Healthcare Trends in Review: Increasing Costs and the Rise of Retail
January 04, 2021
This blog post is part of our Ten Healthcare Trends Series, presented annually since 2012 by Robin Rose, VP, Healthcare Resources Group.
As 2021 opens, healthcare faces the new reality of pricing transparency and an unclear future for the Affordable Care Act. At the same time, healthcare systems and providers will be dealing with the fallout from the COVID pandemic for years to come. As a follow-up to our tenth annual special webinar, Top Trends: How Healthcare Moves Forward in 2021, two trends we’ve explored in past years merit re-examination:
1. Rising Costs, Declining Results
Ten years ago, the healthcare industry was in a very different place than it is today. A decade ago, healthcare costs were increasing at a rate that surpassed national GDP and quality of care was poor. The U.S. had the highest healthcare costs in the world, yet we were achieving outcomes that were far less favorable than most other industrialized nations. Most of the year-over-year activity in 2012 was focused on new regulations and new ways of managing care that were supposed to reduce healthcare costs while also improving patient care. There was hope within the industry that it could fix itself with programs such as CAHPS, patient-centered medical homes, accountable care organizations, etc. CMS was implementing programs to reduce unnecessary readmissions and reduce the number of hospital-acquired conditions. There was also the push to have electronic health records, implement meaningful use programs, and react to the open payments database. All of these programs had financial incentives to drive improvement.
More recently, we have realized that many of these measures have not worked as well as we had hoped, and that the industry is very slow to change. Healthcare costs are still on the rise, and we are still producing poor outcomes compared to most other countries. For example, we are 35th in the world in terms of maternal mortality during childbirth.
While many providers report the rise in skipping needed care in 2020 due to COVID concerns, high costs have driven consumers away from needed care long before the pandemic began.
2. The Rise of the Retailers
Increasing costs and stagnating outcome improvements have opened the door for competitors in a big way. While a decade ago, the healthcare industry was fairly self-contained, numerous “outside” competitors are entering the industry and causing great concern to traditional healthcare executives. Some of the big competitors include most of the large insurance companies, Amazon, Apple, Google, Microsoft, IBM, drug store retailers such as CVS and Walgreens, big box retailers such as Target and Walmart, and major grocery chains. All of these competitors have deeper pockets and much more advanced consumer tracking technology than do healthcare organizations. These organizations want to be disruptive in bringing change to the industry rather than slower, incremental, year-over-year progress.
We have been presenting trends for years that predicted the rise of outside competition who are eager to get a piece of this $2.5 trillion dollar industry. Healthcare executives had to focus all their attention on the pandemic in 2020, leaving the backdoor for retail competitors to come in.
For example, CVS Health reported a 600% surge in use of its retail health clinics via telehealth and a big jump in home prescription delivery as Americans sought easier access to healthcare services amid the spread of the coronavirus strain COVID-19 (Japsen, 2020). “Retail prescription home delivery is up more than 1,000%,” CVS chief executive Larry Merlo reported. “When facing any health crisis, including this pandemic, we’re uniquely positioned to understand consumer and patient needs and how to address them,” Merlo said.
As we move into 2021, revenue concerns and retail growth will doubtless continue to play outsized roles. To what extent remains to be seen.
Download the free webinar recording, Ten Trends: How Healthcare Moves Forward in 2021.
Now in its tenth year, our Ten Trends webinar series is an annual favorite of healthcare leaders nationwide. Watch and listen for a fresh, informed perspective on ten trends that will have significant impacts on healthcare in the coming year. Download the recording of this engaging live webinar and Q&A session.