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Global Tax Insights

Prognosis for the Healthcare Industry

September 16, 2019

The healthcare industry faces staffing shortages, cyber opportunities and risks, and a shift to value-based care in 2019 and beyond. How are businesses dealing with the changes?

The healthcare industry continues to see dramatic change, largely driven by the move to value-based care (VBC). Providers must stay atop these trends to minimize disruptions to their profits and financial well-being.

Shifting Players

VBC is leading to new business models, such as telemedicine and concierge care. This has attracted new players to the industry, from Amazon, Berkshire Hathaway and JPMorgan to Google, Apple and even Uber.

At the same time, consolidation remains a key strategy to help drive down costs. Not only traditional providers are engaging in mergers and acquisitions, but entities throughout the healthcare continuum are also joining forces.

For example, CVS Health’s acquisition of Aetna is currently under review by a federal judge. Cigna is combining with Express Scripts. And physician practices are being scooped up by various insurance companies and hospitals.

Cyber Opportunities and Risks

Like other sectors, healthcare is turning to technology to reduce costs. Wearables, for example, are growing in popularity with both patients and providers. Fitbits, smartwatches, biosensors, and blood pressure and electrocardiogram monitors are among the already available devices that can collect data on users’ health and activity levels and transmit the information to their physicians.

It’s one thing to collect data; it’s another to use it effectively. Artificial intelligence (AI) is helping organizations leverage their mountains of data to improve patient care and control costs. Providers also can deploy AI more directly in the care environment through, for example, chatbots that perform initial screenings of patients seeking virtual healthcare or telemedicine. Blockchain — a digitized, decentralized ledger or database that inalterably records and shares secure information — is poised to revolutionize several different areas, as well.

Data security is an ongoing concern, with providers and their vendors under constant attack. A recent study of multiple industries by IBM Security found that, for the ninth consecutive year, healthcare organizations had the highest cost of a data breach. In 2019, healthcare organizations lost an average of almost $6.5 million per incident and $429 per stolen record.

Staffing Shortages

The aging population has dramatically increased demand for healthcare services. At the same time, many practicing physicians and nurses are nearing retirement. In 2016, more than half of actively licensed U.S. physicians were age 50 or older. In 2017, the average age of U.S. registered nurses was 51.

Automation, telemedicine and the like will offset the coming wave of retirements somewhat. But there’s no replacement for the human touch in healthcare, and skilled staff will always be needed.

Ongoing ACA Litigation

Challenges to the Affordable Care Act (ACA) continue. In July 2019, the Fifth Circuit Court of Appeals heard oral arguments as part of its review of a lower court’s ruling that the ACA was unconstitutional. It may not deliver its decision for months, and an appeal is certain to follow. If the plaintiffs prevail, though, the resulting upheaval would include the end of public health insurance exchanges, premium tax credits, subsidies and Medicaid expansion.

The Fifth Circuit case is one of many making their way through the courts. In late July, for example, several medical groups appealed another federal court’s decision upholding the Trump administration’s expansion of short-term health plans. The plans aren’t required to cover the ACA’s essential health benefits or pre-existing conditions, among other things.

In March 2019, a district court struck down a Trump administration rule allowing small businesses to create ACA-exempt association health plans. Later that same month, a different court rejected Kentucky’s and Arkansas’s new Medicaid work requirements.

Contact Us

Is your organization healthy enough to endure the changes happening in the healthcare industry — or will it lag behind stronger, more agile competitors? Our Healthcare Services Group can help your organization address these issues head on and position it to thrive in the future.

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