Healthcare Trends 2023: Technology Modernization Drives…

With 2023 launched and well underway, we’ve identified key areas in the healthcare industry in which we project continued and increased investment and evolution as the result of new and emerging technologies. In this trends report, we’ll focus on technology modernization that can foster improvements to the member, employer, and provider experiences.

Normalization, Investments, and Mergers

We predict continued normalization after the COVID-19 pandemic, during which we witnessed both the good and bad of the healthcare system (the resilience and efficiency in vaccine creation and roll-out, yet the fragility of overburdened hospital systems) and an increased desire for a healthcare experience overhaul. This demanded change in the healthcare experience (led by patients and some federal mandates) has spurred a great transformation; nevertheless, this may still fall short of the rebuild likely needed.

This year should show an increase in investments in connected healthcare ecosystems, with new capabilities and a more streamlined experience. As we see demand for a more cohesive and integrated system in an era of increased costs and negative margins (up to 53% of hospitals are expected to end 2022 with negative margins), healthcare organizations must create a competitive advantage or risk slowing or no growth. Those who adapt and leverage innovation and technology will be able to respond quickly and meet consumer demands.

We expect to see a continued focus on mergers and acquisitions (M&A) activity in 2023, in an attempt to consolidate and provide more comprehensive services. Rather than increasing the number of pass-alongs and upcharges in the chain, M&A activities should ease costs and burdens from the system and allow a focus on better health outcomes. These activities should also provide leverage to provider groups as they grow practices, leading to more advantageous reimbursement rates, providing capital required to invest and grow ancillary service businesses (such as outpatient procedure centers), and driving profitable outcome- based reimbursements.

We will continue to see the influx of net new players in the healthcare space – both well-funded and start-ups – as well as emerging players who previously targeted other industry verticals now offering healthcare delivery solutions. It is these players that historical industry titans should be wary of as they have the ability to work in a technology greenfield, rapidly innovate, and change healthcare at scale without being plagued by years of technical debt hindering acceleration and transformation.

Areas We’re Watching Closely

We’ve identified several macro areas to watch, including the continued adoption of new technologies (artificial intelligence and machine learning), a greater emphasis on patient engagement, the continued expansion of the ecosystem, and actionable insights stemming from data. We also believe ongoing efforts to control healthcare costs, and an increased focus on preventative care and population health, will be areas to monitor.

Trend 1

Machine learning and artificial intelligence will drive the healthcare ecosystem to more optimized and affordable care models.

Healthcare is emerging as the next frontier for artificial intelligence (AI) and machine learning (ML). How the industry embarks on that frontier is up to the leaders, disruptors, and consumers of the ecosystem. The healthcare ecosystem, comprised of payers, providers, life sciences companies, and patients, engage in trading the greatest commodity presently available – information. Technologies such as ML and AI, properly leveraged by payers, providers, and life sciences companies, can ensure a more streamlined and cost-effective health ecosystem while also improving the patient experience.

The key is maximizing the interconnectivity of patient interactions. Used properly, this approach can provide a robust menu of options available to patients, through a marketplace of information, by using examples from patients sharing similar conditions. While every patient has a unique story, decision points available to consumers can reveal efficacy of treatments, as well as more transparent costs. The overarching answer is better care models through intelligent patient marketplaces powered by AI and ML. As healthcare continues to emerge as an industry-leading data generator, predictably, 80% of healthcare providers plan to increase investment in technology and digital solutions over the next five years to leverage its insights.

Addressing Patient Complexities

Let’s use the example of a patient newly diagnosed with Type 2 Diabetes, which impacts approximately 1 in 10 people, according to the Centers for Disease Control. Once diagnosed, the patient may anticipate a lifetime of managing medications and frequent visits to a healthcare provider and/or labs to monitor glucose, insulin and A1C (blood sugar storage) levels to track data. Patients with diabetes tend to be at an increased risk for other medical conditions as well, which can lead to additional office visits and hospital stays. The high cost of continued treatment is exacerbated by availability and affordability of healthcare options to those with financial access to healthcare and those who do not have that advantage.

However, if treatment also included transparency about alternatives based on data gathered from other diabetics and leading peer-reviewed articles, the patient would be empowered to have more informed conversations with providers about treatment options, the efficacy of those options, and associated costs.

People with diabetes and, indeed most patients, are challenged to understand their bills and treatment options. Navigating provider systems can quickly prove complex – adding the potential emotional state a patient may experience – so staying organized and making informed decisions can become a full-time pursuit. Doctors and technology systems often lack functional intercommunication, which adds to the complexity of billing, care models, and patient navigation. Many providers now agree; predictions indicate 20% of healthcare providers will shift from patient portals tethered to electronic health records in favor of a “digital front door”as their primary method of digital engagement.

Simplifying the patient experience early will undoubtedly have exponential benefits in market share, which can include improving patient journeys as they navigate common tasks such as enrollment, on-boarding, scheduling, appointment life cycle (pre, during and post) and payments, to name a few.

However, while data privacy is always at the forefront, we believe that recent history proves that many consumers will give up privacy, including their smart phone activity, for convenience and other benefits. When AI and ML are layered on top of consumer data, it will likely reduce costs and allow providers to create more comprehensive treatment plans targeted toward bespoke patient experiences. That said, data privacy application to laws, rules, and regulations is crucial to operationalizing this approach.

Embracing emerging technologies will help payers and providers understand their customers more deeply and deliver targeted care while reducing costs – and ultimately consumers will develop greater brand loyalty.

Trend 2

The recent rise in healthcare costs is leading to an increase in big tech M&As as margin pressures rise.

Healthcare is one of the fastest growing sectors in the world. From 2000 to 2020 healthcare has increased by 6.3% of total U.S. Gross Domestic Product.

It is estimated that healthcare is now a $4 trillion (about $12,000 per person) market in the United States, with this investment trajectory likely to continue well into the next decade These staggering growth rates are accompanied by an equally aggressive race to determine who shares ownership in improving the healthcare experience and cost for the average American.

This rise in investment indicates innovation has become a leading driver to answer healthcare consumer demands for digital enhancements in telemedicine, record-keeping, billing, and scheduling services. These demands, exacerbated by COVID-19’s global impact, propelled the need for increased contactless healthcare digital services and advancement. The increase in demand for innovation has been a constant strain, joined with consumer and government pressures to lower healthcare costs for drugs and services. The result has challenged healthcare executives to innovate technologically, while lowering overall costs and seeking economies of scale.

The rise in cost of several healthcare products (e.g., insulin) has increased pressure on the consumer, which has gained federal interest, as recent legislation (i.e., Inflation Reduction Act) seeks to cap and regulate the cost of commoditized healthcare products. Critics are often quick to cite that federal cost controls stifle innovation and investment. However, considering the aggressive growth demonstrated over the past 20 years in this sector, most economists do not share these concerns of an industry slowdown. Cost efficiencies are needed to continue to drive down costs – so that industry can self-regulate, without federal intervention. Healthcare companies must be ready to address these cost challenges while investing in innovation – or they will risk negative public image issues, consumer flight, or federal cost regulations.

The Impact of M&As

In 2022, we saw numerous major healthcare and big tech mergers and acquisitions, many of which were intended to spur continuous technological innovations and decrease overall costs through economies of scale. The industry has already seen billion-dollar mergers and acquisitions from the following industry big hitters: Advocacy Aurora and Atrium Health, CVS and Signify Health, Walgreen’s VillageMD and Summit Health, Amazon and One Medical. With little indication of an activity decrease in 2023, tech giants such as Amazon, Apple, Facebook, and Walmart are all in similar pursuit of M&A actions. These progressions in the industry are potentially the first step to finding balance between providers, payers, and members in addressing competing costs and determining the industry-wide question of who owns decision-making surrounding rising prices.

For healthcare executives, the decision to pursue a merger or acquisition opens the much larger challenges of implementation and consolidation of corporate IT infrastructures (e.g., data centers, cloud), processes, and talent teams – all of which require careful orchestration, as well as program and change management. These downstream actions often take the form of hundred-million dollar phased implementations over two to three years to become one integrated organization.

In 2023, we anticipate the market will continue to encourage further M&A activity within the realm of big tech providers focusing on enhanced user experience and accessibility. Healthcare executives should seek economies of scale and process improvements to lower costs as additional drivers for M&A activity.

Trend 3

Continued improvements in interoperability will expand data sets for the “whole patient approach” and increase AI-driven predictive health, achieving greater health outcomes.

With the healthcare industry generating approximately 30% of the world’s data volume, there is no shortage of data generated by healthcare – from provider medical records to payer claims, to patient-generated health data. The accessibility and usability of this data, however, is another story. Interoperability – the ability for multiple systems to utilize patient data – has long been a healthcare industry goal, and new federal mandates, combined with technological advances, only push us in that direction. As we continue towards a more connected and patient-centered future, we will see expanded data sets and an increase in AI-driven predictive health, resulting in more significant health outcomes.

Data Challenges

Payers, providers, and patients face a multitude of blockers before interoperability can be adequately achieved and leveraged, primarily due to a lack of patient data standardization and data stored in disparate and separate systems. The result is inconsistent and siloed data that leaves providers and payers without a complete picture and patients who cannot easily access their data. Layer on privacy and security concerns, and interoperability becomes even more of a challenge.

Payers may be well positioned to take the lead on reaching interoperability as they collect, manage, and provide stewardship of data throughout a patient’s life versus providers who may only collect on an event-based basis. Payers should establish a common patient marketplace, so they, patients, and providers would benefit from a secure and interoperable repository. Payers would then manage and provide access for authorized parties to obtain and utilize the marketplace to support a holistic patient approach.

Shift the Marketplace

A key benefit to the marketplace would be the shift toward treating the whole patient instead of treating a single issue. Healthcare providers will be able to access data from different periods of a patient’s life and act on that data – for example, predicting the likelihood of disease or adverse health outcomes.

A marketplace would also allow social determinants of health (SDOH) to play an essential role in predicting health events. Layering in predictive analytics would enable marketplace users to model outcomes and better understand what resources may be needed to promote more equitable health outcomes.

Achieving data interoperability is not a one-size-fits-all solution. Healthcare organizations must determine their goals for effective data use for a whole-patient approach, which requires addressing the challenges above and investing in technology infrastructure and standardization initiatives. Healthcare organizations should also make data more actionable through AI and ML, which can help analyze and identify patterns, make predictions about future health outcomes, and improve the patient journey.

Furthering access to patient data and using AI and ML has the potential to improve the holistic patient journey. And increasing data exchanges between patients, payers, and providers will likely result in improved care delivery, better healthcare equity among disparate populations, and improved patient health.
Now is the time to tackle the challenges due to the ever-increasing volume of data, a growing aging population, and rising health inequities, along with required federal regulations to make interoperability essential.

Achieving data interoperability is not a one-size-fits-all solution. Healthcare organizations must determine their goals for effective data use for a whole-patient approach, which requires addressing the challenges above and investing in technology infrastructure and standardization initiatives. Healthcare organizations should also make data more actionable through AI and ML, which can help analyze and identify patterns, make predictions about future health outcomes, and improve the patient journey.

Furthering access to patient data and using AI and ML has the potential to improve the holistic patient journey. And increasing data exchanges between patients, payers, and providers will likely result in improved care delivery, better healthcare equity among disparate populations, and improved patient health.

Now is the time to tackle the challenges due to the ever-increasing volume of data, a growing aging population, and rising health inequities, along with required federal regulations to make interoperability essential.

Trend 4

Regulatory actions alone struggle to affect substantial change in healthcare; focusing on the end- to-end patient experience will differentiate successful payers and providers from the competition.

Over the last decade, multiple federal legislative and regulatory actions have been enacted that affect the healthcare industry. While these actions solve specific pain points within the system, they have not produced transformational change and, in some cases, they have further entrenched established players in their dominant positions.

Traditional healthcare payers and providers have been slow to modernize their digital experience and legacy infrastructure and are beginning to be exposed by emerging technology-focused competitors like Amazon, Apple, Google, and Microsoft. Initially some of these companies may be seen as additional or value-add services for employers and consumers, but as their services mature and their offerings become more fully developed, they will become true competitors to traditional health insurers and providers without the burden of legacy systems and processes.

Success over the next decade for payers and providers depends on the ability to understand how people engage across the continuum of care as consumers, rather than simply patients or members. Understanding how consumers use data and make decisions regarding their health (taking into account cost, quality, and additional services provided) will determine their ability to satisfy consumer needs and attract business in an increasingly competitive landscape.

Who are the players in any healthcare transaction? What are their goals?

Consumer: Cheaper doesn’t equate to better. When making decisions for my health, I want to know that the providers and payers have my actual health outcomes at the center. My access to high-quality care and accurate pricing information in an easy-to-understand format will help me choose from my available healthcare options.

Provider: We want to provide quality care while increasing revenue. The information presented to consumers will greatly influence consumer choices in which they seek care and lead to increased competition between providers. Additional regulation increases the administrative burden associated with operation of my practice, especially around billing and insurance.

Payer: We want to increase our operating margins by lowering the cost of providing care and increasing premiums. By encouraging price competition among providers, we can reduce the cost of providing care. By providing quality and easy-to-use tools showing cost and outcome data to both providers and consumers, we can encourage competition and lower costs while competing for new business on value. As more of healthcare moves to the open market, quality and satisfaction ratings continue to matter more to us and allow us to command higher premiums.

Recent Healthcare Legislation

Hospital Price Transparency (HPT)

This legislation requires every hospital in the U.S. to publicly provide information on cost for services and procedures performed, both in a machine-readable format and in a consumer-friendly display. HPT requires package pricing, but only for services supplied by the hospital, which means ancillary services are not included. In addition, HPT does not apply to ambulatory surgery centers, free-standing imaging centers, individual practices, etc., so consumers cannot compare hospital costs against these other provider options.

Consumers can now see what different hospital systems will charge for standard procedures, but cannot see ancillary services, so they lack access to a full financial picture. On the provider side, this creates competition based on price and negotiated rates, necessitating a focus on quality, experience, and additional services to attract business. For payers, this encourages cost competition and consumer-driven decisions, which can lower the cost of care. They will need to answer questions that may arise when hospital costs are different from negotiated rates displayed in payer systems.

Transparency in Coverage

The Transparency in Coverage rule requires health insurers to provide cost information for covered services, procedures, and prescriptions xi across two channels:

For consumers, insurers must make personalized out-of-pocket cost information (and the underlying negotiated rates) for all covered health care items and services available through a self-service tool.

For the general public, insurers must make available three datasets:

Details of in-network negotiated rates for all covered services
Historical payments to (and charges billed from) out of network providers for services
In-network negotiated rates and historical net prices for covered prescription drugs

There are a few gaps with this legislation. First, data made available from this act is insurer-focused and does not include charges and rates for the uninsured population. In addition, payments made to out-of-network providers are often subject to balance billing, yet datasets in this act do not take into account additional payments to out-of-network providers by insured members.

The good news is that consumers now have access to personalized cost information for covered services and procedures, allowing them to make informed choices rather than reacting to bills after the fact. But providers face additional competition based on price and negotiated rates, and they may need to increase their focus on quality, experience, and additional services to attract business. For payers, allowing consumers to make decisions, including real data on costs, will lower the cost of care and reduce abrasion and increase satisfaction.

No Surprises Act

The No Surprises Act prohibits out-of-network billing for emergency ambulance or air transportation, and surprise charges by out-of- network providers for services performed at in-network facilities. It also establishes a dispute-resolution process for insurers and providers to follow to resolve disputes around reimbursement amounts for out-of-network services covered by this act. On the downside, this act focuses on the insured population and does not cover uninsured individuals.

Consumers are protected from unanticipated out-of-network charges and risks are limited, due to emergency services provided. Payers face a limited direct financial impact; however, there may be additional administrative burden to process disputed reimbursement amounts from non-insured providers. For providers, this Act limits their ability to charge out-of-network rates and may impact cash flow when disputing reimbursement rates with insurers covered under this act, especially as dispute resolution backlog and timelines grow.

What else can be accomplished? Where do we go next?

Federal legislation and mandates intended to address the need for better price transparency are disjointed and burdensome. They often focus on solving problems of the patient, provider, and payers, but may fail to fully transform data into knowledge. The data required by these mandates must be combined with provider data (reviews, locations, etc.) and accurate quality measures to present a consumer-facing rolled-up service or procedural views (i.e., bundled cost for hip arthroplasty) that allows consumers to make informed decisions regarding provider choices.

Many leading providers and payers have already taken the initiative to develop tools that address this need and incorporate incentives (monetary or otherwise) to consumers for using these tools to help them choose lower cost services.

Providers and payers not prioritizing beyond current minimum requirements should recognize that acting now is crucial to long-term success and reduces the likelihood of losing business to competitors invested in maximizing information derived from data they already have. Laggards will be less competitive in the market and disadvantaged when competing against other payers for employer benefits programs. Focus on the member/ patient journey through digital health solutions such as a digital front door, which allows data to be captured, stored, and transmitted to enable consumer engagement for lifestyle, wellness, and healthcare services.

Sources

i More Than Half of US Hospitals Expect to Lose Money This Year,” Bloomberg, September 15, 2022. https://www.bloomberg.com/news...

ii Amazon Plans to Acquire One Medical in Big Tech’s Latest Bet on Healthcare,”, Forrester, August 18, 2022. https://www.forrester.com/blog...

iii Type 2 Diabetes,” Centers for Disease Control and Prevention. December 30, 2022. https://www.cdc.gov/diabetes/b...

iv Gartner Research, 2022 Gartner® Hype CycleTM for Healthcare Providers, 2022, www.gartner.com

v Patients want privacy, accountability for how their health data is used,” American Medical Association, August 15, 2022. https://www.ama-assn.org/deliv...

vi National Health Expenditure Data,” Centers for Medicare & Medicaid Services, December 21, 2021. https://www.cms.gov/Research-S...

vii The Healthcare Data Exlosion, RBC Capital Markets, https://www.rbccm.com/en/gib/h...

viii Children’s Oral Health,” Centers for Disease Control and Prevention, February 9, 2023. https://www.cdc.gov/chronicdis...

x Why is Healthcare Price Transparency Important?” Talk to Mira, August 23, 2022. From https://www.talktomira.com/pos...

ix 5 Ways Price Transparency Can Improve Your Practice and the Patient Experience,” Ally, May 25, 2022. From https://www.ally.com/consumer-...

xi Transparency in Coverage,” Centers for Medicare & Medicaid Services, January 30, 2023. https://www.cms.gov/healthplan...

xii Making Hospital Price Transparency Work for Health Care Consumers, JAMA Network, April 5, 2021. https://jamanetwork.com/journa...

xiii Unpacking the No Surprises Act, Its Impact on Emergency Medicine, RevCycle Intelligence, December 5, 2022. https://revcycleintelligence.c...

xiv Revenue cycles challenged by mandates of No Surprises Act, Healthcare Finance News, December 2, 2022. https://www.healthcarefinancen...

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Healthcare Trends 2023: Technology Modernization Drives Improved Outcomes

Machine learning and artificial intelligence will drive the healthcare ecosystem to more optimized and affordable care models.

The recent rise in healthcare costs is leading to an increase in big tech M&As as margin pressures rise.

Continued improvements in interoperability will expand data sets for the “whole patient approach” and increase AI-driven predictive health, achieving greater health outcomes.

Regulatory actions alone struggle to affect substantial change in healthcare; focusing on the end- to-end patient experience will differentiate successful payers and providers from the competition.

What else can be accomplished? Where do we go next?

Download the 2023 Healthcare Trends Report

Jason Leonard

Adam Hofheimer

Adam Auerbach

Contributors

Anthony Beeker, Sr. Manager, Management Consulting

Lauren Rieger, Manager, Management Consulting

Kelsey Peissel, Manager, Management Consulting

Matt Beaver, Director, Management Consulting

Paulina Stefano, Sr. Consultant, Management Consulting

Tim Doyle, Director, Management Consulting

Timothy Todorowski, Sr. Manager, Management Consulting