Meet the Healthcare Economy Region: A Dangerous Corner of the Bracket
The Healthcare Economy is arguably the strongest region in this year’s tournament in terms of what’s impacting healthcare daily and will have the greatest influence in 2023. While other regions include trends that are rapidly accelerating and on the cusp of dramatically changing healthcare, economic drivers are the power players in 2023. In fact, 2023 may be a make-or-break year for some health systems, especially those in rural areas, with denials and utilization review costs higher than ever. The economy has caused valuations to drop, resulting in a little less risk-taking by private equity and venture capital, which are likely to refocus on existing investments over putting dollars against new investments.
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The Eight Trends and the First Four Matchups
The top seed in this region is Private Equity Investment, which is outpacing public funding and becoming the industry’s primary source of capital as government dollars evaporate in a post-Covid economy. However, economic uncertainty is expected to have a slowing effect on private equity as well, particularly for new ventures. This trend will take on eighth-seed Increase in Uninsured/Underinsured Patients, a trend with the potential to rock healthcare once the federal public health emergency (PHE) expires on May 11, 2023. As many as 18 million people could lose coverage under Medicaid in the 14 months following the end of the PHE, further stressing financially strapped health systems.
Returning 2022 Champion – Workforce Challenges – comes back as a number two seed under the revamped name Labor and Workforce Shortages, as labor challenges keep intensifying. They will take on seven-seed Health Equity and SDoH (social determinants of health), as the effort to reduce healthcare disparities across underserved populations continues to be a top national priority. This should be an interesting contest, with financial and operational urgency on one side and long-term public interest on the other.
Digital Consolidation is the third seed and a newcomer to the tournament, brought in primarily on the wings of Private Equity. With heavy looks from the industry at digital technology to solve some of healthcare’s biggest challenges, rapid digital growth is expected to lead to consolidation. In Round 1, Digital Consolidation takes on Reduced Discretionary Spending, a consumer healthcare trend having a financial impact as the sixth seed in this region. High inflation is straining household budgets, and healthcare is not immune to its effects.
And in the final matchup in this region is newcomer fourth seed, Cost Cutting Strategies, as the industry grapples with severe economic pressures. This trend is expected to manifest in reduced benefit plans and direct contracting among employers, and waste reduction and staff cuts among providers as they dodge closures and bankruptcies. Speaking of which, Cost Cutting Strategies will try to break up the muscular offense of Provider Consolidation, Bankruptcies and Closures, which enters the tournament as looming economic currents threaten dire possibilities for some providers. Financial sustainability strategies will be essential for many to stay afloat in 2023.
Read about the trends in the other three regions: Purchasers, Clinical & Business Model, Digital Tools & Technology.
What trends do you think are leading the pack?
Join the conversation on LinkedIn and make your predictions by March 8.