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Health Care ’19: Private Equity, Technology, New Business Models

PwC provides an excellent outline in its report "Top health industry issues of 2019: The New Health Economy comes of age." Last week at Davos, we noted that health care was one of the key agenda items as leaders across industries considered global economic activity for 2019 and beyond. Indeed, the sector promises to affect not only personal well-being, but also technology and M&A activity.

PwC provides an excellent outline in its report “Top health industry issues of 2019: The New Health Economy comes of age.” (Access the full report here.)

PwC writes: “The US health industry has often lagged other industries when it comes to modernizing. Once thought to operate outside the greater US economy, the industry—with its byzantine payment system, complicated regulatory barriers and reliance on face-to-face interactions—is being disrupted. Finally, there’s robust evidence that what PwC calls the New Health Economy is kicking into gear.”

The report outlines important stats:

  • “Eighty-four percent of Fortune 50 companies are involved with healthcare. Those include technology companies, telecommunications companies and financial services firms along with traditional healthcare organizations.”
  • “Venture capital funding for digital health startups is projected to top $6.9 billion in 2018, an increase of 230 percent from five years ago.”
  • “Private equity firms, long operating on the margins of the US health industry, closed 487 healthcare deals in the first three quarters of 2018, more than double the number of deals they closed a decade earlier.”
  • “A number of novel deals and partnerships were announced in 2018, including those involving CVS and Aetna; Amazon, Berkshire Hathaway and JPMorgan Chase & Co.; United Health Group and DaVita Medical Group; and a flurry of providers big and small. These new partnerships—and the many that don’t garner headlines but reshape their local markets—will transform the industry in 2019.”
  • “American consumers have told PwC’s Health Research Institute (HRI) since 2013 that they’re eager to embrace more convenient, digitally enabled and affordable care; finally, they’re finding it, with options that resemble the choices they have in other parts of their lives.”

Top Health Care Issues: 2019

So what are the top issues? According to PwC:

The Affordable Care Act in 2019: Still Alive. Two years into the Trump administration, the Affordable Care Act (ACA) remains law yet Republican lawmakers and the administration have reshaped parts of it through legislative, regulatory, budgetary and legal actions. In 2019, these actions will create new winners and losers.

Your company’s new, upskilled health worker of the future is you. “In 2019, healthcare companies will identify which employees have to be upskilled or reskilled to get the most out of new and impending technologies such as artificial intelligence (AI) and robotic process automation (RPA). These technologies will be critical in helping companies continue their shift into providing care anywhere through telehealth, as well as reduce transactional tasks for the 63% of US health workers that say the work they do requires a great deal of manual entry or analysis.”

Tax reform has only just begun for healthcare companies. “The healthcare industry will begin to feel substantial effects of the 2017 Tax Cuts and Jobs Act in 2019. The law will create both new possibilities for companies looking to turn their tax savings into competitive advantages, and novel challenges for organizations facing new taxes. At the same time, emerging trade pressures may create uncertainties for companies hoping to maintain the status quo.”

Creating the Southwest Airlines of healthcare. “In 2019, a health industry increasingly pressured to do more with less will take lessons from emerging companies that have figured out how to deliver value to uninsured and underinsured–traditionally deemed unprofitable–while turning a profit.”

Private equity: Healthcare’s new growth accelerator. “For years private equity firms have invested in healthcare, but now the pace is quickening as they step up their presence in a highly fragmented health industry. Private equity’s acquisitions and investments in the health sector have become increasingly diversified and frequent. HRI expects this trend to accelerate in 2019, giving traditional healthcare companies opportunities to sell all or portions of noncore assets and double down on their core competencies.”

Change Arrives to the Health Care Industry

PwC’s report makes clear that massive change — in technology, business models, care delivery, outcomes, and more — is afoot in the health care sector. The report concludes:

“Change has come to the US health industry at last. Healthcare is joining other industries, such as financial services, that have aggregated data, cut out middlemen and made it easier for their consumers to engage. The industry also can look to these other industries for ways to increase efficiencies, improve customer experience and foster price transparency. The pressures of adapting to that change and seizing the opportunities it represents are spurring a wave of innovation in business models that hasn’t been seen in a long time. The long-term beneficiaries of these new models, new pairings, and new ways of delivering care likely will be the Americans who depend on the industry to keep them well as long as possible and to return them to wellness, or as close to it as possible, when they fall sick.”