Harry Truman, tired of endlessly equivocating advisors, famously requested a "one-armed economist" who could give unambiguous advice. This article is an attempt to get our arms around the future of health and make definitive recommendations despite the uncertainty.
Our view of the future is defined by two sources of uncertainty. The first is the volatility of demand for care and coverage. The second is who will absorb this volatility. Demand for care and coverage has been rising steadily but has suffered a major setback. It may recover quickly, slowly, or continue to fluctuate, driven by epidemiology, economy, politics and preferences. Likewise the risk transfer to consumers and providers has been underway for some time. However, few providers or payers are big enough to absorb the new waves of risk — a further consolidation may be needed, or a greater government intervention. The next major structural change in the industry is underway.
The best-case scenario is a rapid, sustained recovery. Even this scenario will put a strain on the current players, breaking many. A more likely scenario is a slower recovery, punctured by seasonal spikes in infection. At the regional level, all stops would have to be pulled out to meet the challenge. This could give rise to very large integrated regional networks, providing care, coverage and select social services. These networks might be private, state-owned or a combination of the two. In the worst-case scenario characterized by ongoing fluctuation, these networks would expand to national scale as the only way to absorb the constant shocks.
Under any of these scenarios, providers and payers will need to get closer to consumers and employers and closer to each other — while playing closer attention to how they execute. Here are eight factors that define the new normal:
1. Surprisingly, many organizations have found that despite the crisis, their strategies are still fundamentally valid. The years-long repositioning towards more consumer-centric, risk-bearing, technology-aided care has not been cancelled — it has only accelerated. The CEOs we know are sharpening their focus and doubling down on their commitments.
2. However, payer and provider strategies do need to become more responsive and predictive. The ability to flex capacity, accurately price risk and keep the customers and the workforce engaged will be key. On the patient/customer side, we are seeing a much greater effort to improve engagement. As infection rates fluctuate, payers and providers will have to make sure that the journey toward greater health and wellness does not grind to a halt as it did this summer. On the strategy side, we are seeing shorter analytics-supported planning cycles, shorter executive agendas, more involvement from the board and greater focus on the market.
3. However, better focus and planning are not enough — health organizations will need to execute faster. Many of our clients are re-examining their operating models and clearing out the “dampeners” between the executive intent and the front-line, customer- and patient-facing teams. They are also taking a fresh look at their battle-tested C-suite.
4. For most organizations, speed is not enough — they will need resilient scale. Resilient scale means more capacity — measured in people, facilities, technology, supplies, capital and management bandwidth. Resilient scale means a higher pain threshold for the shocks to come and higher cost efficiency. Big is beautiful — the Andean condor, one of the largest birds in the world, is able to soar for a hundred miles without flapping its wings even once.
5. Where will this scale come from? We anticipate significant consolidation and believe that the size of an average provider system will double as large systems grow and small systems fold. Critically, we anticipate more consolidation between providers and payers. While these combinations have seen their share of setbacks, they have weathered the COVID-19 storm with confidence, benefitting from extra resources and capabilities. We believe the future is with the next-generation integrated health networks.
6. The integrated health networks will be sorely needed by the American communities decimated by the pandemic. Payers and providers have cast a critical safety net, expanding their reach into housing, transportation and other non-clinical drivers of health. From now on, every community will have fewer resources and greater needs, requiring a coordinated, networked community health effort led by trusted health organizations. This effort will help the most vulnerable while also helping the communities get back to work safely.
7. A safe return to work is a priority for providers and payers themselves. Their workforces are large, diverse and under tremendous strain. The wave of furloughs, layoffs and benefit reductions is underway, leaving the employees further traumatized. Going forward, they will feel every bump in the road very acutely. However, we need them to perform better than ever — doing more work, sometimes remotely, and rising to new challenges. The talent imperative has to be at the top of every health executive’s agenda, with a plan to re-energize, upskill and flex the team.
8. Finally, and perhaps most importantly, the biggest priority for the providers and payers is the customer — the person they are here to serve. Understanding her and winning her trust will make or break the health organizations of the future. Volatile demand and increasing competition between larger rivals is moving the system closer to the customer — into her phone and her home, providing care, advocacy, navigation and service. On this frontier, providers, payers, retailers and technology companies will compete for attention, data and a lifetime relationship. One size will not fit all — the risk pools have shifted, as have the behaviors of individuals and families. Virtual care in particular has emerged as the Most Valuable Player in keeping the seniors safe, engaged and healthy. Fortunately, the regulators have kept pace, with a push towards more virtual, more transparent, more portable care.
Providers and payers have been through the wringer but they have also been given a new opportunity to lead their people and their communities. Hopefully these suggestions serve as helpful signposts for the road ahead.
Gary Ahlquist, Jeff Gitlin and Igor Belokrinitsky are PwC Strategy& consultants who advise provider and payer executives