According to Deloitte and McKinsey, below are 2024 trends to expect in the healthcare payer space. From my experience, no real surprises as these have all been on our radars for some years now. But, if you’ve been paying attention, industry players are making strategic moves in a piecemeal manner. The big question is, is your org playing checkers or chess? Are you still focused on the next renewal cycle, while others are already 5 years out?
– Shift Toward Government Segments: There’s an anticipation that government healthcare segments will see significant growth compared to commercial segments. By 2027, it’s estimated that profit pools for government segments will be about 65 percent larger than those for commercial segments.
– Value-Based Care Expansion: Approximately 90 million lives are expected to be under Value-Based Care (VBC) models by 2027, up from 43 million in 2022. The expansion is fueled by an increase in commercial VBC adoption, greater penetration of Medicare Advantage, and the Medicare Shared Savings Program model in Medicare fee-for-service.
– Increased Labor Costs and Administrative Expenses: It’s projected that increased labor costs and administrative expenses will reduce payer EBITDA by about 60 basis points in 2023.
– Digital Transformation and AI Integration: The integration of digital technologies and generative AI is expected to revolutionize how healthcare is delivered. This integration is crucial for addressing various sector challenges, including patient access, wait times, claims processing, and staff burnout.
– Consolidation and M&A Activities: Mergers and Acquisitions (M&A) activity in the healthcare sector, which saw a rebound after the COVID-19 pandemic, is expected to continue in 2024. Large healthcare organizations are increasingly acquiring or partnering with non-traditional industry disruptors and innovators such as tech giants, telecom, and retail, as part of their strategy to meet the needs of a more empowered healthcare consumer.
– Focus on Workforce Talent Challenges: Talent shortages and workforce challenges are expected to significantly impact healthcare strategies. Health systems are focused on attracting and retaining clinical staff while addressing clinician burnout. At the same time, health plan executives are less concerned about workforce issues but are focusing on the mental health and well-being of their employees.
– Outsourcing and Offshoring: To manage challenging margins, rising labor costs, and high-interest rates, healthcare organizations might consider outsourcing and offshoring certain functions. This strategy could include moving back-office functions overseas where labor costs can be lower.
– Affordability and Empowered Consumers: With rising healthcare costs, affordability remains a key concern. Health plan executives are focusing on making healthcare more affordable for consumers, potentially through more cost-effective treatment options like virtual health.
Links to sources –
https://www2.deloitte.com/us/en/blog/health-care-blog/2023/outlook-for-health-care.html