The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article.
The popular CBS reality TV hit “Survivor” is a global TV franchise created in 1992 in the UK that’s stayed true to its storyline consistently: castaways, immunity, tribal councils and grueling challenges across a 39-day shooting period lead viewers to the season’s end when one is named the sole survivor.
Our culture seems obsessed with survival. Suzanne Collins’ “Hunger Games” franchise is a blockbuster success in bookstores and the box office. Two of the three novels in the series (The Hunger Games, Catching Fire) were made into films with the third “Mockingjay” due out this November. We like “come back” stories and admire those in our midst who tough it out.
Survival is a key theme playing out in healthcare but it’s not being staged for TV or the box office.
- Hospitals are staring at cuts from Medicare, tougher negotiation with health plans, increased bad debt and frustrated physicians.
- Health insurers are struggling to balance compliance with new laws and soaring prices for drugs and medical services while competing for enrollees on the basis of premium costs.
- Drug companies face loss of patents, higher costs for R&D, increased pressure in pricing negotiation and added regulatory requirements around efficacy and effectiveness.
- Over-the-counter treatments, wellness programs and alternative health providers face increased demands for validation of their business claims and scrutiny from regulators.
- Device manufacturers are being told to demonstrate they’re no longer “essentially equivalent” to prior versions of the same device, and under intense scrutiny about their marketing practices (along with drug companies).
- Long-term providers face increased demand, decreased margins and heightened regulatory scrutiny about safety and fraud.
- Physicians foresee lower pay, more transparency and greater demands from patients armed with technologies and social media that threaten their sense of autonomy.
And so on.
There is no tribal council in healthcare, and the challenges are not resolved in a 39-day production schedule. They’re playing out at a local level in ever-increasing consolidation of physicians, hospitals and long-term care. They’re playing out in regions as bigger health plans absorb smaller, and as health systems expand into a wider array of goods and services. And they’re playing out nationally as Medicare, Medicaid, the VA, multi-state health systems and health plans centralize their planning and coordinate efforts more aggressively. Why?
The issue is healthcare spending. For almost 40 years, healthcare spending has exceeded the U.S. GDP by more than 2%. One in 7 of our civilian workforce is a healthcare worker. And recent forecasts are that annual healthcare spending will increase as much as 6% as seniors age into Medicare and the newly insured seek services from the system.
Healthcare in the U.S. is almost 18% of our GDP. It will continue to increase—most predict above 21% of the GDP in the next 20 years. It is a job-creator industry and the engine for innovation that benefits the world. But other U.S. industries, facing global competition and their own survival games, are subsidizing the healthcare industry and asking tough questions about its value. At the same time, legislators at the state and federal levels are being forced to choose between classrooms, border security, national defense and healthcare.
What’s it mean? There will be winners and losers in each sector. And maintaining the status quo is not an option.
Survival stories get attention these days. In the U.S. healthcare industry, survival is top of mind. Strategies to survive and thrive are being discussed in C suites and boardrooms, albeit many based on faulty assumptions lacking a solid fact base. There will be survivors, but not all.
Sources: bls.gov; cms.gov; “The Economic Case for Health Care Reform,” whitehouse.gov, June 2, 2009; Helen Adamopoulos, “CBO: National Healthcare Spending to Increase to 22% of GDP by 2038,” Becker’s Hospital Review, September 18, 2013
The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.
© 2014 Navigant Consulting, Inc.