PwC: Healthcare in 2010 will focus on cost control, delivery models

PricewaterhouseCoopers' (PwC) Health Research Institute's Top 10 health industry issues in 2010 puts healthcare cost control at the head of the list as the overarching theme for the year ahead.

"Healthcare typically lags behind trends in the business cycle by a year or more. While flat may be the new growth for other sectors of the U.S. economy, the recession could hit healthcare in 2010," said David Chin, MD, partner of PwC's Health Research Institute. "The primary emphasis for all healthcare organizations in the year ahead will be on reducing costs and creating greater value in the health system."

This firm wrote that this coming year's top 10 issues are:

1. Intense effort to reduce healthcare costs: Hospitals, physicians and other providers “will look to squeeze every penny out of their operations and supply chains, renegotiating purchasing agreements and contracts with suppliers on everything from food services to medical devices and pharmaceuticals.” Payors will look to reduce benefit-related administrative costs, and employers are expected to increase audits of employee dependents.
2. Aftermath of health reform: Healthcare organizations will be busy in 2010 absorbing the potential first waves of regulatory changes from healthcare reform, including insurance market and payment reforms; dozens of new agencies and grant programs; reimbursement and pricing pressures; increased oversight, tax changes; and increased coverage and consumer demand. PwC expects the trend in the U.S. to mirror that of European countries in which major reform initiatives and their concomitant regulations will be a recurring process.
3. Government accelerates change through rewards and penalties: 2010 will be a double-bonus year for physicians who act quickly to take advantage of government incentives to adopt EMRs and e-prescribing. Those who do not will face potential penalties later. This “new carrot-and-stick model of accelerating change represents a shift in the government's role as a ‘passive payor’ to an ‘active buyer’ of healthcare and its move from volume-based payments to value-based purchasing,” PwC said.
4. Focus on fraud and mistakes: Healthcare organizations will need to tighten controls and raise the bar on compliance as the government goes after fraud and mistakes in 2010. Health reform is banking on as much as $1.6 billion in savings from healthcare fraud prevention and recovery to bend the curve on cost growth. The Obama Administration has boosted its fraud and abuse budget for 2010 by 50 percent, and a significant portion is dedicated to prosecution and enforcement. Pharmaceutical execs now face jail time for off-label marketing violations. CMS' Recovery Audit Contractor program is analyzing patient and financial records for evidence of overpayments and demanding restitution.
5. Technology and telecommunications sectors become leading players in healthcare: With a huge boost from the 2009 stimulus package for funding and health IT expansion, technology and telecommunications companies are aggressively capturing a growing share of the healthcare business. Beginning in 2010, the convergence of healthcare with technology and telecommunications companies, as well as other new market participants, will change the regulatory rules, the basis for competition and the way health services are delivered.
6. Big pharma joins the healthcare delivery team: The role of pharmaceutical and life sciences companies will evolve from manufacturer/supplier to full partner in healthcare delivery as its focus shifts from lab-based outcomes to promoting prevention and patient outcomes. In 2010, expect to see greater alignment of incentives between pharmaceutical companies, payors and providers.
7. Physician groups to rejoin health systems: The percent of hospitals employing physicians has nearly doubled since 1994, and PwC expects the trend will continue in 2010, as physicians seek greater stability and electronic connectivity.  The realignment of physician groups with hospitals, including new models such as accountable care organizations, will require providers to evaluate their relationships, operational infrastructure, payor contracting and funding models.
8. Alternative care delivery models to emerge: Traditional care delivery models will give way to alternative models of care outside of physicians' offices and hospitals. Expect to see an increase in the number and scope of services offered by work-site and retail health clinics and home health services as well as other technology-enabled delivery such as email, telehealth and remote patient monitoring.
9. H1N1 elevates emphasis on readiness for public health outbreak: Another wave of H1N1 flu in 2010 will put pressure on healthcare organizations, public health officials and employers to re-evaluate readiness for a public health outbreak. They will reassess vaccine supplies and distribution, communication channels, bed capacity, sick leave policies and the funding mechanisms and contingency plans.
10. Community health becomes new social responsibility: In 2010, a new social responsibility for community health will emerge among employers and community leaders, with a boost in funding from the government. Stimulus funding is providing grant money and other incentives for the development of evidence-based clinical and community-based prevention and wellness strategies to address chronic disease rates. A growing number of states and municipalities are creating policies and forming alliances to promote sustainable healthy lifestyles in entire communities.

Each year, PwC's Health Research Institute publishes its top issues across all health industry sectors. The report includes trends affecting insurers, hospitals, physicians and other providers, pharmaceutical and life sciences companies, as well as the growing number of non-traditional market participants converging into the healthcare space.

A full copy of PricewaterhouseCoopers' Health Research Institute's Top 10 Health Industry Issues in 2010, including implications for healthcare organizations is available online.