Healthcare is the largest, fastest growing, and most complex industry in the world. The U.S. healthcare system accounts for more than $2.5 trillion in annual expenditures, which is nearly 20% of our nation’s Gross Domestic Product (GDP). According to economists in the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), spending is projected to grow at an annual average rate of 5.8% through 2020, which is 1.1% higher than our nation’s projected GDP growth. By 2020, healthcare spending is projected to exceed $4.5 trillion.
Despite its size and growth trajectory, the healthcare industry is plagued with large-scale problems and inefficiencies that are prompting a massive transformation in how care is accessed, delivered, and reimbursed. The fundamental challenges confronting healthcare have created opportunities for companies with innovative technology and services that address the most costly problems.
The broad ecosystem of industry stakeholders and sectors includes care delivery systems, such as hospitals and clinics, care providers, such as physicians and nurses, health insurance carriers, medical device and drug manufacturers, specialty service providers, government entities, and consumers, among others. Additional stakeholders and sectors include managed care, life sciences, biotechnology, population health management, telehealth, and consumer-directed health. These markets often function in fragmented and independent domains, each representing multi-billion dollar market segments. Widespread integration and consolidation is resulting as hospitals, health insurance carriers, and other healthcare-focused organizations seek new methods to address the increasing complexity, cost pressures, and government regulation.
Economic, Demographic and Operational Challenges
The U.S. healthcare system is plagued by large-scale problems related to limited resources, demographics, cost and quality, misaligned incentives, and information silos. The economic burden created by escalating costs is not sustainable. The massive annual healthcare expenditures in the U.S. are not resulting in an improved and more efficient healthcare market. According to CMS, the utilization of healthcare services is rapidly increasing at a time where there are diminishing healthcare staff and resources. Market forces impacting this trend include an aging senior population, expanding health insurance coverage, advancement in medical technology, and higher rates of chronic diseases, such as obesity.
Hospital care, physicians, and clinics account for more than 50% of healthcare spending. Healthcare costs and quality remain misaligned as care delivered to a patient may not be tied to the quality of care, but rather the number of procedures performed. Care coordination and information sharing between healthcare stakeholders continues to be nascent. Paper charts still comprise a vast majority of how healthcare information is shared, and digital information is locked inside the silos where it originated, rather than being shared between hospitals, health insurance carriers, and government entities to improve transparency and decision making. Industry stakeholders are embracing change in healthcare, yet many questions persist including the areas where change is needed and who will bear the costs and risks.
Shifting Healthcare Landscape
To meet these challenges, the healthcare system is continuously evolving. The landscape is shifting to address escalating reimbursement and regulatory issues that require tighter budgets in an increasingly uncertain environment. Health reform and government mandates are fundamentally impacting how healthcare is accessed, delivered, and paid for. Operating and growing in this rapidly changing environment is challenging for all types of healthcare organizations. A broad set regulations and self-imposed programs have been introduced, including initiatives related to pay-for-performance, ICD-10 conversion, and fraud, waste, and abuse. These reforms are increasing accountability for payers and providers with a cascading effect on the entire healthcare delivery system.
Hospitals and care delivery systems are evolving to establish clinically integrated models with a more coordinated view of the patient across the system. Health insurance carriers, seeking to align incentives with improved care coordination, while reducing cost and generating better outcomes, continued to research, develop and test new payment methodologies tied directly to physician and hospital reimbursement. These “accountable care” and “integrated” models are forcing care providers and health insurers to work together more closely, sharing risk and aligning their interests to decrease costs and improve outcomes. In addition, many hospitals and clinics are merging in an effort to reduce costs and deliver care in a more coordinated fashion. This consolidation and integration will ultimately improve the sharing of information across localized geographies and systems, while providing broader networks for patients and consumers to select the physicians and facilities that they prefer.
Other large trends impacting the landscape include increased consumer engagement and technology adoption. Consumers and patients are increasingly becoming engaged across the care continuum to participate in the decision making for all aspects of their healthcare. They are demanding more transparency regarding cost and care options, driving many healthcare providers and insurers to begin to design consumer-focused products and services that are more personalized. The adoption of new products such as health savings accounts (HSAs) and defined contribution plans continued to grow as the responsibility for healthcare costs shift from employers to employees. In addition, the adoption of consumer technology and information services, while still nascent in the healthcare market, continued to grow across all healthcare organizations driven by compelling incentives and mandates. The U.S. government-enacted financial and implementation support initiatives, such as the ARRA HITECH provisions that include $35+ billion in incentives for healthcare organizations to modernize operations with “meaningful use” of healthcare technology, continue driving the adoption of electronic healthcare records and related information technology systems.
Demand for Scalable Services and Technology
To enable the delivery system to scale and meet the efficiency requirements of expanding healthcare demand, healthcare services and technology played an increasingly important role in the healthcare landscape. As organizations continued to wrestle with increasing healthcare complexity, reimbursement pressures, and government regulation, new services and technologies are enabling stakeholders to cost-efficiently respond to these challenges with improved care quality, error reduction, and improved sharing of information. In addition, as financial incentives drive adoption, many healthcare organizations are starting to see the benefits and return on investment from services and technologies.
New technology-enabled products and services continued to spur industry expansion and growth in emerging healthcare markets. Large, new healthcare markets are developing with a focus on consumerism, automation, clinical integration, access, compliance and regulation, mobility, and resource utilization. Innovative, disruptive healthcare services and technology companies are making an impact by improving various aspects of the healthcare system through leveraging clinical analytics across financial and operational workflows to build a complete view of patients and populations. Furthermore, information exchanges, which aim to seamlessly share health data across all market constituents, are spurring the development and deployment of innovative products and service with more efficient business processes.
Undoubtedly, growth opportunities abound amid the surging complexity, transformation and consolidation in the healthcare industry.
Staying on top of this dynamic industry requires significant dedication and resources. At TripleTree, we constantly engage multiple perspectives to understand both the micro and macro forces that are driving the healthcare marketplace. Our reputation as an industry leader comprised of invaluable critical thinkers has been earned by providing our clients with exceptional research, relationships – and results. We have independently developed and maintained the strongest network of companies, investors, and industry leaders. Ultimately, our market intelligence enables us to identify and create opportunities that exceed the thinking and capabilities of other firms.
With a focus on technology and services, we are active across many segments of the healthcare industry including:
Payer-Based Outsourcing: Claims Automation, Connectivity and Integration; Payment Integrity (Fraud, Waste and Abuse); Sales/Marketing Distribution; Medical and Population Health Management; Care Management; Behavioral Health Management; Mobile and Wireless Health; Pharmacy Benefit Management; Specialty Benefit Management; Vertical Integration (Payer-Provider Collaboration); Consumer Engagement
Provider-Based Outsourcing: Compliance, Payment Integrity and Revenue Cycle Management; Health Information Management and Coding; HR Outsourcing/Staffing; Supply Chain Management/Purchasing; Clinical Systems, Integration and Decision Support Systems; Outcomes, Quality and Safety (Patient Satisfaction); Vertical Integration (Provider-Payer Integration)
Healthcare Services: Care Delivery: Acute Care (Core, Specialty); Alternate Sites; Home Care; Hospice; Infusion Therapy; DME Distribution; Managed Care: Commercial; Medicare Advantage; Medicaid; Dual-Eligibles; C-SNP
Life Sciences: Sales, Marketing and Communications; Drug Safety and Surveillance; Customer Relationship Management (CRM), Data Management and Integration; Supply Chain Management and Distribution