A Decade in Review: The Top 10 Things That Shaped US Healthcare
The 2010s. A decade in healthcare that began with implementation of the Affordable Care Act (ACA) and ended with a deluge of big tech and retail ventures that blurred boundaries. It was a time where an industry grappled with paradox – although there was more innovation than in any period in recent history, costs and healthy living indicators trended in a worrisome direction. In the meantime, there was an awakening. From the front lines to the executive wings, there are now hundreds of organizations and countless individuals working relentlessly to shake us out of an untenable state.
We see glimmers of an exciting new decade on the horizon. But before we journey forward, we believe it’s valuable to assess where we have come from and what the biggest hallmarks were. In this piece, the Oliver Wyman team will identify the ten trends that drew the most collective energy and attention during the 2010s, drawing on a few of many notable examples along the way. Some things made the list based on sheer volume of activity. Others challenged communities and families with epidemics of addiction and factors transcending traditional “health” definitions. And others set in motion new rules and roles for industry stakeholders.
At the end of it all, did we light a match that finally ignites a value and consumer revolution? We must wait until the 2020s to know more. Until then, we hope you enjoy this time reflecting.
Editor's Note: Interested in one of our top 10 points? Click on the statement to navigate to our analysis on the topic. Or, scroll down to read the entire article.
TOP 10 THINGS THAT SHAPED AMERICAN HEALTHCARE
1: The government pushed more people into healthcare – and into a (still) broken system.
2010 started out with a bang. The passage of the ACA was arguably the most important piece of American healthcare legislation since Medicare and Medicaid back in 1965. The ACA hoped to expand access, drastically reduce the number of people uninsured, improve care quality, and bend the trend of cost increases. While the number of uninsured dropped from 46 million in 2010 to 27 million in 2016 (before increasing by 500,000 from 2017 to 2018, that is), the underlying system didn’t become more effective.
Over the past decade, life expectancy at birth for the average American remained flat at 78.6 years, while annual premiums for the average family with employer-based health insurance increased by a whopping 40 percent to $19,565. The industry grappled with both ACA implementation and its many updates, including launch of ACO models, MACRA, and the repeal of individual mandate – with the threat of a full repeal always looming. Additionally, the government rolled out the HITECH Act and its various stages of Meaningful Use regulations to accelerate the digitization of healthcare information and promote data interoperability. Over 95 percent of hospitals have adopted electronic health records, though the industry is feeling the hangover of this push with documentation burden and physician burnout.
As the decade came to an end, the Centers for Medicare and Medicaid Services (CMS) passed regulations to address site neutral payments, reimburse telemedicine, and force price transparency. Healthcare remains an unsolved, prominent issue as the next Presidential election cycle nears. Undoubtedly, the government will continue to play a major role in defining what happens next. The industry will watch carefully as regulations shape healthcare’s future.
2: It was a breakout decade for Medicare Advantage.
In 2010, Medicare Advantage (MA) plans had 11 million enrollees – about 25 percent of the eligible Medicare population. Eight year later, nearly 20 million people (34 percent), were enrolled in MA plans. With nearly 10,000 new Medicare-eligible beneficiaries entering the market daily, MA represented the only real opportunity for profitable new membership growth for payers. And with spending hovering somewhere near $10,000 per member annually, and government funding for MA continuing to rise, payers rushed to build products and solutions for this segment.
There are now over 3,500 MA plans available nationwide for individual enrollment, most offering extremely competitive benefits. For example, in 2019, half of all MA enrollees paid no premium (other than Part B). The age wave and growth of the market has attracted many new players to the industry, like Clover Health and Alignment Healthcare. Alignment made a splash by announcing they were offering their members 24/7 on-demand access in-person, in-home, or on devices as well as a personal concierge that schedules doctor appointments, arranges transportation, and even delivers food following hospital visits. Plans (and innovative providers) also took note and redoubled their focuses in the space.
MA’s star is burning bright. We expect national enrollment figures will increase to over 40 percent during the next decade.
3: Rise of high deductible health plans: consumers paid more than ever for care.
As health costs kept rising, more consumers had to foot the bill. From the start of the decade to now, enrollment in High Deductible Health Plans (HDHP) has increased nearly 18 percentage points. That number’s now closer to 28 percent. Although employers embraced HDHPs so consumers could make healthcare decisions from the driver’s seat, this data suggests a troubling pattern. While consumers reduced spending by 12 percent after switching to HDHPs, this reduction was sparked by limited utilization and avoidance of high-value services like preventative care. This in turn led to expensive episodes and higher industry costs later down the road.
The industry realized members were not given the tools they needed to shop for services and make informed decisions. This trend could change in the next decade with the rise of transparency applications like Healthcare Bluebook and Castlight. But how quickly and effectively consumers learn to use transparency remains to be seen.
Employers offering Health Savings Accounts (HSAs) alongside HDHPs also had mixed results. While average HSA account balances jumped 22 percent to $2,843, this amount was just above the minimum allowable deductible amount for family coverage ($2,700), but less than one-fourth the max annual out-of-pocket contribution for family coverage ($13,500). Given the median American family has only $11,700 in savings and 29 percent of households have less than $1,000 in savings, many Americans are one medical issue away from financial ruin.
Cost sharing has reached its limits. Going forward, the industry must use new cost control tools to manage expenses.
4. The opioid crisis brought tension between profit and appropriate care into sharp relief.
First, the good news. After opioid over-prescriptions were recognized as a nationwide crisis, we took action. The number of opioid prescriptions dropped to 191 million (or 58 prescriptions per 100 people) by 2017 from a whopping 251 million (or 81 prescriptions per 100 people) at the start of the decade.
Now for the bad news: Despite our progress, current data shows the US still grossly overprescribes opioids relative to both other developed countries and the latest clinical guidelines. Much of the US government’s response to overprescribing has been focused on rehab and medications. These initiatives, although significant, still overlook the systemic fact that opioids keep being dangerously overprescribed. Today, opioids are the main cause of over 70,000 annual drug overdose deaths.
While lack of individual responsibility and macro societal trends like unemployment were discussed as drivers of abuse, the opioid crisis also exposed systemic operational flaws in the health industry’s pursuit of profits. Consider that over just a ten-month period, McKesson, America’s sixth-largest company, shipped over 3 million prescription opioids — or nearly 10,000 pills daily on average — to one pharmacy in a Southern West Virginia town with only 400 residents. In neighboring Virginia, a doctor was sentenced to forty years in jail for prescribing over 500,000 opioids over two years.
By the end of the decade, Americans were fighting back. OxyContin maker Purdue Pharma reached a $12 billion settlement over its role in the US opioid crisis and filed for bankruptcy. Cases like these offer some closure to those deeply hurt by the epidemic. We begin the next decade by asking: How can we ensure doctors practice medicine appropriately? How can we prevent profit motives across industry sectors from destabilizing the entire industry?
5. Vertical integration: the healthcare value chain combined to shape new roles.
In a decade full of megamergers and deals, one thing was obvious – the usual suspects looked beyond their traditionally siloed industry roles and combined to form wholly new vertically integrated businesses. Payers and providers came together in a big way. Since United Healthcare’s 2010 launch of Optum, the company’s physician arm OptumCare has grown rapidly. Today, it employs or has affiliation with over 40,000 physicians as the largest US physician employer. Blues plans did not sit on the sidelines – in 2013, Highmark acquired Allegheny Health which operates eight hospitals as a vertically integrated system. Several other Blues plans launched primary care clinics. In 2017’s blockbuster $70 billion deal, CVS and Aetna merged. With 1,100 MinuteClinics in 33 states and an intention to expand to 1,500 HealthHUBs by 2021, the combined organization hopes to make convenient care the destination of choice for most Americans. By moving Aetna’s drug formulary to CVS Caremark and increasing scale and negotiating power, the company expects $3.5 billion in incremental operating profit in 2022 and positions the combined entity in a new industry role.
Not to be outdone, Cigna-Express Scripts also came together in a $67 billion deal to better manage medical and pharmacy costs. Furthermore, recognizing the increasing cost of procuring drugs for their patients, Intermountain Healthcare, alongside 45 health systems, spearheaded formation of Civica Rx to procure and distribute generic drugs directly from manufacturers.
The lines between payers, providers, and pharmaceuticals firms are blending. The next decade offers promise of synergies from a vertically integrated industry.
6. Horizontal consolidation: incumbents got bigger as scale became a priority.
Something shifted in hospital operators’ minds at the start of the decade. They started to believe that bigger really is better when it comes to a health system’s essentiality and sustainability. To that end, many major health systems merged, including CHI and Dignity Health (for $29 billion), Providence and St. Joseph Health (for $18 billion), and Advocate and Aurora Health (for $11 billion). The hopes of these mergers? To immediately realize cost savings in back office operations and long- term, realize additional care delivery synergies to serve new populations, and increase their share of care.
Questions currently unanswered include: How will these behemoths integrate their cultures and processes? Work with disparate physician groups, payers, and consumers in local markets? Realize the benefits of scale? And deliver enhanced value to their communities?
Payers seeking scale through mergers were mostly thwarted as big deals failed following regulatory scrutiny and antitrust related push-back (for example, with Aetna-Humana, or Anthem-Cigna). Pharmaceuticals and medical device companies, historically active in mergers and acquisitions (M&A), continued the blockbuster deal trend, like Celgene and BMS (for $74 billion) and JNJ and Synthes (for $21 billion). We believe horizontal industry consolidations will continue into the next decade, but that the specific number of blockbuster hospital deals will slow down significantly.
7. “New front doors” to care became a reality and virtual, digital, convenient care made a big splash.
The 2010s brought merged consumer forces, technological advancements, and (more recently) legislative payment reforms that created an onslaught of “new front doors” to healthcare delivery. With over 2,800 retail clinics and over 9,200 urgent care centers nationwide, the supply of convenient options exploded, and continues to grow. Consumers using these care alternatives really like them – over one-third of consumers who used a retail clinic in the past year prefer this experience to a traditional doctor’s office visit.
Primary care innovators like One Medical, with their highly desired same day appointment product, expanded their footprint to serve 12 major cities. On the digital front, we saw a rapid rise in telemedicine usage like on-demand video visits and text-based services. Insurance claims for non-hospital-based provider-to-patient telehealth spiked by nearly 1,400 percent since 2014. Kaiser Permanente even reported in 2016 that 52 percent of their patient transactions were conducted online through virtual visits or through apps.
Speaking of apps, digital health startups announced that funding totaled $14.2 billion in 2018 (an amount 14 times higher compared to 2010). Artificial intelligence (AI) diagnostic and symptom checker chatbot, Ada, inked a deal with Sutter Health to bring AI to the health system’s 3 million members. Health startup 98point6 even launched their $1 per live doctor visit (no insurance needed!) via their text app.
Although there was lots to get excited about, traditional primary care offices remain healthcare’s prevailing “front doors”, as consumer awareness of these new options and capabilities is inconsistent at best. Lagging reimbursement and benefit coverage, once big hindrances, are both now beginning to aggressively pivot towards virtual care as we approach a new decade. Accelerating “new front door” adoption will be a major driver over the next ten years.
8. Social factors and mental health are (finally) part of the equation.
The industry collectively realized for the first time that social determinants of health (SDOH) and mental health contribute heavily to people’s health outcomes across populations. When we realized, for instance, that nearly 60 percent of a person’s health is determined by social, environmental, and behavioral factors, CMS and industry players began making SDOH a focus area of their services. Providers like Mt. Sinai Health System sent community health workers to patients' homes, Kaiser Permanente invested $200 million to fight homelessness and housing instability, Geisinger and ProMedica focused on solving food insecurity, and Cleveland Clinic handed over support services to local businesses to create local jobs.
Health plans also took up the charge on addressing SDOH given that in 2017, 19 states required Medicaid managed care plans to screen for and/or provide referrals for social needs. These entities and programs already realized tangible clinical and cost benefits within the populations served. America specifically acknowledged its mental health crisis. Life expectancy dropped in the past three years (for the first time since 1920) because of increases in suicide and drug overdoses.
We realized not having access to mental health clinicians was a big issue. (Consider that nearly 40 percent of Americans live in areas with a shortage of mental health professionals.) Given that only 43 percent of adults with mental illness gets annual treatment and it currently takes nearly 11 years between symptom onset and treatment, we have a massive gap to fill. Integrating mental health into traditional medical care has only just begun, efforts often driven by innovative care models and regulatory pushes. Many apps like TalkSpace, Mindstrong, and Ginger.io are working to bring digital therapy services to the masses. But, there’s ton more to be done over the next decade.
9. Specialty drug spend is surpassing traditional drug spend.
2019 is the first time in US healthcare history that specialty pharmacy spending is outpacing traditional pharmacy spending. Costs were not driven by drugs alone; service site was a major driver of spend, and providers viewed specialty as an important increased revenue opportunity. As this spend increased, industry players responded: Pharmacy Benefit Managers (PBMs) expanded their specialty pharmacy footprints through M&A (like when OptumRx acquired Avella Specialty Pharmacy for $325 million and CVS Health announced five specialty pharmacy deals in just 2018), payers implemented restricted formulary designs and utilization management programs, pharma companies increased research and development (R&D) investments in new specialty therapies (for example, 80 percent of new drug approvals are considered specialty), payers explored outcome-based pricing models directly with manufacturers, employers began making difficult decisions about pharmacy coverage as part of an overall healthcare benefit cost portfolio, and providers began considering specialty pharmacy as a new revenue stream.
In the next decade, a robust pipeline of high-cost therapies in autoimmune/anti-inflammatory, oncology, and HIV/AIDs is slated to hit the market. These new therapies will keep driving up specialty drug spend to a minimum of around 65 percent of total drug spend. Specialty isn’t special anymore, it’s the new norm. The question remains: What new techniques will the industry use to deliver these necessary therapeutics while limiting spend?
10. We weren’t alone… new players entered the healthcare game.
Big players from other sectors turned their attention on how their expertise, scale, and fresh perspectives could reshape a broken industry. Apple, for instance, enabled the mobile health app explosion, with their Apple Healthkit launch and data portability partnerships. As another example, Walmart launched low-cost visits in portions of its high-traffic store footprint to expand the population of people it serves. Amazon (both solo and through its Haven partnership) began working to become the channel of distribution and delivery for pharmacy (via Pill Pack) and ambulatory care needs (via Amazon Care). These and other high- profile innovators have each hired industry heavyweights to lead their push. They employ data and analytics and industrial discipline in ways healthcare incumbents have struggled to emulate.
Although their impact is yet to be determined, the ability to innovate without the constraints of incumbent assets and business models makes them important forces that will either threaten or enable the transformation of the industry as we know it.
11. (Sorry, but we just couldn’t stop at 10!) We collected a lot of healthcare data. And, we’re still figuring out what to do with it.
By 2018, the healthcare system generated nearly one zettabyte (that’s a trillion gigabytes) of annual data, an amount projected to double every two years going forward. (For context, if each Terabyte in a Zettabyte were a kilometer, that’s the same as 1,300 round trips to the moon and back.) While this decade marked the digitization of healthcare and the proliferation of data, two questions remain for us to answer: What insights can we glean from this data to transform care delivery? What’s the impact of our data collection efforts?
Doctors spend about six hours on data entry during an eleven-hour workday – extra time that’s often criticized for contributing to physician burnout and work-life imbalance. Consumers are being asked to track more health information, including wearable data, often across dozens of health apps – but to what end? Hopefully, somewhere embedded in mountains of raw data are the keys to unlocking a better healthcare system for all. We hope new medical insights come out of studying many patients with similar profiles. We imagine new levels of personalization as the system becomes “smarter about me”. We envision a time when the warning signs of chronic disease are recognized long before illness and disease take hold. These are the data problems of the next decade. In the meantime, we’re betting it’s worth the effort.
What Comes Next? The Rewriting of Healthcare’s Rules.
Looking back, the 2010s was a decade where incumbents faced mounting pressures to legacy business models, legions of new (and big adjacent) players entered the scene, and consumers emerged from the healthcare wilderness. And it was a decade when campfires of innovation were lit across the country. While we did not meaningfully move the big dials of impact (especially on affordability), a number of trends we’ve described above are foundational to further progress. Many puzzle pieces are now in play, but they are scattered and sub-scale. Looking ahead, we cannot help but be excited for the major changes the American healthcare system is poised to make. Access everywhere, personalized models, community ecosystems, “always-on” engagement, and more. In our rearview mirror is a ten-year stretch of experimentation. What looms ahead is a decade where bigger tectonic shifts to the rules of healthcare will be written.
