PwC's Top Health Industry Issues in 2012 Says Health Organizations Will Act Despite Political and Economic Uncertainty

Healthcare Ranks Second to Job Creation as Most Important Issue for Americans

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Nov 16, 2011, 06:00 ET

NEW YORK, Nov. 16, 2011 /PRNewswire/ -- In its annual report on the top health industry issues for the year ahead, PwC's Health Research Institute says that, despite economic and political uncertainty, health organizations will move full steam ahead to meet regulatory requirements in 2012 and respond to a host of challenges including mounting pressure to contain healthcare costs, new state health insurance exchanges, increasing drug shortages and new reporting requirements. Organizations across different parts of the health industry will join forces in new collaborative business arrangements, says PwC, but they also are creating contingency plans in anticipation of legislative wildcards.

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In a nationwide poll of 1,000 U.S. adults, PwC's Health Research Institute found consensus among the American public about the importance of addressing healthcare issues. According to PwC's research:

Healthcare and the national deficit rank equally as the second most pressing election concern after job creation on the minds of the American public.
With out-of-pocket healthcare costs rising, nearly half (46 percent) of people surveyed by PwC said that at least once this past year they decided not to seek healthcare or pay for pharmaceuticals because of cost, and one in 10 deferred care on at least five occasions.

"2012 will be a seminal year for the health industries as businesses wade through economic, regulatory and political uncertainty," said Kelly Barnes, U.S. health industries practice leader, PwC. "One of the ways the health industry is responding to these uncertainties is by connecting in new ways with each other and their consumers as they rethink existing business models and previous notions about competition, cooperation and collaboration."

Market-driven, private-sector solutions are emerging in the form of new, collaborative business arrangements, strategic use of health informatics and innovative ways of connecting with consumers in the rapidly changing healthcare market. Based on research and insight as a leading advisor to public and private organizations across the health industries, PwC has identified key areas that health organizations will be focused on in the year ahead.

Published today, here are PwC's Top Issues for the Health Industries in 2012:

Defining and paying for value: Theory becomes reality. In light of pressure to wring costs out of the health system, health organizations must demonstrate they are delivering better value; those that don't will be penalized. In 2012, health organizations will need to adapt to new performance- and value-based payment structures, and insurers will look to cut administrative costs and keep premiums down.
Higher deductibles and co-pays cramp utilization. As consumers continue to defer care because of rising out-of-pocket costs, health organizations need to counter the resulting decline in revenue. In addition, insurers and employers will need to carefully monitor the impact of care deferral on workforce health and productivity.
Providers and insurers team up for population health. Health insurers committed more than $2 billion in the last year to acquire or align with physician groups, clinics, and hospitals, according to PwC. With the move toward population health, a further uptick in payer-provider relationships in 2012 is likely as these players team to integrate care, share information and participate in new payment models with incentives for shared savings. Nearly three-fourths of consumers (72 percent) surveyed by PwC said they would prefer health organizations that deliver a wide range of comprehensive health-related services versus organizations that focus on specialized areas. Thirty-eight percent of those surveyed believe an integrated approach would lower costs, and 36 percent expect that quality of care would increase.
The coming drug (shortage) wars. Sudden increases in demand for certain drugs, discontinued products, manufacturing delays and quality issues among generic drug manufacturers are creating a shortage of some drug supplies and raising concerns about patient care and safety. In 2012, there may be heightened focus by the FDA, hospitals and pharmaceutical companies on supply chains, real-time inventory tracking and quality-control to counteract the risk of rising counterfeit drug and grey market activity.
Investments in health informatics ramp up. Information is king. In 2012, health organizations will invest considerably in health informatics and form data-sharing partnerships with organizations that have a mutual interest in new uses of information, such as to improve health outcomes, coordinate patient care, identify population health trends, speed targeted product time-to-market and identify and manage high-risk populations. Before data assets can be maximized, the industry will need to address issues around data collection, quality and integration, develop scalable analytical tools, address privacy and security, and overcome the shortage of skilled informatics professionals and trainers, says PwC.
Privacy and security become a billboard for new business. Health organizations will focus more on information privacy and security in 2012 not only because of increased risks and the threat of stiffer breach enforcement actions, but because consumers consider privacy and security issues a differentiator. Sixty percent of consumers surveyed by PwC said they would be comfortable having their health information shared among healthcare organizations if doing so would improve coordination of their care. Nearly one-third (30 percent) of consumers said clear privacy and security policies were a top consideration in choosing one hospital over another.
Insurance exchanges: Health plans learn to compete in a new marketplace. In October 2012, states are expected to begin certifying health plans for participation in the exchanges. Insurers planning to participate in state health insurance exchanges can expect new growth opportunities but also challenges as they shift from a wholesale to a retail approach, focus on population risk management and compete head-to-head for consumers' business. Thirty-seven percent of consumers surveyed by PwC think health insurance exchanges will make it easier to find and purchase a competitive health insurance plan and one-third (34 percent) said they would have a less favorable impression of a health insurance company that decided not to participate in their state's health insurance exchange.
A slimmer pharma looks to reinvent itself. Big pharma could get smaller in 2012 as pharmaceutical companies develop new strategies to deal with the decline in patented drug sales and new regulatory realities. Following two years of mega mergers and acquisitions, major players are reducing their workforce and experimenting with new approaches to R&D, sales and marketing. The biggest casualty could be U.S.-driven R&D productivity, says PwC, but the loss would come when Americans consider pharma R&D a critical part of the nation's economy. Six in ten people surveyed by PwC view pharmaceutical and biomedical research an important engine for economic growth.
Social media plays a bigger role in healthcare. Nearly one-third of survey respondents (32 percent), including half of people under the age of 35, have used social media channels for healthcare purposes, such as connecting with health organizations and other people with shared health interests. Healthcare organizations are experimenting with building stronger connections and communities through social media, and the trend is expected to grow in 2012 as social media becomes part of an organization's overall strategy to improve healthcare and outcomes.
Healthcare will take a central role in election year. With healthcare a central issue in the mid-term election, as the Congressional "super committee" considers funding issues and the Supreme Court decides on the constitutionality of the individual mandate, healthcare organizations will have to incorporate uncertainty into scenario planning. They will need to allocate resources along multiple strategic paths and plan for contingencies that might affect strategic plans and growth assumptions.

For an in-depth look of PwC's top issues for health industry organizations in 2012, the report is available for download at www.pwc.com/us/tophealthissues2012.

Research Methodology

This annual report discusses the top issues for health industry organizations including healthcare providers, health insurers, pharmaceuticals and life sciences companies and employers. In fall 2011 PwC's Health Research Institute commissioned an online survey of 1,000 US adults representing a cross-section of the population in terms of insurance status, age, gender, income, and geography.

About PwC's Health Research Institute (HRI)

PwC's Health Research Institute (www.pwc.com/hri) provides new intelligence, perspectives, and analysis on trends affecting all health-related industries. The Health Research Institute helps executive decision makers navigate change through primary research and collaborative exchange. Our views are shaped by a network of professionals with executive and day-to-day experience in the health industry. HRI research is not sponsored by businesses, government, or other institutions.

About PwC's Health Industries Group

PwC's Health Industries Group (www.pwc.com/us/healthindustries) is a leading advisor to public and private organizations across the health industries, including healthcare providers, pharmaceuticals, health and life sciences, payers, employers, academic institutions and non-health organizations with significant presence in the health market. Follow PwC Health Industries at http://twitter.com/PwCHealth.

About the PwC Network

PwC firms help organizations and individuals create the value they're looking for. We're a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

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