The US healthcare sector is on the cusp of significant transformation, driven by a confluence of factors, including labor shortages, inflation, and the ongoing impacts of COVID-19. Despite these challenges, the industry is poised for recovery and growth, thanks to strategic transformations and innovations across its various segments. This article delves into the key trends and opportunities expected to shape US healthcare’s future, drawing on insights from a comprehensive analysis by McKinsey & Company.
The Road to Recovery and Growth
The healthcare industry has faced unprecedented challenges recently, but the tide is turning. Efforts to transform healthcare delivery and payment models are beginning to bear fruit, with health systems and payers adapting to the new landscape. The managed care duals population, individuals eligible for both Medicaid and Medicare, represents a significant growth opportunity for payers. Meanwhile, health systems are expected to see financial performance rebound as they diversify revenue and embrace mergers and acquisitions (M&A).
Technology adoption is a critical driver of growth in the healthcare services and technology (HST) sector, with companies that offer measurable improvements to their customers poised for success. Similarly, the pharmacy services sector, particularly specialty pharmacy, is expected to experience rapid growth fueled by advances in therapy and an increasing focus on patient care.
Key Segments to Watch
The healthcare profit pools are projected to grow at a 7 percent compound annual growth rate (CAGR), reaching $819 billion by 2027. This growth will be uneven across the sector, with specific segments poised for higher growth rates. Medicare Advantage, outpatient care settings, and technology-driven HST businesses are expected to outperform. Conversely, segments like acute care and Medicaid within payers may grow slower.
The Shift Towards Value-Based Care (VBC)
The expansion of VBC models is a pivotal trend, with an estimated 90 million lives covered by 2027. This shift is expected to drive improvements in cost and quality outcomes across the healthcare spectrum. The adoption of VBC is not just limited to primary care but is expanding into specialties such as orthopedics and nephrology, promising a more holistic approach to patient care.
Government Segments Leading the Way
The payer profit pools are anticipated to grow, with government segments outpacing commercial segments significantly by 2027. This growth is attributed to increased Medicare Advantage penetration and the expansion of the dual population. However, challenges such as regulatory pressures and changes in Medicaid enrollment due to eligibility redeterminations could impact this growth.
Health Systems: Embracing Transformation
Health systems are undertaking significant transformation efforts to address cost pressures and improve EBITDA margins. These efforts include enhancing labor productivity, adopting technological innovations, and shifting care to more cost-effective settings. Despite these efforts, achieving pre-pandemic EBITDA margins remains challenging, underscoring the need for continued innovation and efficiency improvements.
The Rise of Healthcare Services and Technology
The HST sector is expected to be the fastest-growing healthcare segment, focusing on software and platforms, data analytics, and technology adoption. The demand for efficient, technology-driven solutions drives growth in this sector as healthcare providers and payers seek to improve operational efficiency and patient care.
Pharmacy Services: Navigating Change
The pharmacy services sector is undergoing significant changes, with specialty pharmacy emerging as a critical growth area. The industry faces challenges such as reimbursement pressures and regulatory changes but also benefits from developing new therapies and an increased focus on patient care.
Conclusion
The US healthcare industry is at a pivotal moment, with significant growth and transformation potential in the coming years. By embracing technology, pursuing strategic transformations, and adapting to changing patient and regulatory landscapes, the sector can navigate the challenges ahead and emerge stronger. As we look to 2024 and beyond, the healthcare industry’s ability to innovate and adapt will be critical to its success.
To dive deeper into these insights, visit McKinsey & Company’s comprehensive analysis: What to expect in US healthcare in 2024 and beyond.
