By James Varelis and Brian S. Williams, PwC
In 2016, millions of American consumers will likely have their first video consults, be prescribed their first health apps, and begin using their smartphones as personal diagnostic tools. These new experiences will begin to make real the dream of anywhere, anytime healthcare, changing consumer expectations and fueling innovation.
Also in 2016, many Americans, faced with higher deductibles, will manage medical expenses with new tools and services rolled out by their insurance companies, healthcare providers, banks, and other new entrants to the healthcare space, such as software, hardware, and technology companies. Consumers may find these new experiences reminiscent of the way they now plan for retirement, using 401(k)s and other financial vehicles.
This will be the year that doctors and other clinicians learn to use insights gleaned from data, and to integrate novel analytical tools into their treatment plans. Supporting this transformation in the practice of medicine, leading medical device companies are developing partnerships with technology and software companies to aggregate large volumes of medical and consumer data. These companies are using cognitive computing to provide physicians and researchers with more holistic and personalized treatment options, including for difficult chronic conditions, such as diabetes.
Artificial intelligence-based coaching systems have demonstrated results in complex treatment areas, such as joint replacement, behavioral health, and spinal surgery, and AI technology shows promise in advancing treatment and demonstrable outcomes across a range of conditions. Expect data-oriented strategic partnerships and joint ventures to continue their prominence in 2016, with industry leaders redefining their approach to business development and partnerships to sustain competitive advantage in an outcomes-driven new health economy.
As physician preference sales fade due to the market forces of consolidation and readmission risk, medical device companies will likely face three new care delivery challenges and opportunities: First, retailers will most likely continue their aggressive push into care delivery, taking advantage of their physical presence, large traffic counts, and extensive consumer insights. Second, the emergence of “bedless” hospitals, where intervention occurs in the hospital and recovery takes place in the patient’s home or an alternative setting, will radically impact healthcare. Finally, we will likely see the rise of virtual care centers that oversee patients through an ecosystem of technology, diagnostics, devices, and sensors to provide the necessary data to support consumers and clinicians in care decision-making.
Fueled by alternative payment models, reimbursement systems that support the provision of remote care, technological advances, and powerful new database tools that can define value at the moment of intervention and along the care continuum, these new care delivery models will likely continue to spread and, in many cases, represent the initial steps on a long journey.
However, in the new health economy where care is distributed, data — be it patient-specific, for a cohort, or an aggregated set of data — becomes as important as the clinical efficacy of a particular device or diagnostic. In addition to clinical data, consumer-generated data is demonstrating predictive and prognostic health value. The proliferation of consumer-focused, clinical-grade sensors further explodes the volume of information available to researchers and clinicians in identifying, delivering, and monitoring patient-specific health results.
However, questions about who owns the data persist, impeding information sharing and, most importantly, creating challenges in defining partnerships where vital information is provided to the right party at the right time, aligning economic and health interests. To attain this vision, the industry will need to address interoperability and, in 2016, we expect new entrants to continue leveraging their technological strength and consumer loyalty to drive interoperability platforms.
Also, while consumer demand and market dynamics are driving change in healthcare, 2016 also is an election year, and healthcare will be part of the political mix. Despite two U.S. Supreme Court decisions solidifying the legality of the Affordable Care Act (ACA), efforts will continue to chip away at its provisions.
PwC’s Health Research Institute’s annual Top Health Issuesi offers insight on issues expected to impact the healthcare industry. Specific elements that will impact the medical device industry in 2016 include:
- Merger mania — High-profile mergers and acquisitions will continue in 2016, with regulators taking center stage in the debate over how consolidation impacts consumers. While consolidation will help the acquirers strengthen product portfolios and negotiating positions with larger providers and payers, leaders will also need to use their scale and resources to redefine how they compete in the new health economy.
- Care in the palm of your hand — Thanks to the rapid pace of technological innovation and shifts in financial incentives, care will begin to move into the palms of consumers’ hands, providing care anywhere, anytime. This transformation represents the greatest risk to the diagnostics industry, as new entrants push aggressively to provide consumer-oriented solutions that meet health and clinical needs.
- Cybersecurity becomes a medical device industry issue — As security breaches become more common and costly across all industries, consumer and regulator attention will intensify regarding the security of medical devices. By 2020, Internet-connected healthcare products will be worth an estimated $285 billion in economic value.ii But connectivity comes with a price – vulnerability to hackers and criminals. An estimated 85 percent of large health organizations experienced a data breach in 2014, with 18 percent of breaches costing more than $1 million to remediate.iii Device companies and healthcare providers will need to take preemptive action to maintain both consumer and investor trust, and to prevent breaches that could cripple the industry.
- The new money managers — Shouldering higher deductibles, consumers will seek help managing their health spending with fresh tools and services developed by players new and old. The medical device industry will need to define value that supports a consumer’s desire to attain and maintain health.
- Behavioral health rises in prominence — Technology and integrated care networks support the common goals of employers, healthcare payers, and care providers: Keeping costs down, productivity up, and consumers healthy. The focus on behavioral health will open a new frontier for the medical device and diagnostics industry.
- Care moves to the community — As payment shifts to value-based models, health systems will pursue lower-cost settings more aggressively while employing creative approaches to delivering care. The device and diagnostics industry will need to balance consumer demands against clinical requirements when designing products and solutions that integrate into a distributed care environment.
- New databases improve patient care and consumer health — New database tools will allow industry players to analyze data from many sources in novel ways, finally unlocking insights embedded in the reams of information being collected about consumers. The device industry will need to understand where and how these data sets help them define and capture value, and the industry will need to collaborate with new entrants whose extensive consumer knowledge will be vital to success.
- The medical cost mystery — In the journey to value-based care, health systems will use data to calculate the true cost of services, an exercise that can also uncover opportunities to become more efficient and improve outcomes. Healthcare providers will increasingly turn to the medical device industry to lower cost, improve efficiency, improve outcomes, and mitigate risk.
In 2016, the health industry will begin to lay down new paths to a more connected, transparent, convenient ecosystem of care. Forging new ways of receiving, paying for, and delivering care is a hallmark of the creation of a new health economy — an industry that is more digital, nimble, responsive, and focused on consumers. As organizations master these tools and services, they will combine them in new ways, form new partnerships, and ultimately transform the industry.
About The Authors
Jim Varelis is a Principal with PwC's Healthcare Group and leads the Global Medical Technologies Practice. With more than 25 years of industry and consulting experience, Jim has helped large medical device, diagnostic and pharmaceutical companies develop corporate and operational strategies including market entry, expansion, and acquisition strategies, and improve core business processes in innovation, quality, clinical and supply chain operations.
As a director in PwC's New Entrants practice, Brian Williams advises senior executives of traditional medical device and diagnostics companies on the “New Health Economy,” and senior executives at non-traditional healthcare companies seeking to enter and transform access to and adherence to care. He has nearly twenty years of investment, business development and strategy expertise within health care.
- Gartner, Forecast: The Internet of Things, Worldwide, 2013. November 2013. http://www.salesforcemarketing.com/internet-of-things-2/internet-of-things-2/
- PwC, Global State of Information Security Survey 2015. September 2014.