4 factors expected to increase healthcare sector growth in 2015

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 - Financial_analysis

For 2015, the PricewaterhouseCoopers (PwC) Health Research Institute (HRI) is forecasting an end to the five-year contraction in the $2.8 trillion health industry. It predicts medical cost growth of 6.8 percent, up from the 6.5 percent it projected for 2014.

The ninth HRI "Behind the Number" report bases its cost growth predictions on data from industry executives, health policy experts and health plan actuaries whose companies cover a combined 93 million members, as well as from PwC’s own 2014 "Touchstone Survey"of more than 1,000 employers from 35 industries. In addition, HRI analyzed a survey of more than 20 health plans belonging to the Health Plan Alliance, government data, journal articles and conference proceedings. 

Based on this information, the report authors attributed the uptick in growth to four main factors. These were:

  1. The economic recovery. While no surprise, HRI noted that the typical delay between when the economy recovers and when consumers become more confident in visiting doctors and taking care of long-delayed healthcare needs had caused many to wonder when the economic upswing would kick in. Based on pervious recessions' data, now should be the time, HRI says, and it predicts the recovery will begin really pushing up the healthcare growth rate in 2015.
  2. Specialty drugs. As shown by Sovaldi (Gilead’s new $1,000-a-pill Hepatitis C treatment), drug development will continue to push up costs in the short run.
  3. Physician employment. Hospitals and health systems are increasingly acquiring physician practices, and this may allow them to bill higher hospital rates for some services provided by the physicians, a trend HRI predicts will really take off next year.
  4. Information technology investments. With more large-scale mergers and acquisitions, the need to integrate data and information to capture potential efficiencies of scale could raise hospital operating costs by up to 2 percent during integration.

However, the story is a little more nuanced than a traditional recession recovery as some factors that had been pushing down cost growth will continue to remain in play. These include healthcare merger and acquisitions placing new focus on creating efficiencies and more coordinated, high quality care.

In addition, consumers are becoming more price sensitive and willing to accept that more care is not necessarily always better care. Finally, newer risk-based payment systems such as accountable care organizations and shared savings programs are creating incentives for providers to decrease costly mistakes and healthcare overutilization.