Top US health industry trends of 2007

8 December 2006

New York, USA. The year ahead will be a watershed for the health industries, according to PricewaterhouseCoopers LLP, as health savings accounts reach a tipping point, states act where the federal government hasn't and pressure on pricing amid demand for transparency forces pharmaceutical companies, hospitals and health plans to rethink their strategies. These are among the top issues identified by PricewaterhouseCoopers' Health Research Institute, which today released its report, "The Top Seven Health Industry Trends of '07."

The report also includes findings of a nationwide survey of 1,000 Americans about their perceptions of the U.S. healthcare system. The survey identified significant differences between what the public and industry believe to be key issues, including:

  • Nine out of ten Americans (90%) believe that greed is a major reason that U.S. healthcare costs are rising, a greater number than those citing drug prices, care for the uninsured, business inefficiencies or malpractice costs.
  • Nearly one-quarter (24%) of Americans don't yet believe that having an electronic health record will improve the quality of healthcare, and four in ten consumers (42%) are unsure.
  • Only one in six (17%) agrees that a very important way to reduce the cost of healthcare in the United States is for consumers to share more of the cost, which is the strategy behind high-deductible health plans with Health Savings Accounts. More than half of those surveyed (51%) believe that better, more advanced medical technology and diagnostics is the answer.

"Every health organization across the health industries is responding to pressure to reduce costs, meet growing demand and do more, better and faster with less," said David Chin, MD, partner and leader of PricewaterhouseCoopers' Health Research Institute. "Our survey, however, found a disconnect between what the American people, policy makers and industry think is wrong with our nation's health system and how to fix it. It appears that consumers may not appreciate the complexity of healthcare as a business, and therefore the industry's messages about itself and the challenges it faces are failing to resonate in the court of public opinion. This disconnect must be addressed before real progress can occur."

PricewaterhouseCoopers has identified the following as the top seven trends in the health industries for 2007, based on its work with leading employers, policymakers, associations, advocacy groups and organizations across the health industries, including hospitals, health systems, physician groups, government and commercial health insurers, pharmaceutical companies and life sciences firms:

  1. States Take the Initiative: In the presence of federal gridlock, states are taking the lead on divisive issues such as stem cell research, health insurance coverage for the uninsured and oversight of advertising and promotion by pharmaceutical companies. Responding to local social and fiscal concerns, states are developing innovative insurance programs, forming public-private partnerships to spur innovation and passing legislation to drive greater accountability and transparency from hospitals, physicians and pharmaceutical manufacturers. According to PwC, such state-led initiatives will likely expand in 2007, but the risk is a patchwork quilt of local programs and regulations.
  2. Transparency Could be Revealing: The demand for transparency around pricing, quality measures, safety standards and community benefit is being driven by and is supportive of consumer-directed healthcare and pay-for-performance. In 2007, the health industries will focus on becoming more transparent, but government, insurers and employers need to educate consumers about the availability and use of such information. Providers will need to dedicate more resources to reporting, a strategic issue that can no longer be delegated down in the organization.
  3. Time to Walk the Talk on Technology: Developing a digital backbone to support electronic health records, interoperability and transparency is a national priority, but the public mandate is unclear and the industry is struggling with the cost and return on the investment. According to PwC's research, nearly one-quarter (24 percent) of Americans don't yet believe that having an electronic health record will improve the quality of healthcare, and four in ten consumers (42 percent) are unsure. Progress will take an investment of resources from the government and/or the private sector.
  4. Consumers Take the Wheel: The shift toward consumer-driven healthcare as a way to control costs will continue, but the year ahead will be the tipping point for HDHPs and HSAs. Insurers, employers, and to some extent the government have been proceeding in favor of consumer-directed health plans in the absence of strong support from the consumers themselves and from strong data on the results of such changes in benefits. PwC's consumer research found that only one in seven Americans (17 percent) surveyed by PwC thinks that increased cost-sharing is a "very important" way to reduce healthcare costs. With a critical mass of people now enrolled in these plans, 2007 will be the year to see whether they really have results to offer, and for consumers to weigh in on what they think of them.
  5. Price Check for Pharmaceuticals: Forty-two blockbuster drugs will lose their patents in 2007, opening the door to generic equivalents and potentially creating an enormous loss of revenue for brand name
    pharmaceutical manufacturers. PwC's consumer survey indicates that the public is quite aware of and sensitive to drug prices, perhaps due to relatively high cost sharing and price transparency of pharmaceuticals, relative to other health services. Nearly three quarters (72 percent) of consumers surveyed said they would be willing to take a generic versus brand--name prescription drug. According to PwC, drug pricing will come under continued pressure from generics, and pharmaceutical companies will have to develop innovative pricing strategies to compete.
  6. Obesity is the New Smoking: First smoking, now weight. There is a culture shift around healthy eating sweeping the United States, as evidenced by the number of fast food chains cutting out transfats and U.S. companies introducing health and wellness programs. Two-thirds of U.S. adults are overweight, and obesity's impact on chronic health problems is stirring healthcare organizations and employers to
    aggressively promote weight loss. Public attitudes have yet to catch up: While three in five Americans (61 percent) believe health insurance should cost more for smokers, only 40 percent believe it should cost more for those who are overweight because of poor lifestyle habits. In 2007, expect public health campaigns to push the envelope on obesity through wellness programs and financial incentives to lead healthier lifestyles.
  7. Small is Big: The competitive landscape will change as healthcare gets smaller, more focused and patient friendly under consumer-directed healthcare. Physicians and hospitals are now competing with retailers, several of whom have announced plans to open mini-health clinics within their walls. Consumers like the idea: Four in ten people surveyed by PwC (42 percent) said they would seek non-emergency care from a retail health clinic. In addition, large general hospitals are seeing competition from increasing numbers of smaller, specialty hospitals, surgery centers and outpatient clinics, the result of regulatory action overturning the specialty hospital ban. There already are 130 specialty hospitals in operation and more under construction, predominantly in the South and West.

"Though there is disagreement about priorities, most everyone agrees that our current health system is ailing and isn't sustainable without major changes," said Sandy Lutz, director of PricewaterhouseCoopers' Health Research Institute. "There is a myriad of issues facing health organizations and opportunities for executives to address them, but they need to also focus on closing the gap between how consumers view the industry and how the industry views itself. Healthcare is a people business and must become more consumer- centric. To be sustainable, health organizations must communicate and connect with their customers through innovative approaches and fresh perspectives - beginning in 2007."

A copy of The Top Seven Health Industry Trends of '07 is available at www.pwc.com/healthcare under "Publication/Thought Leadership."

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