3 Health Care Trends That Don’t Hinge on the ACA

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Executive Summary

While the fate of the U.S health care bill is in flux, there are three immutable trends in the US healthcare system that won’t change. The first trend is demographic: The US population is continuing to age. Second, technology has become a pervasive element across health care system, with a major impact on diagnosis, treatment and communications. Third, discoveries in the life sciences that enhance the quality and extend the length of life will continue to flow from research laboratories. As a result, businesses that help patients to understand, access and use the healthcare system; that allow older patients to receive high-quality care while remaining in place; and that expand the capabilities and reach of electronic health records and digital health applications will benefit. Regardless of how the law evolves, tremendous opportunities will remain in these areas for consumers, medical providers, healthcare payers, and investors to shape and improve the health care system.

Laura Schneider for HBR

In early May 2017 Republicans in the U.S. House of Representatives voted to repeal and replace the Affordable Care Act (or Obamacare). Subsequently, Republicans in the U.S. Senate began working on their version of a law to do the same. The House bill is flawed, leaving many uncertainties that the Senate has promised to address. While the fate of the bill is in flux, there are three immutable trends in the U.S. health care system that won’t change. As a result, regardless of how the law evolves, tremendous opportunities will remain for consumers, medical providers, health care payers, and investors to shape and improve the health care system.

The first trend is demographic: The U.S. population is continuing to age. In 1960 the median age for men and women in the U.S. was 29.5; it is now 37.9, and in the next 12 years will exceed 40. Per capita annual health care costs are roughly $4,500 for people age 19 to 44; they double for people age 45 to 64; and they double once again for those 65 and older. Thus, as the population ages, health care services will naturally expand, as will the pressure to find efficient ways to deliver those services.

Second, technology has become a pervasive element across the health care system, with a major impact on diagnosis, treatment, and communications. In 2004 one in 5 practicing physicians used an electronic health record (EHR) in the U.S. Today nearly nine in 10 physicians regularly employ EHRs. There’s a tremendous amount of information and structured data now available to guide treatment, assess outcomes, and measure quality of care. Beyond EHRs, digital health tools — apps, wearable devices, and other hardware and software that measures and monitors health — are becoming common in consumers’ lives. From 2015 to 2016, investors poured more than $8 billion into funding these tools. More than 3,000 apps are now available to help manage diabetes alone. Clearly, most of these tools won’t survive. But technology has become rooted firmly in U.S. health care and, as elsewhere, consumers will choose many of the winners.

Insight Center

Third, irrespective of revisions to the ACA, discoveries in the life sciences that enhance the quality and extend the length of life will continue to flow from research laboratories. These are being driven by two major trends: the availability of personal health data, and the plummeting cost of integrating massive health data sets in the cloud. Based on these two foundations, we’ll begin to see the emergence of personalized medicine.

The pipeline for new drugs is bursting, and new devices and tools in the rapidly emerging digital health space will come to market more quickly. According to QuintilesIMS, there are more than 2,000 drugs in the late-stage approval process, and they will yield an estimated 45 new active substances annually over the next five years. This therapeutic deluge will make decision making more complex for clinicians, who must understand efficacy and risk, and for payers, who must choose which treatments to favor through preferred pricing. Indeed, the profusion of new treatments may present a serious challenge to the current payer strategy of negotiating favorable pricing with drug and device companies.

Taken together, these three trends will drive dramatic changes in health care, regardless of government policies. We see several areas where patients and care providers, as well as entrepreneurs and investors, will likely benefit.

First, businesses that help patients understand, access, and use the health care system will be rewarded. Patient engagement has been a mantra for those seeking to reform health care, as it’s widely accepted that patients who are engaged in their own health care have better outcomes. Technology plays a crucial role in promoting engagement, in part by customizing medical information for each patient, and digital platforms — whether websites, apps, or EHRs — that promote health and help patients understand their medical conditions and their options for treatment and prevention will grow in importance.

Investors are already keenly focused on this area, with many startups competing for a slice of the market. In 2011 81 digital health startups received venture funding; with consistent year-over-year increases, 296 startups were venture backed in 2016. The venture industry is betting big on digital health, with $4–$5 billion invested annually. But traditional business models focused on and serving third-party reimbursement continue to struggle with how to monetize digital health tools. We believe models will emerge that capture value from the growing consumer demand for effective digital health-promotion support. Solutions that drive patient engagement and improve outcomes will succeed in the marketplace.

Second, we expect to see growth in businesses that make it easier for consumers to access affordable health care while living where they want to live, in a setting that they can afford. In the U.S., the two key drivers of this trend are the aging of the population and the need for cost control. Telemedicine is increasingly becoming an adjunct to care that addresses these trends. Today’s technology enables practitioners to scale their services, seeing more patients in less time, and it embeds analytics that can help focus clinicians’ time on the cases where they can have the greatest effect. From the patients’ perspective, telemedicine is appealing because it allows them to engage more frequently with doctors than they could through in-person visits — a particular aid for older patients with chronic conditions, who benefit from the frequent contact and care coordination that telemedicine can provide.

The market for services tailored to the elderly, helping them age in place, will expand in many directions. Stanley Healthcare, a division of Stanley Black & Decker Corporation, which sells products to over 17,000 hospitals and senior living facilities, offers a good example. One product helps reduce falls; another, Wander Guard, helps seniors with early stages of dementia live semi-independently. Stanley and others have quickly gained market share by serving the needs of this population and addressing patients’ and caregivers’ eagerness to adopt assistive technologies.

A third growth area is in EHRs and digital health applications. While new EHR offerings continue to emerge, the market has consolidated around a few large players, which has held back innovation and interoperability. The proprietary nature and standards for EHRs are likely to diminish, however, as industry pressure opens up data repositories and personal data become more accessible. Two initiatives deserve particular attention, because both will accelerate data liberation, punish companies that resist, and reward vendors that get onboard early: the Human API platform and the Fast Healthcare Interoperability Resources (FHIR) specification. While they are different from each other, both are significant attempts at retrieving, aggregating, and contextualizing patient wellness and medical data. With the venture capital firm Andreessen Horowitz and Alphabet’s Eric Schmidt among its investors, Human API has the audacious objective of creating a consumer-controlled digital repository, where health data is securely shared with just those parties selected by the consumer. FHIR is a standard crafted by Health Level Seven, a health data sharing nonprofit, to provide interoperability among health systems. Rather than passing entire health documents among providers, FHIR allows the transfer of clinical and administrative data between software applications used by different health care providers, enabling them to access the specific data needed from medical records across systems.

We’re convinced that these trends will ultimately drive mainstream adoption for proven digital health solutions. Where clinical trials demonstrate efficacy, and the solutions allow for improved cost management, we’ll begin to see multiple models emerge: insurance reimbursement, employer subsidies, and even consumer purchases. As adoption increases, companies that today provide therapeutics — principally pharmaceutical and medical device manufacturers — will begin to add digital health solutions to their portfolios.

Uncertainty surrounding the health care bill shouldn’t have a material effect on the success of various solutions. Indeed, with the current government gridlock, the rapid development of and growing demand for new health care technologies may help policy makers chart the course forward.

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3 Health Care Trends That Don’t Hinge on the ACA

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