C-suite expects to reach value-based care tipping point by 2020

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Healthcare executives believe the shift to value-based care and risk-sharing models will be transforming the industry within the next few years, according to a survey published by Lazard.

These opinions weren’t collected solely from U.S. healthcare leaders, with responses coming from 97 international C-level executives and 203 from the U.S. While European respondents were somewhat more bullish on whether value-based payments will be “transformative,” the majority of U.S. executives (55 percent) predicted that more than half of healthcare payments in the U.S. will be value-based or risk-sharing by 2020—what the survey referred to as the “tipping point” for value-based care.

“We’ve seen what business model disruption has done to other industries,” Peter Orszag, global co-head of Lazard’s Healthcare Group, said in a press release. “The rise of value-based care may prove to be the great disrupting force in healthcare.”

Some executives predict an even faster transition, with 36 percent predicting healthcare will cross the 50 percent value-based payment threshold by 2019. A large majority (95 percent) said it expected the tipping point to come after 2020.

Investors in healthcare services expect a faster transition, with 54 percent predicted hitting the tipping point by 2019 and 79 percent said it would happen by 2020. Among the pharmaceutical executives, however, attitudes were more skeptical, as only 25 percent said the tipping point would be reached by 2020.

The survey also delved into the strategic challenges facing healthcare. When asked their top strategic concerns, the most common answer from executives and investors, by a wide margin, was pricing pressures (57 percent), followed by quality and cost (39 percent), the regulatory environment (37 percent), the political environment (26 percent) and public perception of the healthcare (23 percent).

For pharmaceutical executives, pricing and reimbursement was even a greater concern, with 67 percent naming it among the top three challenges. Among leaders of U.S. companies, 73 percent said the political environment was one of the top three drivers on pressure on drug prices.

To deal with the pressures along with the transition to value-based care and assuming more risk, survey respondents said they’re expecting an uptick in mergers and acquisitions and the entry of non-traditional competitors into the market.

For example, 80 percent of all respondents said companies like Google, Apple, IBM or Fitbit will affect the industry in the next three to five years. Most believe, however, their impact will be limited to a niche of certain markets, a view expressed by 62 percent of executives in pharmaceuticals, 54 percent in medical device technology and 52 percent in healthcare services.

In terms of merger and acquisition activity, 57 percent of respondents expected an increase in acquisitions of public companies over the next 18 months, with 67 percent predicting a rise in private company acquisitions. Executives were similarly confident about an increase in joint ventures (52 percent) and partnerships (72 percent) over the same time period.