4. "Apple a Day." With a poor-performing economy, but strong stakeholder alignment, health-conscious millennials reshape the health care landscape with political impetus for a single-payer system and unprecedented government regulation of the sector. Profitability declines as companies struggle with compliance and pricing pressures, while massive data collection of genetic information proves to be a double-edged proposition.
1. Demographic Shifts: The sector has to contend with demographic shifts, namely dealing with the differing health characteristics of the two largest generations -- aging baby boomers and up-and-coming millennials, according to the report. Boomers are generally less healthy than younger generations due to years of unhealthy behaviors, but they also have the wherewithal to spend more money treating their conditions and diseases. On the other hand, millennials tend to smoke less, eat better, exercise more and take a much more active role in their preventative health., so companies within the health care sector will have to adjust their business models.
"The aging and unhealthy baby boomer population presents, on net, a significant boon for hospitals, pharmaceutical companies, medical device manufacturers and retail pharmacies," the study's authors write. "At the same time, rising boomer health care spending will strain Medicare and private insurers by creating more unhealthy patient pools." By contrast, millennials' health and wealth trends threaten to cut into the profits of traditional pharmaceutical companies, medical device manufacturers, and hospitals, while largely sparing insurers and boosting retail pharmacies.
2. Disruptive Technologies: The sector will also be transformed by innovation via both medical research and disruptive technology, according to the report. Advancements in personalized medicine, brain research and biotechnology will be further enabled by telemedicine, virtual and augmented reality, advanced analytics, wearables and other Internet of Things devices. "Adoption of predictive analytics and deep learning algorithms will provide an opportunity for companies across the sector to decrease costs and increase value," the experts write. "Still, such digitization invites outside actors to enter the sector. Tech companies such as Alphabet, Amazon, and Apple, with their expansive collections of consumer data and top tech talent, threaten to eat into the margins of medical device manufacturers and retail pharmacies."
3. Delving Deeper into Science: Advancements in science, particularly genetics, allow for the possibility of delivering new services and specific treatments to people based on their genetic makeup – but will also present ethical questions that push current moral boundaries for many people – as well as higher costs for the treatments, according to the report. "New scientific breakthroughs will result in new commercial products -- such as immunotherapies and bioresorbable medical devices -- driving sales," the experts write. "Such innovation will also allow hospitals and other health providers to improve patient outcomes and turn critical diseases into more manageable chronic conditions."
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4. Consumer-Driven Treatment: Health care is rapidly shifting away from the traditional doctor-centric treatment model to an open, "consumer-driven" orientation for diagnosis and provision of services, according to the report. Developments in digitalization, the growing capabilities of consumer-priced wearables, and a shift in general consumer interest in health and wellness are accelerating patient empowerment. "The trend toward consumerization of health care offers immense potential for the entire health sector to benefit -- with implications for payers, providers, and life science companies to fully engage and coordinate in the end-to-end patient experience," the experts write. "Access to data will spur opportunities and requirements for companies across the entire value chain to seamlessly share information across all parties, thus streamlining and connecting key players to reduce costs and improve services."
5. Treating Sickness vs. Fostering Wellness: As people increasingly take a much more proactive stance toward their health, businesses across the health sector will have to adjust their models that have historically focused on treating sickness rather than fostering wellness, according to the report. "While more active patient involvement in health will likely lead to improved health outcomes, aiding insurers and retail pharmacies, such proactive approaches to health may also reduce the need for expensive late-stage interventions, cutting into the bottom lines of medical device manufacturers, hospitals, and other providers," the experts write.
6. Cyber Risks: The digitization of health care has opened the sector to increasing cybersecurity threats, according to the report. Indeed, the Brookings Institution finds that 23 percent of all cyber breaches happen in the health sector, and that the medical data of more than 155 million Americans has been potentially exposed in 1,500 separate incidents over the past six years. "Businesses with direct patient engagement and financial transactions, particularly health insurers, hospitals, and retail pharmacies, face an array of cyber threats and regulatory restrictions that will add to compliance and litigation costs, " the experts write.
7. Value-Based Service: The transition from fee-for-service to fee-for-value payment models will put downward price pressure on much of the health sector, but it also creates opportunities for businesses to capture greater market value, according to the report. "Pharmaceutical companies, for instance, may seek to highlight how preemptive dosing or use of certain drugs may forestall critical illnesses, thus providing long-term health savings," Retail pharmacies look "particularly well positioned" to take advantage of the changing payer environment, particularly as they increase their outpatient procedure offerings and expand their sales of generic drugs, they write.
Where do we go from here? A.T. Kearney's experts then offer four potential scenarios of what could happen to health care delivery over the next eight years, depending on the strength of the American economy and the level of alignment between the various stakeholders -- patients, pharmacies, providers, drug and device manufacturers, payers, and perhaps most importantly, political forces.
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1. "Fit as a Fiddle." With a high-performing economy and strong stakeholder alignment, it's the best-of-all-worlds scenario: Technological innovation drives the health sector forward, dramatically increasing patient access and pushing down costs. Biotechnology, artificial intelligence, and big data show dramatic gains, accelerating personalized medicine and improving patient care.
2. "Bitter Pill." With a high-performing economy, but weak stakeholder alignment that results in continued political partisanship and disagreement regarding national health priorities, a "two-tier society" emerges in which wealthy Americans can afford advanced medical treatments that are more expensive, while other Americans have limited health access.
3. "Death's Door." With a poor-performing economy and weak stakeholder alignment, America's healthcare system is in disarray, with a dysfunctional government, lack of business leadership, collapsing nonprofits, and protectionist policies that are causing prices to skyrocket.
4. "Apple a Day." With a poor-performing economy, but strong stakeholder alignment, health-conscious millennials reshape the health care landscape with political impetus for a single-payer system and unprecedented government regulation of the sector. Profitability declines as companies struggle with compliance and pricing pressures, while massive data collection of genetic information proves to be a double-edged proposition.
1. Demographic Shifts: The sector has to contend with demographic shifts, namely dealing with the differing health characteristics of the two largest generations -- aging baby boomers and up-and-coming millennials, according to the report. Boomers are generally less healthy than younger generations due to years of unhealthy behaviors, but they also have the wherewithal to spend more money treating their conditions and diseases. On the other hand, millennials tend to smoke less, eat better, exercise more and take a much more active role in their preventative health., so companies within the health care sector will have to adjust their business models.
"The aging and unhealthy baby boomer population presents, on net, a significant boon for hospitals, pharmaceutical companies, medical device manufacturers and retail pharmacies," the study's authors write. "At the same time, rising boomer health care spending will strain Medicare and private insurers by creating more unhealthy patient pools." By contrast, millennials' health and wealth trends threaten to cut into the profits of traditional pharmaceutical companies, medical device manufacturers, and hospitals, while largely sparing insurers and boosting retail pharmacies.
2. Disruptive Technologies: The sector will also be transformed by innovation via both medical research and disruptive technology, according to the report. Advancements in personalized medicine, brain research and biotechnology will be further enabled by telemedicine, virtual and augmented reality, advanced analytics, wearables and other Internet of Things devices. "Adoption of predictive analytics and deep learning algorithms will provide an opportunity for companies across the sector to decrease costs and increase value," the experts write. "Still, such digitization invites outside actors to enter the sector. Tech companies such as Alphabet, Amazon, and Apple, with their expansive collections of consumer data and top tech talent, threaten to eat into the margins of medical device manufacturers and retail pharmacies."
3. Delving Deeper into Science: Advancements in science, particularly genetics, allow for the possibility of delivering new services and specific treatments to people based on their genetic makeup – but will also present ethical questions that push current moral boundaries for many people – as well as higher costs for the treatments, according to the report. "New scientific breakthroughs will result in new commercial products -- such as immunotherapies and bioresorbable medical devices -- driving sales," the experts write. "Such innovation will also allow hospitals and other health providers to improve patient outcomes and turn critical diseases into more manageable chronic conditions."
Advertisement
4. Consumer-Driven Treatment: Health care is rapidly shifting away from the traditional doctor-centric treatment model to an open, "consumer-driven" orientation for diagnosis and provision of services, according to the report. Developments in digitalization, the growing capabilities of consumer-priced wearables, and a shift in general consumer interest in health and wellness are accelerating patient empowerment. "The trend toward consumerization of health care offers immense potential for the entire health sector to benefit -- with implications for payers, providers, and life science companies to fully engage and coordinate in the end-to-end patient experience," the experts write. "Access to data will spur opportunities and requirements for companies across the entire value chain to seamlessly share information across all parties, thus streamlining and connecting key players to reduce costs and improve services."
5. Treating Sickness vs. Fostering Wellness: As people increasingly take a much more proactive stance toward their health, businesses across the health sector will have to adjust their models that have historically focused on treating sickness rather than fostering wellness, according to the report. "While more active patient involvement in health will likely lead to improved health outcomes, aiding insurers and retail pharmacies, such proactive approaches to health may also reduce the need for expensive late-stage interventions, cutting into the bottom lines of medical device manufacturers, hospitals, and other providers," the experts write.
6. Cyber Risks: The digitization of health care has opened the sector to increasing cybersecurity threats, according to the report. Indeed, the Brookings Institution finds that 23 percent of all cyber breaches happen in the health sector, and that the medical data of more than 155 million Americans has been potentially exposed in 1,500 separate incidents over the past six years. "Businesses with direct patient engagement and financial transactions, particularly health insurers, hospitals, and retail pharmacies, face an array of cyber threats and regulatory restrictions that will add to compliance and litigation costs, " the experts write.
7. Value-Based Service: The transition from fee-for-service to fee-for-value payment models will put downward price pressure on much of the health sector, but it also creates opportunities for businesses to capture greater market value, according to the report. "Pharmaceutical companies, for instance, may seek to highlight how preemptive dosing or use of certain drugs may forestall critical illnesses, thus providing long-term health savings," Retail pharmacies look "particularly well positioned" to take advantage of the changing payer environment, particularly as they increase their outpatient procedure offerings and expand their sales of generic drugs, they write.
Where do we go from here? A.T. Kearney's experts then offer four potential scenarios of what could happen to health care delivery over the next eight years, depending on the strength of the American economy and the level of alignment between the various stakeholders -- patients, pharmacies, providers, drug and device manufacturers, payers, and perhaps most importantly, political forces.
Advertisement
1. "Fit as a Fiddle." With a high-performing economy and strong stakeholder alignment, it's the best-of-all-worlds scenario: Technological innovation drives the health sector forward, dramatically increasing patient access and pushing down costs. Biotechnology, artificial intelligence, and big data show dramatic gains, accelerating personalized medicine and improving patient care.
2. "Bitter Pill." With a high-performing economy, but weak stakeholder alignment that results in continued political partisanship and disagreement regarding national health priorities, a "two-tier society" emerges in which wealthy Americans can afford advanced medical treatments that are more expensive, while other Americans have limited health access.
3. "Death's Door." With a poor-performing economy and weak stakeholder alignment, America's healthcare system is in disarray, with a dysfunctional government, lack of business leadership, collapsing nonprofits, and protectionist policies that are causing prices to skyrocket.
4. "Apple a Day." With a poor-performing economy, but strong stakeholder alignment, health-conscious millennials reshape the health care landscape with political impetus for a single-payer system and unprecedented government regulation of the sector. Profitability declines as companies struggle with compliance and pricing pressures, while massive data collection of genetic information proves to be a double-edged proposition.
The entire U.S. health care sector stands to be transformed by a number of factors, including demographic shifts, disruptive technologies, a deeper understanding of genetics and more direct-to-patient care, according to A.T. Kearney's report, "Health@250 -- The Seven Drivers of Change Shaping the Future." A.T. Kearney experts detail industry implications of these trends and four possible scenarios of what could happen to the health care sector by 2026 – the 250th anniversary of the U.S. -- depending on the strength of the economy and the level of alignment between the various stakeholders. Click the slides below to take a more in-depth look at the drivers shaping the future of health care: "These developments are intersecting in extraordinary ways, with the promise to increase wellness, decrease disease, and set new standards for prevention and care," the experts write. "If America can capitalize on this opportunity and rise to meet persistent and emerging challenges, the potential exists to radically shift the trajectory of health costs, provision, access, and patient outcomes."
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Katie Kuehner-Hebert
Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.
