Healthcare outlook after COVID-19 spurs new business models

Photo: Luis Alvarez / Getty Images

The impact of the COVID-19 pandemic on the healthcare industry is enormous, resulting in changing profit pools, rapid innovation, and the creation of new business models, accelerating diversification and vertical integration as a result of the pandemic. There is likely to be.

These are one of the conclusions of a report from McKinsey, which also found that providers are diversifying into more profitable and fast-growing care delivery services outside the hospital.

The payer and services sector profit pool is expected to grow the fastest, with interest, taxes, depreciation and pre-amortization overall revenue (EBITDA) increasing 6% from 2012 to 2026 to 31 billion. Expected to reach dollar profit.

However, the report does not take into account factors such as economic headwinds and rising inflation.

The evolution of payer composition, driven by the popularity of Medicare Advantage, and the changes in care sites driven by digitized services such as virtual care and home-based services will be important elements of the future healthcare business. prize.

The report estimates that managed Medicaid’s annual revenue growth will be 5.3% between 2021 and 2025, compared to 3.7% in 2017-2019. Meanwhile, the Healthcare Services and Technology (HST) segment will grow at a compound annual growth rate (CAGR) of 8.2%. By the end of 2021 and 2025, it had reached $ 70 billion.

“Some provider systems have also launched venture funds aimed at diversifying their core businesses into attractive revenue pools such as data and analytics. Some have various digital health products and We have created a startup incubator to build the service, “the report added.

Why this is important

According to Fitch Ratings, you’ll receive reports when the industry is facing increased costs and lower margins. This trend seems to be accelerating due to rising labor, supply and capital costs.

In Los Angeles, for example, the ordinance raised the minimum wage for private health workers to $ 25 per hour. This is a move affecting about 20,000 healthcare professionals.

Big trend

Hospitals are expected to experience a financial burden over the next decade, telemedicine will resume rising, and 27% of all assessment and management visits by 2032, according to a June report from Vizient and its subsidiary Sg2. Is expected to occupy.

The Cleveland Clinic has discovered that the virtual second opinion program, a joint venture between healthcare systems and Amwell, can save organizations $ 65 million annually.

On record

“Payers, providers, HST players and pharmaceutical service companies are facing big decisions about what they want to be in the next few years. Despite the ongoing pandemic, it’s time to make a strategic choice. It’s time to make a potentially big bet. Acquisitions and building new businesses will be an increasingly important success factor.

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