Author: Dana Jacoby
The long-term implications of the COVID-19 virus will cost further billions and leave an irreversible, deeply-rooted impression on our industry. For a variety of factors, healthcare providers are now forced to operate differently, meet and handle patients differently, and maintain an extreme level of vigilance. Simply put, our healthcare delivery system has been transformed forever.
Since 2022 is an election year and there is an abundance of political log jams, it’s unlikely that the industry will be burdened with new legislation that impedes healthcare transactional activity. This expected absence of any administrative complications extends a much-needed respite to healthcare providers.
Today’s blog entry is not focused on COVID itself, as the pandemic has been covered extensively elsewhere. Instead, we will take a closer look at what we expect to emerge as the broader, prevailing — and sometimes related — healthcare trends in the United States in coming years.
The Rise of Advanced Telehealth Solutions
The use of telehealth consulting services has already surged by nearly 40 times from pre-COVID-19 levels, and we expect these numbers to continue to grow.
Before the pandemic, telemedicine was viewed as an awkward, uncomfortable and generally less desirable means of communication by physicians and patients alike. COVID-19 changed that attitude for good, and telehealth is today viewed as essential. Now, our industry now faces the challenge of properly integrating the tech into primary health practice.
McKinsey & Co reckons that nearly $250bn of US healthcare expenditure could shift into virtual or virtually enabled care models, but warns that this transformation isn’t a foregone conclusion. It is certain to require widespread clinician adoption and a radical re-thinking of care pathways to incorporate what McKinsey describes as ‘virtual modalities.’
The rate of innovation is impressive. Telemedicine and virtual care now equip doctors to monitor patients remotely with the use of sensors that measure vital signs, health records and other personal data. Consumer-facing solutions and hybrid models (combining face-to-face sessions and remote consultations) pave the way for a more efficient service.
Patients are enthusiastic about the prospect of telehealth services if they are properly embedded in the practice — and when it involves a team of experts they personally know and trust, rather than an anonymous ensemble of physicians located across the country. For this reason, the long-term status of standalone telehealth groups is questionable.
Patient first telehealth is on the horizon, and this will force primary care practices to re-examine how they deliver care. We expect this necessary process of reinvention to become one of the defining healthcare provider trends in coming years. In the meantime, you can expect investor interest in virtual care and digital health to intensify.
Consolidation of Transactional Activity
We expect the continued consolidation of transactional activity to be one of the top healthcare industry trends of the early 2020s. This should bring mostly useful changes, as it helps providers to address duplicative care and other system flaws. Organizations can improve their financial position via well-planned mergers, hospital-physician medical group affiliation, and investments from venture capital or private equity (PE) groups.
There exists a massive appetite for consolidation, with an emphasis on providing ever higher-quality and more closely patient-focused healthcare services.
Today’s consolidation-related transactional activity among healthcare payers and providers is wide-ranging and creative. The government is likely to scrutinize regulatory issues, but with an eye for avoiding disruption. Tax changes (like cutting or totally removing capital gains) could bring complications, but there is no immediate sign of this happening.
At Vector Medical Group, we expect values, risks, and returns to be high — and the appeal of boosting economic performance post-transaction is sure to remain a powerful driver of affiliation transactions. Most organizations feel no pressure to take action of this sort merely for the sake of it, however.
As organizations weigh up their options in the search for an ideal, or at least well-optimized affiliation transactional model, savvy leadership is crucial.
Recently there have been signs of industry-wide price increases, with negative effects on purchasing power (for the consumer as well as the healthcare provider). As a result, we expect transactions to involve higher economic values, but their purchasing power (in relative terms due to inflation) will be diminished.
PwC’s Health Research Institute (HRI) is forecasting a 6.5% medical cost trend in total for 2022, which is slightly lower than the 7% increase registered last year. Experts claim that sharper rises have been averted due to the unique features of the healthcare industry; for one, healthcare prices typically lag quite far behind rising supply costs or labor shortages.
Healthcare prices are established in advance, codified into binding contracts following in-depth negotiations between providers and insurers — or when the government sets new regulations affecting programs like Medicare. These prices are typically set in stone for a whole year, until a fresh round of talks yields new prices for the following year.
Runaway workforce costs have only accelerated in the course of the last year. That’s why we recommend monitoring the current inflationary trend very closely in the times ahead. Wherever practical, healthcare providers should invest in assets that help them to hedge against inflation in their investment portfolio.
Whatever your plans, Vector Medical Group can offer you friendly, cutting edge physician practice consulting. Fill out our survey now to learn how Vector can help you keep pace with industry trends and challenges in the years ahead.
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