September 19, 2017. and the number of small employers33.Defined as employers with fewer than 50 full-time employees (including full-time equivalent employees). How we lock in that speed is going to be a big imperative as we look ahead. 17. Subscribed to {PRACTICE_NAME} email alerts. The growth in these two segments—largely enabled by advanced analytics and digital transformation—has been so strong that the combined profit pool from all service vendors eclipsed the commercial health insurance profit pool in 2016 (if individual market losses are included). 12. Defined as employers with fewer than 50 full-time employees (including full-time equivalent employees). The data underlying this analysis came from a wide range of sources, including annual financial fillings (10-K) for CVS, Walgreens, and Rite Aid; Euromonitor; The 2017 Economic Report on US Pharmacies and Pharmacy Benefit Managers, Pembroke Consulting, Inc., and Drug Channels Institute. Instead, could possess a first degree in robotics and have experience with how robots actually work in healthcare and other industries. This variation reflects the gross … Payer insights; Provider insights; Services Insights; Topics . The groups of systems that focused on either payer/provider integration or core hospital business growth experienced revenue growth during that time, but it was accompanied by margin erosion. We evaluated the M&A activity of the top 50 US health systems to classify their strategies into four types: The providers pursuing growth in distributed settings of care were the only group of health systems that experienced both revenue growth and margin improvement between 2012 and 2015 (Exhibit 8). The growth in the profit pool for clinical and financial services reflects ongoing industry changes. (The two were roughly equal if the individual market losses are excluded.) The consumer-oriented nature of these ecosystems also will increase the number of healthcare touchpoints, with the goal of modifying patient behavior and improving outcomes. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries, The future of business: Reimagining 2020 and beyond. McKinsey on Healthcare. Global management consulting company McKinsey and Company’s report, “The Great Acceleration In Healthcare: Six Trends to Heed,” identifies six trends in healthcare that are accelerating due to the global COVID-19 pandemic. In 2016, facilities owned by health systems with a market share above 50% in a given metropolitan area had margins that were 30% higher than those of either facilities owned by health systems with less than 25% market share or independent hospitals with a similarly small market share (Exhibit 7). Sozdatelev A et al. McKinsey analysis based on National Association of Dental Plans and IBISWorld data. And those people are going to need support—both emotional support as well as a bit of time to rest. At the same time, cost concerns, uncertainty, and complexity make it an unnerving one. November 2017. A range of factors, including meaningful use incentives, advanced analytics, and greater complexity in benefit design, have made sophisticated financial capabilities (e.g., for payment integrity and revenue cycle management) increasingly important for both payers and providers. Please use UP and DOWN arrow keys to review autocomplete results. Press enter to select and open the results on a new page. As automation begins to take over low-skilled jobs, such as manual labor jobs and office support functions, … Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. PBMs and retail pharmacies captured a greater share of total profits from the pharmaceutical value chain in 2016 than in 2012 (Exhibit 10). An important change has also occurred within the government lines of business for health insurers. Learn about This paper outlines the underlying drivers of historic—and potential future—profit pool shifts among industry stakeholders (health insurers, healthcare delivery systems, service vendors, and pharmaceuticals), as well as the impact technology-driven disruption could have on them. Consumers, employers, and the government continue to see the financial burden of healthcare grow faster than their incomes or revenues—a long-standing gap unlikely to change soon. Sozdatelev A et al. 2017 Employer Health Benefits Survey. In many countries, we’ve seen 70 to 80 percent of primary-care consultations either go online or be carried out by phone. McKinsey Payer Financial Database based on National Association of Insurance Commissioners filings. People create and sustain change. As we look toward the future of healthcare, there are four industry-level changes that could disrupt healthcare value pools as they exist today: modernized transaction and data infrastructure; radically more efficient medical supply chain; faster, more effective therapy development; and new, personalized, and intuitive healthcare ecosystems. tab. If you would like information about this … However, results from McKinsey physician surveys both before and during the COVID-19 pandemic suggest that these partnerships may benefit from an updated approach. The healthcare ecosystems of the future will likely be defined by the needs of different patient populations and their associated effective care journeys (including beyond care itself). If you would like information about this content we will be happy to work with you. Clinical laboratory and pathology groups that support ambulatory and virtual care, and urgent care and retail clinics may experience growth. That is a bit of a wake-up call to say we need to stress-test our system. DISCLAIMER: The views and opinions expressed are those of the interviewee(s) and are not necessarily those of McKinsey and Company. McKinsey analysis based on Capital IQ and Pitchbook data. Penny Dash: And what’s happened in the past three months has been an unbelievable level of adoption. Services. Hear perspectives on navigating the changing healthcare environment, embracing opportunities and disruptions, and preparing for the future of healthcare across the globe. After 40 million virtual visits, Australia just made temporary telehealth expansion permanent. For example, increasing use of care management and population health management models has strengthened the market for clinical services. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Kaiser Family Foundation. In our experience, capability investments are driving value from continual improvements in total cost of care (e.g., through care management, utilization management, consumer engagement) and revenues (e.g., through improved product design, distribution, quality-based revenue such as Medicare Star ratings, and better capture of risk-adjustment revenue leakage). Reinvent your business. McKinsey Payer Financial Database based on National Association of Insurance Commissioners filings. Climate & sustainability. 10. Sozdatelev A et al. Since the Affordable Care Act was enacted, a major shift in insurers’ profit pools has occurred. The intrinsic demand for healthcare services continues to rise in the United States, given population aging, the increasing prevalence of chronic disease, and the search for a higher quality of life. McKinsey analysis based on American Hospital Association hospital survey and Medicare cost report data. Please try again later. McKinsey analysis based on Capital IQ and Pitchbook data. Please click "Accept" to help us improve its usefulness with additional cookies. ... McKinsey Global Institute. Leadership and talent capable of operating in this bifocal world will be essential. Team-based care at Western Diabetes Institute, California. Researchers note that the shift is not inevitable, however, and the window for providers to act is now. Most transformations fail. Between 2012 and 2016, enrollment in fully insured group plans decreased 16% as employers switched to self-insured arrangements,22.Kaiser Family Foundation. … The data underlying this analysis came from a wide range of sources, including annual financial fillings (10-K) for CVS, Walgreens, and Rite Aid; Euromonitor; The 2017 Economic Report on US Pharmacies and Pharmacy Benefit Managers, Pembroke Consulting, Inc., and Drug Channels Institute.) McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. These realities are likely to put even more pressure on health systems to consolidate. I think it will be very tempting to say, “Whew, right. Learn more about cookies, Opens in new Digital upends old models. October 26, 2017.Retail pharmacies are already acutely aware of the potential of technology-driven disruption, as front-of-store pharmacy revenues have been virtually flat since 2012 due to the digital transformation of the retail industry. cookies, McKinsey_Website_Accessibility@mckinsey.com. Shubham Singhal: In healthcare, coming into the COVID-19 crisis, there was the promise of the use of virtual health, digital health, telehealth. 14. ‎The McKinsey on Healthcare Podcast features conversations with McKinsey and other industry experts on the challenges, strategies, and innovations shaping the healthcare industry. These forces will require commercial health insurers to continue to innovate and drive efficiency to maintain and grow their share of industry profit pools. Hear perspectives on navigating the changing healthcare environment, embracing opportunities and disruptions, and preparing for the future of healthcare across the globe. Scale within local markets is also important. While the McKinsey trio has a strong idea of what the future of hospital care will look like, industry-wide disruption is long overdue. Scale is also becoming increasingly important for providers. Kaiser Family Foundation. 9. Please click "Accept" to help us improve its usefulness with additional cookies. See more from McKinsey Future of Health Care Forum, Oct 1-2 2015, Stockholm, Sweden . October 1-2, 2015 | Stockholm, Sweden Dr. Pumerantz, Vice Chairman of Medical Advisory Board, ClickMedix, describes ClickMedix – Western Diabetes Institute integrated care model for chronic diseases for diabetes and related co-morbid conditions. November 2017. Helping US healthcare stakeholders understand the human side of the COVID-19 crisis: McKinsey Consumer Healthcare Insights. 2017 Employer Health Benefits Survey. Something went wrong. Corporate finance; Digital transformation; Marketing & sales; Operations; Organizational excellence; Payments; Scale & M&A ... these programs helped create an important and powerful infrastructure that certainly will be useful in the future. AI has only recently begun to take a leading role in healthcare. Exhibit 8 They also face pressing questions about what the future of healthcare provision may look like in a post-COVID-19 world. What the COVID-19 crisis has done is accelerated that. If you would like information about this content we will be happy to work with you. The authors would like to thank Elina Onitskansky, Rob May, Nikhil Seshan, Manuel Valverde, and Rasagya Kabra for their contributions to this article. Hospital spending on drugs grew by 7% to 11% per year, far outstripping growth in reimbursements from both commercial and government payers (estimated at 3.5% to 5% and 1% to 1.5%, respectively).13 People don’t want to use digital services for healthcare. A transcript of their remarks follows below. So the flexibility in the workforce is a very important part. Similarly, there is still a gap between consumers’ interest in telehealth (76 percent) and actual usage … Shubham Singhal: How do we take the learnings around the rate and speed at which you can change—and take that speed that you’ve shown during “wartime,” if you will—and take it forward to “peacetime”? Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Please try again later. Although growth in the penetration of mail-order pharmacies has waned in recent years, initial attempts to sell prescription drugs online (e.g., through start-ups like Pill Pack and Lemonaid Health) have started gaining traction.17 McKinsey's survey also found that about 76% of consumers say they are highly or moderately likely to use telehealth in the future. Exhibit 9 Employers in several markets are already collaborating to pursue new models of care delivery for their workers. McKinsey analysis based on Capital IQ data. which suggests that the switch to lower-cost, less-capital-intensive care delivery systems will not abate. Reuters staff. Our flagship business publication has been defining and informing the senior-management agenda since 1964. During a crisis, do we have established protocols for allowing a nurse in the hospital so that they can be trained to be an ICU [intensive-care-unit] nurse and capable of helping with ventilators, for example? Centers for Medicare and Medicaid Services’. (The pharmacies have experienced revenue growth below 1% for general merchandise and 2% for over-the-counter medications; the comparable numbers in the overall US market are about 2% and 4%, respectively.16 Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. 8. 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