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  • Writer's pictureTodd Gentzel

Seven drivers that are shaping the future of healthcare

In strategic foresight, we look to explore and consider how changes in the environment will serve as a catalyst for innovation and a platform for strategic and operational decision-making. This is different from the annual predictions that typically come out this time of year. The goal of foresight is to speak to the world beyond the hype cycles and short-term investments, focusing instead on the macro-trends that are shaping the future of markets and industries.


Future of healthcare

In healthcare, we’re facing an unprecedented era of disruption, the product of a dynamic and high-velocity business environment that is challenging convention and propelling us into the future. There is a broad range of variables worth considering, but there are seven drivers that will play an outsized role in shaping the operating environment and defining the years ahead.


An aging population

Declining birth rates and increasing life expectancy are just two of the many demographic changes that will prove powerfully disruptive for the healthcare sector and the economy more broadly. An aging population will continue to drive the inverse curves of mass retirements and increased demand for services, creating the conditions for continued labor shortages and payor mix erosion for at least the next decade or more.


The challenges associated with these demographic changes are profound, but so are the opportunities. Meeting the evolving needs of the 65+ healthcare market should be a priority, providing high-touch and cost-effective care with an eye toward improving the health and quality of life of senior adults. Given the inevitable workforce constraints and escalating costs, the focus should be on how to leverage technology and care model innovation to structurally lower costs, scale efforts to increase engagement and improve clinical outcomes.


 

An expanding consumer expectations gap

Consumer expectations are constantly changing, influenced by a broad and diverse group of experiences across sectors and categories. The gap between what healthcare consumers want and what they actually receive continues to grow, as incumbents struggle to keep pace with the agility of other consumer-facing industries. Compounding the issue, a number of the organizations that have led the way in shaping the modern consumer experience have themselves entered the healthcare space to great effect.


Given the rapid proliferation of new market-based alternatives and the increasing power that consumers are exercising in the management of their own health, it’s time to get serious about what it really means to be ‘consumer-centered’. The industry must move beyond workshops, passion projects and Net Promoter Scores, and engage in the hard work of tuning their organizations to compete for the modern healthcare consumer.  When it’s done right, it makes for good business and even better medicine.


 

A transitioning information technology landscape

For the last two decades, the Electronic Medical Record (EMR) has played prominently in just about every discussion regarding information technology in healthcare, but with the proliferation of new digital solutions and technologies that’s all changing. Meeting the needs of consumers and taking advantage of accelerating cycles of innovation is moving the industry toward a more modern approach to infrastructure, integration, design and development.


The gatekeeping and integration complexity of the past must give way to a technical environment that favors agility, adaptability and extensibility, while dramatically increasing capacity for cyber-security. Enterprise applications including the EMR will remain a priority, serving as a foundation for an evolving digital health ecosystem; but they should no longer serve as the primary driver of decision-making or resource allocation at the intersection of strategy and information technology.


 

The unprecedented potential of exponential technologies

Artificial intelligence has captured the imagination and garnered the public’s attention of late, but it’s just one of several exponential technologies that are accelerating discovery and creating the conditions for industry-scale transformation. Breakthroughs and improvements in processing power provide a glimpse of a quantum future, while the proliferation of advanced sensors and monitoring technologies contribute to the rapid maturation and increasing utility of the Internet of Medical Things. We’re witnessing advances in materials science, 3D printing and robotics that are unlocking the potential of next-generation manufacturing, and progress in nanotechnology that is opening up new frontiers in diagnostics and therapeutics.


Individually, any one of these technologies represents a powerful opportunity for disruption and progress, but collectively they portend of something far greater.  The manner in which the technologies are combined and configured will accelerate discovery, unlock latent value and usher in a period of innovation unlike anything we’ve seen. The nature of healthcare technology will be fundamentally redefined in the coming years. Realizing the value of this opportunity will require leadership with a bias toward innovation and experience beyond traditional information technology. The opportunity will require a workforce capable of implementing, exploiting and supporting a far more complex and diverse portfolio of technologies.


 

The transformational impact of advances in pharmacology

A look at the pharmacology pipeline and an honest assessment of the advanced therapeutics environment leads one to believe that we are on the precipice of something extraordinary. Recent advances in vaccinology and breakthroughs in oncology, cardiovascular and respiratory health all point to improved outcomes and the potential for longer and healthier lives. This is clearly great news for patients and clinicians, but it has the potential to put new strain on the already fragile nature of healthcare system economics. as disease progression slows and commercially insured procedural volume decreases.


Despite the progress toward value-based care models, healthcare system margins are still in large part reliant on a relatively narrow group of medical and surgical interventions and a commercially insured cohort of patients in their early- to mid-sixties. As therapies advance, and disease progression slows, the need for these encounters and procedures will be delayed and traditional opportunities for value realization within this group will narrow. Even a small shift from commercial to managed care has the potential to be extraordinarily disruptive. Healthcare systems should begin the process of modeling the potential impacts, evolving their business models and adjusting cost structures accordingly.


 

Increased competition and the rise of healthcare ecosystems

Flooded with an unprecedented level of investment, the industry has seen competition rapidly proliferate and diversify, challenging long-held assumptions about the structure of markets and nature of clinical access. The power dynamics of the sector are shifting. Traditional notions of demand, brand loyalty and funnel integrity are being challenged and redefined, as consumers embrace a rapidly expanding number of choices and exercise greater autonomy across the continuum of care.


The position that traditional health systems have enjoyed in the marketplace will likely give way to ecosystems of care that by way of their structures and synergies will prove far more capable of meeting the evolving needs and changing expectations of consumers and clinicians. For incumbents, this could translate to a narrowing of focus, a divestiture of non-essential assets and a value realization strategy that relies primarily on high-acuity medical and complex surgical interventions. For others, this will serve as an opportunity to expand their scope by acquiring and investing in key aspects of the value chain, leveraging their assets and resources as a platform for incubating, accelerating and de-risking their positions in the expanding healthcare ecosystem of the future.


 

The evolving nature of the legislative and regulatory environment

The legislative and regulatory environment often lags behind the pace and trajectory of the industry and its efforts, but given the sector’s scale and impact, it should come as no surprise that it has become a major target for increased scrutiny and enforcement. The DOJ and the FTC have taken steps to position themselves to more effectively block deals that have the potential to limit competition, fail to produce meaningful synergies or decrease value to consumers. Despite what’s expected to be a busy few years of M&A activity, the increased scrutiny will likely make inorganic growth efforts far more challenging, and raise the stakes associated with post-transaction integration and value realization.


Beyond the deals environment, government actors at every level and in every jurisdiction are struggling to keep pace with the velocity of technological and societal change that is shaping the world around us. In these moments, it’s important to acknowledge the potential for executive and legislative intervention and regulatory disruption. As new and novel concepts are evaluated and tested in both the courts and in the public square, the outcome can be unpredictable, characterized by fits and starts.


Each of these drivers can significantly impact the trajectory of the industry, but that’s not how the future is made. The healthcare sector is a complex global ecosystem that exists in an almost constant state of transition. As drivers act on, react to and interact with one another, they shape the context and elicit responses from the various actors and interests. The intent of strategic foresight is not to make predictions or somehow arrive at the answers before the right questions are even asked. The goal is to engage decision-makers in a process of exploration and consider the plausible futures in which they will likely compete.


We can only prepare for what we’re willing to consider. At a time when disruption is likely and scaled business transformation seems inevitable, there has never been a better time to embrace strategic foresight as a foundational practice in a larger effort to build the agility, adaptability and resilience required to compete for the future.


Todd Gentzel is a strategic foresight expert with a proven track record in strategy, innovation and business transformation. He is the author of the Houston 2040 Scenarios, the country’s largest privately funded regional strategic foresight initiative, and strategist for more than a dozen healthcare organizations from large health systems and integrated delivery networks to medical aviation operators and digital health companies.

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