A view from the Center

Deloitte's Life Sciences & Health Care Blog

2016 Outlook: Opportunities for growth in the life sciences and health care industry

An interview with Mitch Morris, MD, Vice Chair and US and Global Health Care leader; Greg Scott, Vice Chair and US health plans leader; and Greg Reh, Vice Chair and US and Global Life Sciences leader.

Where are the opportunities for growth in health care and life sciences?

Dr. Mitch Morris:  The opportunities for the provider sector in 2016 revolve around strategic approaches to providing additional value at more reasonable cost and greater efficiencies in organizational structure and service.

Strong mergers and acquisition (M&A) and consolidation activity is expected to continue, involving horizontal integration across health providers and vertical integration within the care continuum. Vertical integration offers a special opportunity for organizations, as it promises a shift closer to a more financially viable value-based care model.

As Americans live longer and once-fatal diseases become chronic illnesses, value-based care (VBC) will only grow in importance. As a result, providers have new opportunities to offer population health management services to more effectively serve these patients and improve outcomes. They’ll start moving the needle on stabilizing and reducing health care expenditures.

So far, a majority of providers have only dipped their toes into the expanding pool of value-based care. Transitioning into productive VBC models isn’t easy, but the growth potential is significant. We expect to see great progress among providers in 2016 toward value-based strategies.

Greg Scott: The opportunities for health plans fall broadly into four categories: government-driven lines of business, inorganic growth, the exploration of global markets, and diversification.

The commercial employer group business continues to be stronger than many would have predicted with the passage of the Affordable Care Act (ACA). For most health plans, however, Medicare, Medicaid, and individual markets shaped by the ACA represent the most promising sources of membership growth.

Growth potential for many organizations is expected to manifest in inorganic ways. Consolidation throughout the industry was a primary theme in the health plan marketplace in the last year, and we expect that to continue as an important growth play for plans in 2016.

An increasing number of US health plans are pursuing opportunities in global markets, across Latin America, Asia and Europe. That global upside will be widely explored in 2016, particularly by health plans that are most able to forge strong relationships with select partners in other countries.

Many health insurance companies operating in a heavily regulated industry are seeking diversified growth opportunities beyond the core business. Leading health plans, we expect, will move to adjacent product and services opportunities to expand their capabilities, customer reach, and financial returns.

Greg Reh: Emerging markets have yielded mixed results for US life sciences companies in recent years. But that doesn’t mean they won’t continue to offer promising opportunities in 2016. Life sciences organizations should be seeking openings in new markets that have significant access constraints and unmet needs, notably in Africa and Latin America.

Another important strategy will be restructuring the overall portfolio from a therapeutic area perspective, with M&D activity playing a significant role in the prospects for growth and diversification.

Certainly, we’re hearing a lot of discussion about demonstrating market value through innovation, in terms of operating models and the implementation of new technology. How the drive for operational innovation balances with the overall research and development (R&D) agenda will be a critical consideration over the next year.

Organizations also have a renewed opportunity to solidify their role within the evolving health care ecosystem. That will be one of the challenges facing the industry in 2016, as is the growing focus on patient engagement.

Although trust in life sciences companies appears to be rising, it still falls below other health care stakeholders. Addressing the question of trust directly is important to companies as they continue efforts to build patient confidence and gain permission to participate in patient engagement. That, in turn, can go a long way toward impacting market opportunities.

Read more about the 2016 outlook for life sciences and health care at www.deloitte.com/us/LSHC-Outlooks

Author bio

Mitch Morris: Dr. Mitch Morris is the Vice Chair and Global Leader for the Health Care Sector at Deloitte, including Consulting, Audit, Tax, and Financial Advisory Services. Dr. Morris has more than 30 years of health care experience in consulting, health care administration, research, technology, education, and clinical care. Earlier, he served as a Senior VP of health systems and CIO at MD Anderson Cancer Center where he was also Professor in Gynecologic Oncology and in Health Services Research.

 

Greg Reh: Greg leads the DTTL Global and US Life Sciences practices for Deloitte. In his role with Deloitte’s US member firm, he leads the life sciences sector practices for consulting, audit, tax, and financial advisory services. Greg has more than 25 years of experience helping clients in the life sciences, process manufacturing, consumer, and government sectors. In his role consulting to clients, his career has spanned such topics as technology strategy, integration solution development, and implementation of emerging and disruptive technology. Prior to his consulting career Greg held positions at a government research lab, where he led teams in the design and development of life support devices; and was a lecturer at the University of Pennsylvania.

 

Greg Scott: Greg Scott, Deloitte Consulting LLP, is national leader of the Health Plans Practice. He has over 25 years of industry experience as a management consultant, insurance company executive, and government official. Greg’s expertise includes health system reform, Medicare, Medicaid, market strategy, operational performance improvement, and M&A. He has served commercial health plans, integrated delivery systems, PBMs, and federal and state government agencies. Greg joined Deloitte in 1998.