.

Organizations that make these investments will have the building blocks to create the business models needed for the future, with consistent quality, affordability and convenience at their core. With a strong business model in place, they will be well-positioned to succeed in an increasingly market-driven healthcare ecosystem. 

For a more detailed examination of market influencers and how the industry is responding, read our recent whitepaper, “Healthcare meets the market.”