The healthcare industry is facing a gathering storm due to a combination of affordability challenges, access issues, clinical staff shortages exacerbated by the COVID-19 pandemic, and limited progress on outcomes. Nearly half of the industry's profit pools are at risk. Those who will thrive in this crisis will need to redesign their organizations for speed, accelerate productivity improvements, reshape their portfolio, innovate new business models to refashion care, and reallocate constrained resources. However, the healthcare industry has lagged behind other industries in applying these practices, and players that are unable to adapt could face challenges in the coming years.
This marks the end of a decade of relative calm in US healthcare, where real spending on healthcare only rose 0.3 percentage points above growth in real GDP. This compares with a 3.0 percentage-point differential in the decade before the enactment of the Affordable Care Act. Historical data shows that periods of acceleration in healthcare costs above the growth of the economy have resulted in fiscal interventions by the government, while economic recessions in these periods have led to broader healthcare reforms. As inflation persists at the highest levels since the 1970s, the economy has experienced two successive quarters of negative GDP growth, and there is an increased risk of a recession. This has increased the potential for discontinuous change in healthcare.
The turbulence that lies ahead will require the industry to face storm clouds on the horizon, and to consider the potential impact compared to past periods of upheaval. Rising inflation, both broadly and specifically as the industry confronts clinical staff shortages, will affect access, costs, and growth. An endemic COVID-19 could also impact the expected trajectory of healthcare costs. Stakeholders must consider what they can do to mitigate these risks and prepare for the changes ahead.
In conclusion, the healthcare industry is facing a storm that has the potential to reorder the industry and put nearly half of its profit pools at risk. Players who can adapt by redesigning their organizations for speed, reshaping their portfolio, innovating new business models, and reallocating constrained resources could set themselves up for success in the coming years. As the potential for discontinuous change in healthcare increases, stakeholders must take action to address the storm clouds on the horizon and prepare for the turbulence that lies ahead.
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