An interview with Mitch Morris, MD, vice chairman and US/global health care providers leader, Deloitte Consulting LLP; Greg Scott, US health plans leader and vice chairman of Deloitte LLP; and Homi Kapadia, US life sciences leader and vice chairman of Deloitte LLP
Dr. Mitch Morris on opportunities for growth for health care providers: A significant opportunity in the evolution of the U.S. health system from volume- to value-based care (VBC) is under way, spurred by widespread efforts to control/reduce costs, improve outcomes, and obtain more value for money spent. While this evolution impacts all health care stakeholders, VBC’s future depends most heavily on physicians, due to their integral role in health care delivery.
It has become more common to hear the phrase “get big or get out” as it relates to health care. The need for health systems to aggressively grow, often by rapid consolidation of providers, seems critical to survival. Significant regulatory changes, technological innovations, financial pressures and market dynamics are setting the stage for this type of activity. From 2009 through 2013, hospital deal volume increased 14 percent annually. Physicians are rapidly moving from private practice to an employed model and are being acquired by health systems and health plans. Both vertical consolidation (health systems acquiring physician practices, ambulatory centers, diagnostic centers, home care services, and durable medical equipment and wellness companies) and horizontal consolidation (hospitals acquiring other hospitals) has been increasing, despite heightened regulatory scrutiny.
Greg Scott on opportunities for growthfor health plans: We are witnessing unprecedented regulatory, financial and competitive disruption in the health care industry. Roles of players are changing rapidly and strategies that made health plans successful in the past will not likely suffice for the future. While traditional employer group business is atrophying, new opportunities for growth are emerging. The rise of the individual consumer is one example. There are significant opportunities that health plans can capitalize on as consumerism takes shape in the health care industry. Both government (Medicare, Medicaid and dual eligibles) as well as commercial individual insurance are on the rise through public health insurance marketplaces, private exchanges, and off-exchange models. Health plans that understand consumers’ wants and needs, and are able to activate the right behaviors in the right consumers at the right time, will likely prevail and grow in the redefined, consumer-centric health care marketplace. Integration along the value chain also presents opportunities for growth. Collaboration between health plans and providers to drive value-based care and better health outcomes offers tremendous opportunities to expand and increase market share.
In addition to these U.S. opportunities, international expansion also offers potential for growth, even though most health plans are still opportunistic in their global strategies.
In 2015, health plans need fresh ideas and relentless execution of new sources of growth, both organic and inorganic, at home and abroad.
Homi Kapadia on opportunities for growthfor life sciences: US life sciences companies operate in a dynamic environment that presents numerous opportunities for growth. To capture these opportunities, companies in 2015 should focus on areas in which they excel, improve areas that are important to achieving their goals, and let go of elements that might be holding them back.
Market reconfiguration and consolidation are driving companies to search for the right scale. This could mean narrowing to a core set of capabilities or therapeutic areas or building them out by acquiring and managing a large portfolio of businesses. Each approach is resulting in an unprecedented level of deal-making in the form of mergers, acquisitions, joint ventures, divestitures, and licensing agreements. In addition, emerging markets are fueling the growth of local companies that are expected to shift the US-centric “skew” of the global competitive landscape and open up new M&A opportunities for US companies.
Innovating in specialty (versus primary care) therapeutic areas may drive considerable pharmaceutical revenue growth in coming years. Meanwhile, some biotech companies are moving to M&A and open innovation models as a way to help overcome organic productivity challenges and spur product and market growth. A number of medtech companies are integrating R&D, marketing, engineering, and other disciplines to more effectively connect customer insights with the biodesign process. In addition, some are looking for ways to wrap health care services (e.g., cellular therapy) around their products.
Read more about the 2015 outlook for life sciences and health care at www.deloitte.com/us/2015lshcoutlooks