2019 Global health care outlook - Shaping the future - Deloitte

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2019 Global health care outlook
Shaping the future
2019 Global health care outlook l Shaping the future

Overview and outlook                                                      3
Global health care sector issues in 2019                                  7
    Creating financial sustainability in an uncertain health economy      7
    Using new care delivery models to improve access and affordability   10
    Adapting to changing consumer needs, demands, and expectations       16
    Investing in digital innovation and transformation                   19
    Maintaining regulatory compliance and cybersecurity                  24
    Recruiting, developing, and retaining top talent                     28
Appendix                                                                 33
Endnotes                                                                 35
Contacts                                                                 40

2019 Global health care outlook l Shaping the future

Overview and outlook

The adage, “What goes up, must come down,” isn’t likely to
apply to the global health care sector in 2019. Aging and
growing populations, greater prevalence of chronic diseases,
exponential advances in innovative, but costly, digital
technologies—these and other developments continue to
increase health care demand and expenditures.

2019 Global health care outlook l Shaping the future

Snapshot: Global health care
by the numbers
      Global health care spending is projected to increase at an annual rate of 5.4% in 2018–2022, a considerable
      rise from 2.9% in 2013–2017. This increase reflects the strengthening of the dollar against the euro and
      other currencies, the expansion of health care coverage in developing markets, the growing care needs of
      elderly populations, advances in treatments and health technologies, and rising health care labor costs.1

      Per-person health care spending is expected to continue to vary widely, ranging from $11,674 in the United
      States to just $54 in Pakistan in 2022. Efforts to close this gap will be constrained by higher population
      growth in developing economies.2

      Higher per-person spending does not always equate to higher-quality health care. When compared to 10
      developed countries, the United States ranks last in overall health care performance, highlighted by per capita
      spending that is 50% greater than the next country and last place rankings in efficiency, equity, and healthy lives.3

      Life expectancy appears to continue to climb. It is projected to increase from 73.5 years in 2018 to 74.4 in
      2022—bringing the number of people aged over 65 globally to more than 668 million, or 11.6% of the total
      global population. Increasing life expectancy and years of productive life is a major achievement for health
      care, because increased output per worker is associated with increased real GDP per capita. The effect is
      expected to be most noticeable in Japan, where this share will likely reach almost 29%; in Western Europe it
      is estimated near 22%. Even some developing countries, such as Argentina, Thailand, and China, are
      starting to experience similar situations.4

      The fight against communicable diseases—through better sanitation, improved living conditions, and wider
      access to health care—is making notable gains. The number of AIDS-related deaths dropped from 2.3
      million in 2005 to an estimated 940,000 in 2017, largely due to the successful rollout of treatment.5
      Infections from tuberculosis are falling by around 2% a year.6 The estimated number of malaria deaths
      worldwide fell to 445,000 in 2016, down from nearly one million in 2000. New vaccines and wider use of
      treated nets have cut infection and death rates for all mosquito-borne diseases.7

      Non-communicable diseases (NCDs)—most prominently, cancer, heart disease, and diabetes—accounted for
      71% of the 56.9 million deaths reported worldwide in 2016; that share increases to over 80% in the most
      developed markets. NCDs’ rise in both developed and developing markets is fueled by urbanization,
      sedentary lifestyles, changing diets, and rising obesity levels.8

      Ambient pollution contributed to 4.2 million deaths worldwide in 2016, with the Western Pacific region
      among the worst affected.9 In China, the effort to fight pollution is a focus of the government’s health care
      policy due, in part, to its negative impact on GDP (e.g., decreased worker productivity and the cost burden of
      disease). One culprit drawing increased attention: diesel-powered vehicles, which are now known to emit
      more pollution than previously thought.10

2019 Global health care outlook l Shaping the future

Health care stakeholders—providers,                    which requires a philosophical shift in           platform interoperability.
governments, payers, consumers, and other              focus away from a system of sick care, in
companies/organizations—struggling to                  which we treat patients after they fall ill, to   It’s expected that health care’s evolution will
manage clinical, operational, and financial            one of health care,11 which supports well-        have far-reaching impacts as new business
challenges envision a future in which new              being, prevention, and early intervention.        models emerge that blur boundaries and
business and care delivery models, aided               It is unlikely, however, that today’s health      drive cross-sector and cross-industry
by digital technologies, may help to solve             care system and players will be able              convergence. The resulting “superclusters”
today’s problems and to build a sustainable            to make this shift alone. They likely will        of public-private providers, payers, and
foundation for affordable, accessible, high-           need to partner with other traditional            market disruptors could then use a smart
quality health care.                                   sectors such as employment, housing,              health community approach (figure 1) to
                                                       education, and transportation to address          collectively drive innovation, increase access
This vision may have a greater probability             the social determinants of health, and with       and affordability, improve quality, and
of becoming a reality if all stakeholders              new sectors such as retail, banking, and          lower costs through more efficient delivery
actively participate in shaping the future—            technology giants to improve data and             models.

     Figure 1: Characteristics of a smart health community
                            Appropriate treatments are delivered at the appropriate time, in the appropriate place, for the appropriate patient

                            Clinicians use technology to more accurately diagnose and treat illness and deliver care

                            All care delivery stakeholders across the ecosystem effectively and efficiently communicate and use information

                            The correct individuals do the correct work (e.g., nurses handle patient care, not administrative tasks)

                            Patients are informed and actively involved in their treatment plan

                            New, cost-effective delivery models bring health care to places and people that don’t have it

                            Efficiency improves; waste declines12

Standing at the epicenter of the new health            health care delivery model from business-         as consumers join other stakeholders
care value system will likely be informed and          to-consumer (B2C) to consumer-to-business         in accessing, analyzing, and sharing
empowered consumers—change agents                      (C2B). In response, stakeholders are              information. In addition, disruptive trends
and active caretakers of their health who              expected to use innovative technologies           in health care delivery and mobility may
have high expectations of their health care            and personalized programs to engage               radically alter everything from the site of
ecosystem. These consumers will likely                 with consumers and improve the patient            care to who delivers care and how.13
be “pulling” solutions rather than being               experience. Data interoperability, security,
“pushed” services, flipping the current                and ownership should move to the forefront

2019 Global health care outlook l Shaping the future

Is there a road map to this future state? Are    care system? It’s highly likely that every     and diverge. There is, however, a common
there directions to guide stakeholders’ steps    organization’s journey will be unique; they    departure point: Responding to the issues
along the path to an accessible, affordable,     may be traveling with companions at times      impacting the global health care community
high-quality, and sustainable health             and alone at others; paths may converge        in 2019 (figure 2).

Figure 2: Global health care sector issues in 2019

            Creating financial
                                                                                                  Maintaining regulatory
          sustainability in an
                                                                                                  compliance and cybersecurity
     uncertain health economy

             Adapting to changing                                                                              Investing in digital
       consumer needs, demands,                                                                                innovation and
               and expectations                                                                                transformation

          Using new care delivery                                                                              Recruiting, developing,
               models to improve                                                                               and retaining top talent
           access and affordability

This outlook reviews the current state of        patients, and other stakeholders; and
the global health care sector; explores          suggests considerations for them as they
trends and issues in 2019 impacting health       seek to shape the future of health care.
care providers, governments, other payers,

2019 Global health care outlook l Shaping the future

Global health care sector
issues in 2019

Creating financial sustainability in an uncertain health economy

The emergence of personalized medicine,                or niche player—to remain relevant and          annual rate of 5.4 percent in 2017–2022,
exponential technologies, disruptive                   financially viable.                             from USD $7.724 trillion to USD $10.059
competitors, expanded delivery sites, and                                                              trillion (figure 3), although cost-containment
revamped payment models is injecting                   Battling health system cost pressures           efforts combined with faster economic
uncertainty into the global health economy             Global health care expenditures continue to     growth should maintain the share of GDP
and increasing the urgency for organizations           escalate, shining a light on health systems’    devoted to health care at around 10.4
to plan when and how to make future                    need to reduce costs and increase efficiency.   percent over the five-year period to 2022.14
moves—as a market leader, fast follower,               Spending is projected to increase at an

Figure 3: Health care spending (USD billion), and CAGR 2017 - 2022

                                 Global                                                                         7,724

                  North America

                Western Europe

             Asia & Australasia

                    Latin America

         Middle East & Africa

       Transition economies                                                                                                       2022

Source: The Economic Intelligence Unit, Data Tool accessed on 16 August 2018

2019 Global health care outlook l Shaping the future

Similar with recent years, health care            appear to be falling short of what is              in 2016 and the subsequent creation of
spending in 2019 will likely be driven by         needed to counter persistent challenges            Integrated Sustainability and Transformation
the shared factors of aging and growing           in accessibility (imbalanced distribution,         Partnerships comprising both health and
populations, developing market expansion,         including a rural-urban divide), affordability     social care services, aimed at helping to
clinical and technology advances, and             (especially for patients with low economic         improve care quality and efficiency of
rising labor costs. In addition, the trend        status), awareness (of lifestyle diseases, risk    services, develop new models of care, and
toward universal health care is expected to       factors, vaccinations), absent or inadequate       prioritize prevention and public health.21
continue, with more countries expanding or        infrastructure, and skilled human resources.
deepening their public health care systems        Australian states, for example, appear to          Cost pressures aren’t confined to the public
to reduce out-of-pocket (OOP) expenses.15         be struggling with increasing public health        health care sector. As an example, private
Still, the short-term outlook for health care     care costs. Australia’s federal government         hospitals in India appear to be caught in
spending is expected to vary by region/           and state-based treasury departments are           a pricing squeeze; as a result, many are
country:                                          putting pressure on state-based health             emphasizing financial management and
                                                  systems and public health networks                 operational efficiency by closely watching
•• Population aging, rising wealth, and the
                                                  (PHNs) to drive innovation that can lead to        costs, using technology to become more
   expansion of China’s health care system
                                                  sustainable cost-bending.                          efficient, and testing different channel
   will likely drive increased spending in that
                                                                                                     and product mix strategies to maximize
   country, as will the rollout of a new health
                                                  The UK’s National Health Service (NHS)             per-bed metrics. In Australia, a drop in
   insurance program in India.16
                                                  is illustrative of the public health system        the number of people holding private
•• A recovery in global commodity prices          cost and funding conundrum: For                    health insurance is challenging private
   appears to be helping to repair public         example, in 2010–2011, just 5 percent of           hospitals and insurers already dealing
   finances and boost health care spending        NHS providers in England overspent their           with the systemic cost increases. The
   in many resource-dependent countries;          annual budgets. By 2015–2016, two-thirds           decline in private insurance policies is
   notably, in the Middle East, Latin America,    of trusts (66 percent) were in deficit as a        especially prevalent among younger,
   and the former Soviet Union.17                 slowdown in NHS funding took its toll. The         healthier individuals who, in response to
                                                  2015 Spending Review provided additional           increasing out-of-pocket expenses and
•• The United Kingdom’s economy and health
                                                  funding for the NHS, which contributed to          lack of transparency in product coverage,
   care spending could be dampened by its
                                                  a fall in deficits, but 44 percent of trusts       are choosing to invest their income in
   decision to leave the European Union (EU)
                                                  still overspent their budgets in 2017–2018.        well-being: sports, recreational activities,
   in 2019. Other EU health economies also
                                                  The NHS provider sector in total ended             nutritional supplements and the like.
   may be negatively affected by “Brexit,” as
                                                  the year with a deficit of £960 million.20         Looking ahead, Australia is expected to see
   well as the long-running migration crisis.18
                                                  The situation is exacerbated by the UK’s           consolidation in the private hospital sector
•• Tax reform and health policy changes           continuing and unrelenting increase in             to retain scale and drive efficiencies, along
   in the United States will likely continue      demand for hospital care despite initiatives       with potential purchases by Asian hospital
   to undercut the Affordable Care Act’s          to reduce over-reliance on hospitals.              groups. Private insurers, meanwhile, are
   (ACA) programs to expand health care           Concurrently, there is an increase in              looking to offset decreasing policyholder
   access and affordability. The end of the       the number of people unable to get an              numbers with claims reduction programs
   individual mandate in January 2019 should      appointment with a general practitioner            with a focus on prevention and early
   allow companies to offer their employees       (GP) and a lack of community and district          intervention, organizational redesign, and
   cheaper, less comprehensive policies.          services that limits NHS capacity to respond       new revenue streams (e.g., stepping into the
   While these changes will expand choice,        to the growing demand. To address these            provider space, running dental practices
   they are likely to reduce coverage.19          challenges, England has embarked on                that aren’t covered by public insurance,
                                                  longer-term transformational changes with          buying optometry clinics and home health
Despite funding increases in numerous             the creation of 44 geographically focused          care services providers).
countries, public health systems’ budgets         NHS Sustainable Transformation Plans

2019 Global health care outlook l Shaping the future

Competing with disruptive market                       •• Verily is also looking for opportunities to     (NHC), which will enable Luye to cater
entrants                                                  enter the health insurance market through       to the rising demand for cardiovascular
Health care profits have been eroding                     partnerships; initially, in the population      treatment.32 Fullerton Health China became
over time and, in parallel, new entrants                  health market. Alphabet planned to invest       a major shareholder in Shanghai Redleaf
are threatening to redefine fundamental                   USD $375 million in 2018 in the health          International Women’s & Children’s Hospital,
aspects of the health care business. The                  insurance start-up, Oscar Health.28             its first investment in the specialty hospital
health technology sector is expected to                                                                   sector.33 Ramsay Générale de Santé,
                                                       •• Philips’ “Connected Care Solutions” is an
reach USD $280.25 billion by 2021, at a                                                                   the largest operator of private hospitals
                                                          intelligent health care service that collects
CAGR of 15.9 percent between 2016 and                                                                     in France, announced in July 2018 its
                                                          patient data (generally related to chronic
2021.22 Among initiatives by top technology                                                               acquisition of Capio AB, a Sweden-based
                                                          diseases) and allows providers to monitor
companies to disrupt the health care sector:                                                              health care provider. The combined group
                                                          and deliver round-the-clock solutions by
                                                                                                          would become a leading pan-European
•• Apple23 is working with startup Health                 linking patient data with hospitals.29
                                                                                                          private health care services operator
   Gorilla to add diagnostic data to the
                                                                                                          spanning six countries.34
   iPhone, including blood work, by                    Pursuing mergers, acquisitions, and
   integrating with hospitals, lab-testing             partnering
                                                                                                          The search for alternative revenue sources
   companies, and imaging centers. The                 Some health care organizations looking
                                                                                                          is propelling vertical industry integration
   offering is primarily geared to physicians          to optimize financial and operational
                                                                                                          as well. Grab, the leading ride-hailing app
   and serves as a marketplace for them                performance continue to turn to mergers,
                                                                                                          in Southeast Asia, recently ventured into
   to place orders and share medical                   acquisitions, and partnering to add
                                                                                                          health care by partnering with Ping An Good
   records. But it also has a free offering for        capabilities and build scale. While horizontal
                                                                                                          Doctor, an e-health platform in China, aiming
   patients that promises to gather medical            integration in the United States has
                                                                                                          to deliver transformative online health
   information in 10 minutes. The goal is              somewhat slowed—government regulators
                                                                                                          care services in Southeast Asia. The duo
   to give iPhone users the tools to review,           with a “big-is-big-enough” mind-set have
                                                                                                          will provide an array of integrated medical
   store, and share their medical information,         denied some mergers—activity is brisk in
                                                                                                          services, such as AI-assisted online medical
   including lab results, allergy lists, and           other regions of the world. For example,
                                                                                                          consultations, medicine delivery, and
   more.24                                             Malaysia’s IHH Healthcare Berhad acquired
                                                                                                          appointment bookings through an online
                                                       India’s second-largest provider, Fortis
•• Alphabet’s Google unit has acquired                                                                    platform.35 Similarly, Indonesian ride-hailing
                                                       Healthcare, which operates a network of
   application program interface (API)                                                                    giant Go-Jek announced the integration of
                                                       34 hospitals. The four-month-long bidding
   management company Apigee to help                                                                      its medicine delivery service Go-Med into
                                                       war saw interest from both domestic and
   it create data pipes that will enhance                                                                 the HaloDoc app, a platform that enables
                                                       international suitors.30 Additional deals
   interoperability among hospitals,                                                                      online consultation with doctors.36
                                                       have included Life Healthcare, one of South
   physicians, and patients.25 The company
                                                       Africa’s largest private health care providers,
   is also applying artificial intelligence (AI)                                                          The United States is seeing mergers
                                                       selling its 49.7 percent stake in Max
   to tackle disease, from monitoring, to                                                                 between health care insurance companies
                                                       Healthcare Institute Limited to KKR.31
   detection, to lifestyle management.26                                                                  and pharmacy chains—especially those
                                                                                                          with retail clinics. The combined company
•• Alphabet’s health care unit, Verily, is             In other deals, Singapore-based Luye
                                                                                                          could provide direct care to the insurers’
   working on detecting diabetic retinopathy           Medical Group, which owns 53 health
                                                                                                          members and offer its workers one-stop
   via a partnership with Nikon’s subsidiary           care facilities across 26 cities in Singapore,
                                                                                                          shopping for health insurance. In one 2018
   Optos, which makes the machines for                 Australia, South Korea, and China,
                                                                                                          example, health insurer giant Cigna agreed
   retinal imaging tests and eye disease               completed a majority equity investment
                                                                                                          to acquire Express Scripts, the nation’s
   detection.27                                        in Singapore’s Novena Heart Centre

2019 Global health care outlook l Shaping the future

largest pharmacy benefit manager (PBM),           care; community- and home-based care.           align their cost structure and care models
for $52 billion.37                                In India, for instance, private clinics and     with reimbursement trends and payment
                                                  start-ups are targeting select clientele by     models, respectively.
Acquisitions by the world’s largest e-retailers   offering high-end diagnostics, maternity
have the potential to dramatically disrupt        care, oncology care, senior day care, and       Health plans that focus on affordability and
health care product and service delivery:         other specialties. The UK’s Moorfields Eye      create differentiation through innovation
Amazon’s 2018 purchase of online US               Hospital is a specialist NHS eye hospital       (i.e., member-focused digital service
pharmacy PillPack, which lets users buy           and a center of excellence for ophthalmic       offerings) could reduce the cost of care
medications in pre-made doses,38 is being         research and education. Moorfields’ 2,300       provided to members and maintain strong
echoed by Alibaba Group’s investments             staff treat people at over 30 sites in and      margins.
in pharmaceutical companies. In August            around London.41
2018, subsidiary Alibaba Health Information                                                       Providers and payers that embrace new
Technology acquired a stake in local              Stakeholder considerations                      business, care delivery, and risk models
pharmaceutical company Guizhou Ensure             Shrinking margins and rising costs are          could offset the disruptive potential of
Chain Pharmacy Company Limited.                   driving public and private health systems       powerful market entrants and emerge as
Ali Health engages in pharmaceutical              to use technology innovations, M&A,             leaders in the new ecosystem of affordable
e-commerce, intelligent medicine, and             and other partnering arrangements to            health care solutions. One suggestion is to
product tracking platform businesses in           improve operational efficiencies and            learn from industries outside of health care,
China, operating in the B2C pharmacy              reduce expenses; however, doing so can be       where we see technological and business
business. Guizhou Ensure Chain, along with        complicated by price controls, misaligned       process innovations that are applicable in
its subsidiaries, is principally engaged in       incentives, and disruptive market entrants.     a health care setting. For example, the use
pharmaceutical retail chain business.39           Yet there are ways to shape a more positive     of robotic process automation to improve
                                                  fiscal future.                                  claims time without overtime or increased
We also see continued convergence                                                                 staffing is growing. Also, some offshore
between the health care and life sciences         Governments that leverage private sector        vendors handling health care providers’
sectors (often in cross-border deals) as          strengths in cost-efficient operations,         revenue cycle processes are replacing
both seek new business models and                 through public-private partnerships and         full-time equivalent (FTEs) employees with
revenue sources. For example, the purchase        other collaborations, could help bolster        bots.42 While some leaders may be reluctant
of NxStage Medical, Inc., by Germany’s            underfunded and/or underperforming              to change the status quo, assessing and
Fresenius Medical Care, the world’s largest       public health systems. Also, positioning        taking risks will be an important part of
provider of dialysis products and services,       requested investments in prevention and         shaping a more sustainable global health
establishes Fresenius’s presence in the           well-being as providing benefits in terms of    care system.
US critical care space and positions the          economically active citizens and improved
company as a global leader in home                GDP may register more favorably with            Using new care delivery models to
dialysis.40 These transactions reflect            government treasury departments.                improve access and affordability
the increasingly blurred lines between
traditionally separate spheres of the rapidly     Health care providers that stress rigorous      Focusing on value- and outcomes-based
changing health care ecosystem.                   financial management, efficient operational     reimbursement
                                                  performance, outcomes-based care, and           Health care systems will likely need to
Some organizations are sidestepping the           innovative solutions development (e.g.,         innovate and embrace new business, care
“bigger-is-better” path to sustainability in      moving certain procedures to outpatient         delivery, and risk models to potentially
favor of single-specialty, niche areas: centers   settings) could improve care provision,         shape affordable, high-quality health
of excellence; low-cost/high-quality elective     reduce costs, counter declining margins, and    care solutions for the future. And while

2019 Global health care outlook l Shaping the future

change is never easy, a very important one             •• The advanced alternative payment                first year that other clinicians will receive
is already underway: the transition from                  model (AAPM) for Qualifying Participants        QP incentive payments based on their
volume-based/fee-for-service (FFS) models                 (QPs), which allows clinicians who have         participation in AAPMs. Additionally, for
to value-based care (VBC). Emerging VBC                   significant percentages of their practices in   the first time, performance information
reimbursement models are edging out FFS                   risk-bearing, coordinated care models to        for clinicians participating in MIPS will be
arrangements and creating a new paradigm                  receive temporary financial bonuses and         publicly available via the Medicare Physician
in which health care services are delivered               higher payment updates in the long term.        Compare website.46
by a coordinated care community sharing in
the responsibility—and risk—of outcomes                MIPS is budget-neutral; it produces savings        Across Europe there is growing recognition
and costs.43                                           in comparison to the baseline through              of the need to adopt a more value-based
                                                       minimal annual increases in the standard           approach to health care; although adoption
Building an outcomes-based financial                   rates under the Medicare Physician Fee             of VBC appears to be currently low, it
model and data infrastructure to maximize              Schedule through 2026. AAPMs are more              seems to be increasing.47 Likewise, local
VBC reimbursement pathways will likely                 wide-reaching and may involve both                 governments in Asia appear to be shifting
be fundamental to many health systems’                 commercial and government payers, with             their focus from volume-based to value-
sustainable growth. It’s expected that one             potential to generate significant savings          based care, although uptake is still slow.48
key to prospering in this volume-to-value              both to Medicare and to the American               Australia’s public health system appears
shift will be business integration and data            health system at large. The AAPM’s risk-           to be embracing the idea of a value- and
aggregation—both inside and outside of                 bearing coordinated care models are                outcomes-based payment model but the
an organization, and across sectors and                largely products of the Accountable Care           country is likely a couple of years away from
models of care. Transformative actions                 Organization (ACO) movement, where                 getting real traction; efforts to date have
could include adopting a coordinated care              providers that exceed quality and cost             been confined to pilots and discrete groups
model, improving clinician engagement                  benchmarks receive financial incentives            of patients. One example is the HealthLinks
and alignment, and building the technology             such as retaining a portion of any savings or      chronic care initiative in Victoria, which aims
infrastructure for sophisticated data                  receiving quality bonuses. In order to qualify     to improve care for patients at high risk of
analytics and financial modeling. While the            as an AAPM, an ACO needs to assume risk,           multiple unplanned hospital admissions.
level of investment is likely to be substantial,       meaning that failure to meet benchmarks            HealthLinks is testing whether a flexible
the market shift toward VBC is anticipated to          results in penalties or losses. Recent             funding model can remove some of the
present unprecedented financial and clinical           changes mean that a greater percentage             barriers that inhibit effective and integrated
opportunities.44                                       of ACOs will be required to take on risk           models of care, and promote innovative
                                                       over the next two years, and therefore             models that produce better outcomes for
The shift to value-based care appears to be            qualify as AAPMs under MACRA. While little         patients at no additional cost to the public
most active in the United States, where a              information is currently available on AAPMs’       health system.49
visible example is the Medicare Access and             specific savings to date, ACOs in general
CHIP Reauthorization Act of 2015 (MACRA),              were found to have saved Medicare $314             A successful value-based payments
which created two new Medicare Part B                  million in 2017.45 MACRA’s incentives for          strategy likely requires payer/provider
payment tracks for clinicians participating in         greater ACO participation may accelerate           collaboration, sharing of patients’ health
its Quality Payment Program (QPP):                     this trend across all US payers.                   data, and IT and analytical support. Given
                                                                                                          the interdependencies of public and
•• The merit-based incentive payment
                                                       It’s expected that 2019 will mark an               private sector stakeholders operating in
   system (MIPS), which provides positive
                                                       important milestone for MACRA: It is the           a VBC ecosystem, it is logical to expect
   or negative payment adjustments for
                                                       first year that payment adjustments under          that coming years will likely see new and
   clinicians whose practices are more closely
                                                       MIPS will be applied to Medicare Part B            novel public-private partnership models
   tied to FFS reimbursement; and
                                                       payments to participating clinicians and the       emerge that promote risk-sharing, allow

2019 Global health care outlook l Shaping the future

for blended financing of critical health care
infrastructures and programs, and maintain
                                                 Social determinants of health include factors
system sustainability.50
                                                 like socioeconomic status, education,
Shifting health focus                            neighborhood and physical environment,
Aging populations and the rise of non-
communicable diseases are driving an             employment, and social support networks,
                                                 as well as access to health care, including
industry shift away from curing disease
in the short term toward preventing and
managing disease and promoting overall
well-being in the long term. Emphasizing
                                                 income, education, and housing conditions.
these proactive measures, generally
grouped under the umbrella of population
                                                 Addressing social determinants of health is
health, will likely require a corresponding      important for improving health and reducing
shift in the way governments, providers,
payers, and other community partners             longstanding disparities in health and health
                                                 care that are often rooted in social and
interact: Instead of operating in silos that
create structural and cultural barriers
to care, they should work together to
coordinate care and services for the most
                                                 economic disadvantages.54
vulnerable people in the population. This
                                                 Coordinating efforts across government,              can make it difficult to coordinate efforts,
may only be achieved, however, if there is
                                                 societal, and health care institutions               integrate data, and assess shared impact.
a supportive financial incentive structure
                                                 and programs can be essential to
and rebalanced professional power across                                                            •• Although investments in one sector can
                                                 solving problems arising from the social
caregiving groups.                                                                                     affect outcomes and generate cost savings
                                                 determinants of health. This can be
                                                                                                       in another, individual sectors generally
                                                 challenging, however, for the following
An important part of this approach is                                                                  consider only their own investments and
addressing the social determinants of                                                                  benefits.
health—the conditions in which people            •• There can be inadequate leadership
                                                                                                    •• The multiple sectors that affect
are born, grow, live, work, and age—                capacity and a lack of sustainable funding
                                                                                                       health—often driven by a variety of
because they often have a greater impact            mechanisms for health improvement
                                                                                                       stakeholder and interest groups—may
on health outcomes than does health                 efforts. Current funding processes often
                                                                                                       have different cultures, values, and
care.51 Health inequalities resulting from          fragment the distribution of resources,
                                                                                                       vocabularies and generally lack experience
negative socioeconomic circumstances                discourage the coordination of funds, and
                                                                                                       working together. This can likely impede
have a substantial economic impact, hitting         can potentially limit the ability to jointly
                                                                                                       partnership and collaboration.55
labor productivity and accounting for an            address common risk and protective
estimated 20 percent of European health             factors.
care costs (€177bn).52 They also take a social
                                                 •• Health care, public health, social services,
toll, having a cumulative effect throughout
                                                    and other sectors typically function and
a person’s life. Unemployment and financial
                                                    are funded in silos, with different funding
disadvantages pass between generations,
                                                    requirements and often-incompatible data
as vulnerable children become vulnerable
                                                    collection and information systems. This

2019 Global health care outlook l Shaping the future

Moving health care outside hospital                          settings. Many surgeries and medical and          and robotic surgery—and new anesthesia
walls                                                        diagnostic procedures that once required          techniques that reduce complications and
Clinical innovations, patient preferences, and               an inpatient stay can now be performed            allow patients to return home sooner.56
financial incentives are prompting hospitals                 safely in an outpatient setting, thanks to        Figure 4 describes the primary types of
and health systems to move certain                           improvements including minimally invasive         hospital-based outpatient facilities.57
inpatient services to lower-acuity/outpatient                surgical procedures—such as laparoscopy

Figure 4: Types of outpatient care

                                                                                                          Emergency departments
                            Imaging service facilities
                                                                                                          Also known as emergency rooms (ERs).
       Facilities where imaging services such as X-rays,
                                                                                                          They provide a broad range of emergency
       MRIs, CT scans, and ultrasounds are performed.
                                                                                                          services to higher-acuity patients.

              Specialized outpatient clinics                                                                        Primary care clinics
     Facilities for providing care in specialty                                                                     These are settings where patients are
      areas such as cardiology and urology,                                                                         seen by their primary care physicians
                               among others.                                                                        (PCPs).

        Ambulatory surgery centers (ASC)                                                                            Retail clinics
        Facilities that specialize in same-day                                                                      Also known as convenient care clinics,
         discharge of patients post-surgery.                                                                        these are walk-in clinics offering
      ASCs can be either hospital-associated                                                                        preventive health service and treatment
                              or freestanding.                                                                      for uncomplicated illnesses.

                                     Urgent care centers                                                  Community health clinics
               Facilities that provide medical services to                                                Typically offer primary care services to patients
            patients needing immediate care for certain                                                   with limited access to health care, including
          lower-acuity illnesses and injuries that do not                                                 homeless individuals or migrants, and patients
            require a trip to an emergency department.                                                    with low income or no health insurance.

Source: Deloitte Center for Health Solutions research.

2019 Global health care outlook l Shaping the future

Patients appear to be embracing treatment          substitute, for care based on the needs of              providers’ understanding of patients’
in outpatient facilities, as they tend to          the patient population, capabilities of the             health and medical data
cost less—and be more convenient—                  organization, and availability of resources.
                                                                                                         •• Care management process to improve
than inpatient services. Health plans and          The overall goal is to improve access to
                                                                                                            patients’ understanding of and
government program payment policies are            critical services and reduce cost constraints
                                                                                                            engagement with their treatment plans
also supportive of lower-cost outpatient           across the continuum of care.60 Common
surgical facilities58 and community- and           applications of virtual health include:               •• Patient adherence to improve medication
home-based care. Factors critical to the                                                                    adherence, health tracking, and patient
                                                   •• Synchronous care to improve patients’
future growth of these care delivery options                                                                accountability
                                                      ease of access to providers
are scale and responsivity: Scale often helps
                                                                                                         •• Care coordination to improve payer/
providers secure a lower cost-per-activity/        •• Physician-to-physician communication to
                                                                                                            provider relationships61
service from other partners. Responsivity             improve patient care through information
builds patients’ confidence in the quality            sharing
                                                                                                         Several key factors appear to be elevating
and timeliness of the services they receive in
                                                   •• Chronic disease management to improve              consumer and provider interest in
outpatient settings.
                                                      monitoring and alerts for chronic disease          implementing virtual health programs:
                                                      patients                                           expected physician shortages, increased
Investing in virtual health/telehealth
                                                                                                         patient demand, and the evolving policy
could expand outpatient services while also        •• Virtual social work to improve
                                                                                                         landscape. One big game-changer:
helping hospitals bend the cost curve and             communication and care for underserved
                                                                                                         Internet access and connectivity, which has
boost revenue.59 Virtual health is the use of         populations
                                                                                                         increased 1,066 percent since 2000.62 As
teleconferencing, mobile apps, and other
                                                   •• Telehealth care to improve patient                 of June 30, 2018, there were 4,208,571,287
digital technologies to enable continuous,
                                                      monitoring (e.g., eICU, telepsychology,            Internet users around the globe—55.1
connected health care. Virtual health goes
                                                      telestroke)                                        percent of the total population.63 Asia
beyond simply enabling video visits; it can
                                                                                                         dominates the world’s regions in Internet
act as a complement, or even a complete            •• Remote patient monitoring to improve
                                                                                                         usage (figure 5).

Figure 5:

                                                   Internet users in the world by regions - June 2018

             Europe     Latin America/Caribbean    Africa           North America               Asia                 Middle East        Oceania/Australia
            16.8 %            10.4 %              11.0 %               8.2 %                 49.0 %                    3.9 %                0.7 %

Source: Internet World Stats - https://www.internetworldstats.com/stats.htm.

2019 Global health care outlook l Shaping the future

Also spurring provider uptake of virtual               In China, remote registration appears to         Stakeholder considerations
health is continued growth in advanced                 be the only telehealth element that is fully     It appears that it’s time to hit “refresh”
technologies. For example, an AI-powered               developed.                                       on health care financing and operational
nurse avatar by Sensely is being piloted at                                                             models if we intend for the system to be
Mayo Clinic. It interacts with patients by             The Deloitte 2018 Surveys of US Health           sustainable for future generations. Clinging
asking questions and collecting data from              Care Consumers and Physicians have found         to fee-for-service as the basis for provider
wearables, sensors, and biometric devices;             that both stakeholder groups agree on the        reimbursement could burn a deep hole in
assesses the symptoms and medical                      benefits of virtual health. Consumers point      any country’s budget, as the cumulative
history; and analyzes the combined data                to convenience and access (64 percent) as        costs of managing elderly and chronic
for the physician to consider before the               important benefits.69 Physicians agree that      disease patients are simply too high for
in-person patient examination.64 In South              virtual care supports the goals of patient-      individuals, governments, and payers to
Australia, Clevertar’s intelligent virtual             centricity. The top three benefits from          bear. Similarly, continuing to use hospital
agents (IVAs) offer personalized health care           physicians’ perspective are improved patient     facilities to conduct low-risk, routine
coaching and support for patients with type            access to care (66 percent); improved            surgeries drives up costs for payers and
2 diabetes and individuals suffering from              patient satisfaction (52 percent); and staying   patients.
mild to moderate depression and anxiety.65             connected with patients and their caregivers
Consumers using the Helfie app can take                (45 percent).70                                  As they look beyond hospital walls to shape
a picture of any spot, mole, or mark on                                                                 a more cost-efficient future, public and
their skin and get it checked by a doctor              Despite seeing eye to eye on the benefits,       private health systems—especially those
instantly.66 Singapore AI start-up KroniKare           consumers and physicians diverge in their        that receive a large portion of their revenue
has developed a mobile app that assesses               intent to use virtual care. While only 23        from value-based contracts—will likely
chronic wounds and presents a preliminary              percent of consumers have had video              need to expand outpatient services. Doing
assessment to nurses or other health care              visits, 57 percent of those who have not         so may require investments in facilities,
workers.67                                             used them yet are willing to try them in the     staff, and technology to grow capacity and
                                                       future. The interest from physicians is much     infrastructure for outpatient services. A
Importantly, virtual health has an ability             lower: 14 percent of physicians have video       good place to start is partnering with or
to expand access to care for patients in               visit capability today and only 18 percent       acquiring health care organizations and
rural and underserved areas that may                   of the rest plan to add this capability in the   physician networks that already have the
lack medical facilities. Telehealth, often             next year or two.71 Lack of reimbursement,       capacity (e.g., ambulatory surgery centers,
considered the heart of the “smart hospital”           complex licensing requirements,72 and            outpatient clinics, and retail centers) and
model, has five main elements: remote                  the high cost of the technologies73 have         people to support care in outpatient
registration, remote diagnosis, remote                 contributed to slow adoption. Reliability and    settings and grow the volume of services
consultation, remote medical treatment, and            security are also issues: The survey found       performed there.75 Upgrading health
telecare. Regions including the Americas,              that physicians are concerned about medical      information technology (HIT) also may
Europe, and Africa are implementing                    errors (36 percent) and data security and        enhance outpatient capabilities: Health
telehealth backed by technologies like AI              privacy (33 percent).74 An implication is that   systems can use case management,
and analytics—in the United States, for                health systems likely will need to work on       supported by analytics, to help decide which
example, 3,000 rural sites are connected               overcoming physician-related barriers as a       care setting is the most effective, safe, and
to 200 telehealth networks for specialty               strategy for wider adoption. Developing an       efficient for a patient’s procedure.
consultations, continuing medical education            appropriate infrastructure and operating
(CME), and other services.68 Meanwhile, the            model along with the technology is likely to     Adopting a whole-system, whole-life
Middle East and parts of Asia appear to still          be a key differentiator.                         approach to funding and delivering health
be in the initial stages of implementing basic                                                          care likely increases the potential to reduce
tele-consulting for health care accessibility.                                                          costs, boost quality, and improve access and

2019 Global health care outlook l Shaping the future

affordability—if all members of the health        consumers are expecting solutions that are         As patients
care ecosystem unite behind the common            coordinated, convenient, customized, and
goal of long-term sustainability. Each            accessible78—and they are making their             increasingly “shop”
stakeholder group has an important role to
play in this effort:
                                                  opinions known. Numerous factors are
                                                  contributing to this shift:                        for health care
•• Governments—Position preventive                •• The increasing prevalence of chronic            services, enhancing
   health care, wellness, and social care            diseases that require long-term patient-
   funding as an essential driver for broader        provider engagement and management              patient experience
   economic growth; leverage public- and
   private-sector strengths in cost-efficient
                                                  •• Financial scrutiny due to high-deductible       is regarded
                                                     insurance plans and other cost-sharing
   partnerships and programs that could
   reduce health care inequalities.
                                                     models that push more costs onto the            as a potential
•• Providers—Complete the transition to
                                                                                                     driver of hospital
                                                  •• An explosion of digital tools to inform,
   value- and outcomes-based business
   models; also, move certain services
                                                     educate, and empower patients with the          performance, since
                                                     ability to actively manage their well-being
   outside hospital walls using less-costly
   care delivery options.
                                                     and their costs                                 it may strengthen
•• Payers—Make effective use of
                                                  •• Customers’ product and service                  customer loyalty,
                                                     experiences in other industries, leading to
   increasingly available population health
   data to measure the return on investment
                                                     a rise in classic consumerism                   build reputation and
   offered by interventions and suggest           •• Emerging competition from consumer-             brand, and boost
   process improvements that could                   centric, technology-savvy companies that
   potentially lower costs of insurance              bring a nontraditional mind-set to health       utilization of hospital
   coverage.                                         care delivery.

•• Patients—Improve health literacy and
                                                                                                     services through
   actively contribute to the design of local
                                                  As patients’ role and influence in their health
                                                  care increase, providers and payers must
                                                                                                     increased referrals
   and national programs that support
   prevention, care management, and
                                                  likely shift accordingly and take advantage
                                                  of emerging opportunities to establish
                                                                                                     to family and friends.
                                                  more direct, personal relationships with           Deloitte research
•• All stakeholders—Embrace analytics             the consumer.79 Digital technologies can
   and digital technology to provide more         improve engagement, enable convenience-            shows that good
   efficient and cost-effective health care.76    driven access to care, and nurture a two-way
                                                  relationship for the long term. Organizations      patient experience
Adapting to changing consumer needs,
demands, and expectations
                                                  that understand and act on how consumers
                                                  would like to use digital health, telehealth,      is associated with
Providing consumer-centric care
                                                  wearable monitoring and fitness devices,
                                                  online resources, social media, and other
                                                                                                     higher hospital
Not only are regulatory policy and payment        technologies will likely be well-positioned        profitability.83
reform driving some of the transformation         to develop patient engagement strategies
to value- and outcomes-based health               that help individuals make informed
care, patients and caregivers appear to be        health care decisions.80 These engagement
demanding change.77 Dissatisfied with poor        strategies, in turn, could help health care
service and lack of transparency around           organizations improve effectiveness,
price, quality, and safety, today’s health care   efficiency, and value in service delivery;

2019 Global health care outlook l Shaping the future

excel on quality measures that reflect the             •• Apple85 announced it is entering the           which coordination between stakeholders,
patient experience; and outperform their                  personal health record (PHR) space with        therapy, and care is limited or ad hoc, to
competition by attracting and retaining                   Apple Health,86 a new platform that will       a proactive model in which engagement
actively engaged customers.                               interface with electronic health records       tools and support bolster both patients and
                                                          (EHRs) at 12 US hospitals.87                   health care providers.91 Effective patient
A challenge is developing engagement                                                                     engagement could improve self-care
                                                       •• Amazon joined with J.P. Morgan Chase
strategies, products, and services that could                                                            and help achieve better outcomes; many
                                                          and Berkshire Hathaway to establish
bridge gaps between providers, payers, and                                                               health care stakeholders are investing in
                                                          an independent, not-for-profit health
patients and work across myriad consumer                                                                 solutions to address this issue. In addition,
                                                          care company for their one million US
segments.81 In some cases, consumers                                                                     some researchers are trying to understand
                                                          employees. The trio’s goal is to improve
are taking matters into their own hands                                                                  what motivates individual patients and are
                                                          health care services and cost efficiency for
by subscribing to tools such as b.well, a                                                                working on developing tailored solutions
                                                          their employees. With these corporations
personal health app that allows individuals                                                              that incorporate individualized goals.92 For
                                                          being closely monitored in the market,
to safely and securely store, manage, and                                                                example, women typically are the drivers
                                                          their success could act as a model that
share their medical records and family                                                                   of health care spending—not only for their
                                                          other businesses can embrace.88
health history in one place; view financial                                                              own health but for that of their spouses,
information about their benefit plan, co-              •• Walmart signed a deal with Anthem, one         children, and aging parents. Yet most
pays, deductibles, and prescription costs;                of the United States’ largest insurers, to     traditional engagement practices have not
integrate and sync wearables and other                    entice more Medicare enrollees to buy          been designed with women in mind.
self-reported data to track sleep, fitness,               over-the-counter medications and health
nutrition, and more; and take a personalized              supplies at its stores.89                      Even with a wealth of new digital tools
health assessment and use genomic                                                                        and buy-in from governments, providers,
                                                       •• Amazon rolled out a line of private label
screening to learn how to make healthy                                                                   and payers, establishing and sustaining
                                                          over-the-counter medicines, the Basic
decisions.82                                                                                             consumer relationships remain a challenge.
                                                          Care line, and is building a business
                                                                                                         Among hurdles to overcome: providers
                                                          selling a wide array of medical supplies to
Adding another wrinkle to patient                                                                        and payers will need to boost the currently
                                                          doctors, dentists, and hospitals.90
engagement—and introducing a major                                                                       low levels of health literacy and find more
disruptor into the health care value chain—                                                              effective ways to motivate or “nudge”
                                                       Beyond guiding health care purchases,
is the well-funded market entry of non-                                                                  consumers to take ownership of their
                                                       patient engagement strategies may
traditional companies from the consumer,                                                                 health (see sidebar, next page). Unlike many
                                                       positively influence patient behavior,
retail, and technology sectors, as well as                                                               employer-provided health plans, the current
                                                       one of the key components of disease
increased activity in the retail pharmacy                                                                US Medicare and Medicaid health systems,
                                                       management amid an increasing prevalence
space.84 The rise of these alternatives                                                                  for example, have no financial penalty for
                                                       of chronic conditions. There is emerging
to traditional providers and payers was                                                                  consumers who make lifestyle choices that
                                                       support for moving away from a reactive
particularly notable in 2018:                                                                            negatively impact their health (e.g., smoking,
                                                       approach to chronic care management, in
                                                                                                         overeating, excessive alcohol consumption).

2019 Global health care outlook l Shaping the future

“Nudging” toward better health93
No matter how effective a medication,           Sometimes this engagement requires a             team embedded within a health system.
protective a vaccine, or beneficial a           little “nudge,” a change in the way choices      Led by Dr. Mitesh Patel, professor of
lifestyle modification, clinicians must         are presented or information is framed           Medicine and Health Care Management at
recommend a treatment and patients              that alters people’s behavior in a               the Perelman School of Medicine at the
must follow through on it to achieve            predictable way without restricting choice.      University of Pennsylvania, the Nudge Unit
desired health improvements. But both           For example, small changes within an EHR         uses behavioral economics and
traditional and precision medicine have a       can lead to significant differences in the       psychology to design and test approaches
“last mile problem” involving patient           way clinicians order tests and treatments.       to steer medical decision-making and
behavior change. The annual cost of             Similarly, social networks can give subtle       behaviors toward higher-value and
medication nonadherence in the United           nudges that influence how individuals eat        improved patient outcomes.95 Among the
States is estimated at more than $250           and exercise.                                    Nudge Unit’s projects:
billion, and most post-surgical hospital
readmissions are due to patient                 The Penn Medicine Nudge Unit, created in
nonadherence to discharge protocols.94          2016, is the world’s first behavioral design

                                           Enable choice                          Guide choice through changing defaults

           Prompting clinicians to make an                                                       Changing health system-wide
            active choice in the EHR led to a                                                    EHR prescription default settings
           35%–40% increase in ordering                                                          increased generic prescribing
                      influenza vaccination,                                                      rates from 75% to 98%
          colonoscopy, and mammography

     Guide choice through incentives                                                           Frame information

   Framing financial incentives                                                                                Displaying prices for inpatient
  as a loss increased physical                                                                                laboratory tests impacted
   activity goal achievement                                                                                  clinician behavior differently
    by 50% among overweight                                                                                   based on how they were
              and obese adults                                                                                targeted and framed in the EHR

 Source: Penn Medicine Nudge Unit website, http://nudgeunit.upenn.edu/about.

Effective nudge projects need buy-in.           The design also needs to be scalable to a
Physicians want to have autonomy over           large population, not just a handful of
how they practice medicine, so they             patients; that calls for top health system
should be part of the process and have          leadership at the table, as well as the IT
input on the design of the intervention.        team.

2019 Global health care outlook l Shaping the future

Stakeholder considerations                             helps consumers compare cost and quality
As health care becomes more “shoppable”                information and enables them to make           Digital’s potential
and consumers increasingly pay a larger
percentage of their care with their own
                                                       confident decisions about health care in a
                                                       manner that more closely mimics alternative
                                                                                                      in “heart of the
money, enhancing patient experience is                 purchasing and customer service models         business” operations
regarded as a potential driver of hospital             like retail.                                   Technology that lives out
performance. Hospitals’ reimbursements                                                                front—where patients, members,
are increasingly tied to quality performance           Given the new emphasis on patient              and customers can see it—can help
metrics that capture patient experience as             experience as a core element of care quality   a health care organization shine. But
well as clinical outcomes, and many public             and value, health systems should consider      the technology at the core—which
and private payers have begun to recognize             investing in the tools and technologies to     most people never see—makes an
patient experience as a core element of                better engage patients and enhance patient     organization work. Back-office
quality.96                                             experience. Also important is delivering       systems, and the quality of their
                                                       educational insights to inform patient         connections with front-end
Being patient-centered and taking steps                decision-making and behaviors. Possible        enterprise functions, are the critical
to engage patients in their own health                 solutions include medical information and      infrastructure that make pricing,
care is not simple, but it is seen as an               pharmacovigilance, nursing educational         product availability, logistics, quality,
industry imperative. Organizations should              support, and between-visit care.97             financials, and other “heart of the
understand how consumer behaviors                                                                     business” information available
and expectations are transforming care                 Investing in digital innovation and            where it is needed. Although health
delivery and adopt a more consumer-driven,             transformation                                 care organizations are approaching
retail mind-set and approach—with a                                                                   the digital mandate from numerous
focus on greater convenience, service, and             “Being digital”                                angles, one issue remains
support. Again, women use their family and             Major advances in wireless technology,         consistently important: harnessing
social networks to recommend services                  miniaturization, and computing power are       emerging technologies to enable
and physicians, yet health systems don’t               fueling an exponential increase in the pace    core systems and back-office
routinely take this into consideration when            and scale with which digital health care       processes to reinvent how daily
planning their engagement strategies.                  innovations are emerging98 and impacting       work gets done.99 Some provider
                                                       both clinical and business operations (see     organizations are already taking
Both providers and payers may need                     sidebar). These advances are also driving an   steps toward using machine learning
to re-orient themselves around greater                 increase in the expectations of consumers      and robotic process automation
transparency—of costs, quality, processes,             that “going digital” is not enough—“being      (RPA), cloud-based
and services. Organizations also should                digital” appears to be the new necessity for   software-as-a-service (SaaS)
more effectively communicate the value                 all health care organizations.                 offerings, and predictive tools to
of products and services in a way that                                                                improve two primary core functions:
                                                                                                      revenue cycle and supply chain.100

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