Find episode transcript below.
GLENN HUNZINGER:
00:00:03:01 Welcome to PwC’s Next in Health podcast. I'm Glenn Hunzinger, PwC’s health industries leader, and I am thrilled to join you as your new co-host of our Next in Health podcast series, interviewing guests alongside your long-time host, Jenny Colapietro. I'm excited to be here and looking forward to the topics we have to talk about in 2025. And there's no doubt it'll be an exciting year for health.
JENNY COLAPIETRO:
00:00:25:10 We're delighted to have you here, Glenn. I think your perspectives, experience, and your personality will bring some new energy to our conversations. I'm Jenny Colapietro, PwC’s Consulting Commercial Leader, and today we're pleased to welcome back Thom Bales, Leader of our Health Services Advisory practice, joined by Alena Taylor and Ruchita Kewalramani
00:00:46:06 They're going to provide some insightful perspectives on what 2025 holds for health services. So, team, welcome to the podcast.
THOM BALES:
00:00:55:10 Thank you Jenny, and welcome Glenn, great to have you in your role and on this podcast.
ALENA TAYLOR:
00:00:59:04 Happy to be here.
RUCHITA KEWALRAMANI:
00:01:00:05 Thank you for having us.
GLENN HUNZINGER:
00:01:02:04 All right, well, the team is excited to talk about what we think about the health services organizations and what we're going to see in 2025. Before we talk about 2025, probably makes sense to just recap what happened in 2024. There's no doubt there were some challenges along the year for both payers and providers, given the increasing public scrutiny, both from consumers and from the government over affordability concerns and barriers to care.
00:01:29:00 There's no doubt, access, affordability, and quality or consistent themes. We've heard it day in and day out and we'll continue to hear it. But Thom, before we kind of jump into the year ahead, maybe we can kind of recap what we saw in ‘24 and use that as a jump-off point to what we're think we're going to see in ‘25.
THOM BALES:
00:01:45:10 Thanks Glenn. And I was with a client yesterday that we were going through this, and as we talked about 2024, she looked at me and she said, ‘Wow, it really was a year that hit harder across the board than what we were thinking.’ And what was that that hit harder? Well, first of all, in January, AI went mainstream.
00:02:04:02 We had the democratization of it, right, where we could actually get on our keyboards and test it and play with it. And we saw how fast and the possibilities with it. In February, we ran into an unprecedented cyber breach in the US, impacting all of us. We saw into the spring and over the summer the intensification of the scrutiny of the role of PBMs related to drug pricing transparency.
00:02:25:05 We saw deal scrutinized, the ongoing clinical labor shortages persisting the third year in a row of rising medical costs. It's the first time in almost 15 years that we've had three years in a row of rising medical costs. We saw the reality of consumer activism at its worst at the end of the year.
00:02:43:02 And then as we exited the year with the new administration's healthcare agenda, we saw uncertainty and questions on many fronts around how is it that we thought about healthcare policy in the US regulation and where we were headed. So, we enter into 2025 in a year with this uncertainty and a year with the potential for mounting stakeholder frustration,
00:03:04:04 a different kind of government scrutiny and activism that could couple with consumer activism to make it a very interesting year. Health plans and health systems are going to need to be ready to respond with broader resilience strategies and along the way just playing greater vigilance.
JENNY COLAPIETRO:
00:03:23:10 Yeah, Thom, 2024 was definitely a challenging year to say the least. And as you outlined, 2025 has its uncertainties and challenges, particularly with the new healthcare administration's healthcare agenda and the questions that remain. Thom, what should payers and providers be focused on in 2025 and what should they keep their eye on?
THOM BALES:
00:03:45:05 In our report, we outlined 10 sector dynamics that leaders need to watch and act on, including the ongoing need to control costs, make healthcare more affordable, and then to remain on alert as they face increasing cyber-attacks. And for many of you who are out there and are leaders in your organization, you know that these are coming in daily and at times they can be quite egregious.
00:04:06:05 But let's just focus on a few of the other issues starting with the news out of Washington. PwC has our own health policy desk where we are staying alert daily on the major policy changes that are coming out from President Trump's administration, changes that are related to tax, potentially impacting our academic medical centers,
00:04:26:02 changes that are related to reimbursements, impacting both health systems and payers, and then how we think about Medicare and Medicaid, which we'll get into in a little bit more here. And for those listening, we encourage you to check out our latest updates on the administration. They're available on our website and we'll also be doing deep dives through this podcast, but I would also say it's a time period to get more active.
00:04:46:04 And I know that in the past couple of weeks, as I've spoken to many of our clients’ leaders, they're spending more time in Washington just trying to educate and make sure that under the framework that is being developed now around healthcare, that the new administration understands the implications and the impacts for that.
00:05:04:09 And that likewise, our health plans and health systems are in a position to be ready to respond to those as they come through. Being at the table, staying informed and ready to pivot as needed. So, back home within your own organization, that means the ability to have scenario planning, actively talking through what those scenarios might look like, thinking through how the profit pools might shift and where resilience in those profit pools and revenue could be as they start to face policy headwinds.
00:05:34:10 And for some of our organizations, it's even exploring new business relationships for different kinds of growth. We've seen that in the last five to 10 years. What does it mean to be a consumer healthcare organization? What does it mean to be an at-scale industrial-strength health system? There's going to need to be more explanation of that in 2025.
00:05:54:02 And then lastly, underneath all of this, we have the incredible opportunity and innovation that comes with AI that sits on a requirement for everybody engaged to do more around data risk protection and cybersecurity management overall as they adopt AI.
00:06:10:08 So, now let's do a quick deep dive on one of the most important segments in US healthcare, and that is our government programs, Medicare and Medicaid funding. And to that, I'd ask Ruchita to walk us through that.
RUCHITA KEWALRAMANI:
00:06:26:01 Glad to be here and to talk about government programs as one of the biggest growth vectors that we see in the industry right now, both for payers and providers, but also our formal life sciences clients, where this segment of government programs is going to continue to grow at a faster pace than any other population in the industry.
00:06:47:03 When we think about government programs, we really anchor on two big areas. The first one being Medicare, where there are nearly 70 million Americans that are covered by Medicare today and 90 million that are on Medicaid, including the children's health insurance program, which is called as CHIP. From Medicare, we see the new administration pledge to protect Medicare in principle.
00:07:13:03 However, if you think about the landscape and listen closely to some of the earning calls both from our payers and provider clients, there are a lot of undercurrent and continued questions about the reimbursement landscape in Medicare. The increased utilization that we still continue to see, both from disease prevalence, but also disease acuity in Medicare,
00:07:38:04 and then also the competitive landscape in Medicare in which the top five plans get about three-fourths of the share of the market every year. So, there are a lot of questions out there in how plans and providers should play, both from an offensive as well as defensive strategy in Medicare.
00:07:58:09 On the offensive, Medicare has become a game of good product, good marketing, and provider education to drive the right documentation and invest in table stakes. But also, on the defensive, there is a lot of opportunity to guide member education, drive behavior change, and manage the total cost of care of the programs that the payers and providers have.
00:08:23:00 What we continue to observe in the market is the question in Medicare, if there will be exits in the market. So, we do anticipate some M&A activity in the Medicare market for plans and providers who do not have the right level of profitability due to the scale.
00:08:42:05 So, if you think about Medicare Advantage, three-fourths of the market is with the top five players, but then there is a very long tail from there on. And those are provider-sponsored health plans, but also regional health plans that do not have the scale and are asking the question, can they remain in Medicare? In that we are starting to see certain exits, but also collaboration in the market.
00:09:06:03 So, we do anticipate more M&A in the future on Medicare, and then there will be more deals from capabilities build perspective as well, both from investing and acquiring the right platforms, the right data strategies, as well as use of AI.
00:09:25:10 In the last two days, I've spent time at a client where we've been spending lot of time on their platform strategy to manage the Medicare population with the right set of data, the use of AI to drive more efficiency and effectiveness in their clinical operations group.
00:09:40:05 So, I think those trends will continue in 2025 onward. Shifting gears to Medicaid, the decision on Medicaid and the populations and number of enrolees might shrink as we think about where this administration is headed, but how much does it shrink by? Varies state by state.
00:10:01:05 So, in Medicaid it is much more around the landscape that favors more deals and consolidation towards larger plans. And then where the market shrinks, it will be more of how the market distributes between the players that remain. That's what we observe in the Medicare and Medicaid landscape and that's what we anticipate.
GLENN HUNZINGER:
00:10:23:04 Thanks, Ruchita. The comments you made no doubt were similar to what we heard a couple of weeks ago at the JP Morgan Healthcare Conference. That's always a good time to kind of kick off the year and set the path for the year ahead. I think the constant comments around just having certainty from a governmental perspective, the thought about capital being available and certainly the need for people to transform and grow resonated.
00:10:48:05 I think the key thing that we continue to hear is bending the cost curve and how do we accelerate that bending and move it up? There's no doubt that sort of consolidation and scale will be one of the levers and probably something we'll see in the near term. And then, what resonated time and time again was around technology and there was one consistent belief and method here in that technology is going to be the thing that can help bend the curve and the solution longer term here.
00:11:18:05 And so Thom, as you think about that disruption, maybe we can talk a little about, what you think given the landscape and how excited you are for the year ahead, particularly around some of the AI that we've heard?
THOM BALES:
00:11:30:10 Thanks Glenn. With the generally pro-business stance expected from the Trump administration and the easing of regulatory actions to accelerate AI adoption, we definitely see the stage set for companies to make deals, to gain capabilities and in particular to partner and or build their AI and tech-enabled capabilities.
00:11:48:06 And I think something to think about that at the time it made a headline, but there was so much that was going on. I'm not sure that people registered it. It is back in late fall in the winter, we had one of the largest releases of personal health information in US history, and it was completely at will done at the ask of one of our significant figures in the government these days and in the tech industry.
00:12:10:09 And it was a massive release of images of records to build and fuel an AI-powered health navigator. Now, take that for what it is. It's interesting what enables around AI. I think it also potentially raises questions on how is it and what do we think about the willingness of individuals to manage their PHI differently.
00:12:37:03 It will be a gray area for a long time to come. There will remain significant securities related to it, but it's also interesting to start to think about if we start to move towards an opt-in of sharing of that information more broadly, does that even accelerate AI more? For those organizations, our payers, and our providers that are participating in this, accelerating AI adoption really comes down to its strong data foundations.
00:13:04:00 It’s managing the risk associated with that data. It's getting to a value-driven strategy on where you apply and how you invest. It's also, and we're seeing this and we're having a lot of discussions on this, the workforce readiness and what does that mean in terms of the day-to-day job?
00:13:21:07 How are they embracing it? We ourselves, we are embedding AI, prompt engineers, developers with teams to help the teams think through how they do their work differently and drive value. And then as we have discussions with our clients, it is interesting, there are patterns emerging around how our clients are using AI and it's very much around where their strategic capabilities are is where we're hearing the greatest successes.
00:13:44:06 So, for example, one of the largest US health systems have massive workforce management and scheduling challenges and AI has been applied there with success, driving value and optimizing staffing and productivity. Another example, we see one of the health plans using AI to really get in front of care management, behavioral engagement, and targeted interventions to manage the cost of care,
00:14:12:02 and really to also enable just a better experience for their members, our consumers. And then lastly, across the board, a general upskilling and awareness for the employees of all of these organizations. At JP Morgan, we’ve heard the AI message loud and clear, it probably every other talk brought it up in some context and everybody is buzzing about the advent of autonomous AI agents
00:14:33:02 that will be able to execute work, perform workflows, mimic what we do, and get in front of some of the problems that we have today. And I think that across this, it isn't just about productivity, it isn't just about getting to a sort of a moment of delight for something that's unexpected. I think that folks are thinking about that this is an opportunity to really change how healthcare is delivered.
00:14:57:10 And as the US economy approaches 20% of our GDP in healthcare, can AI deliver higher quality, more timely, with better affordability in a way that actually moves the needle on that 20% that we're all hopeful for? We look forward to partnering with many of our clients on this and we'll see what the future holds.
JENNY COLAPIETRO:
00:15:19:02 Yes, Thom absolutely, certainly excited to see how healthcare organizations further embrace and incorporate AI and agentic AI. It's very exciting. Another key theme is affordability and the continued focus on care that's affordable and convenient and hence consumerism. Alena, how are you seeing the industry respond so far relative to consumerism?
ALENA TAYLOR:
00:15:44:10 One of the big trends that we're seeing in this space is the growth in care at home. It's a $150 billion market today and it's continuing to grow as more services are emerging. That's really closing that gap between what is that more traditional home health that's been in the market forever in then the acute care hospital at home.
00:16:04:09 That's really been rising over the last several years. And while the interest in investment in this space is significant across payers, providers, as well as new entrants, it's still a relatively nascent market. And a lot of providers are working to figure out how to make care at home financially and operationally sustainable so that they can meet those patient requests to have that convenience in their care.
00:16:32:00 And I'd really categorize those providers into a few not entirely mutually exclusive categories. There are those that are using care at home because their capacity constrained and the home setting creates a less capital-intensive method to create new capacity.
00:16:47:10 There are also those integrated delivery networks that are looking to create a lower-cost care setting. And lastly, there are those care model innovators that are looking to shift care to the home and close their brick and mortar capacity and really have the operational discipline to make sure that they are closing that brick and mortar capacity as the care moves.
00:17:07:03 And across all of these categories, providers are continuing to work on how to reduce the cost of providing care in the home to meet that affordability need that you mentioned, Jenny. And one of the biggest levers that they're using here is as they're building more infrastructure internally, they're starting to in-source supply and labor needs so that they can take advantage of their internal contracts and create long-term sustainable programs.
00:17:33:01 On the flip side, a lot of the vendors in the care at-home space, many of whom have been acquired by large payers and new entrants, are continuing to evaluate how they balance between being a technology or a service provider and what will really allow them to create differentiation and ultimately scale in the market. Needless to say, I'd expect we'll continue to see a lot of activity and care at home.
00:17:57:05 As you mentioned, patients are looking for convenience, they prefer being at home over hospitalization, and CMS continues to report positive results with lower readmissions and mortality rates when care is received in the home.
THOM BALES:
00:18:11:01 I love that, Alena. And in addition to home health as a consumer bend, there's an interesting development and growth that's going on in new kinds of coverage products that some people have heard of. I think a lot of folks are still learning about it, but level-funded plans are gaining traction in smaller group employers where the risk is split differently and more consumer say is given to the employees
00:18:35:10 on how they direct their own spend and their own choices, and through individual coverage health reimbursement accounts, which is an alternative to traditional group health plans. And in essence, allows the employee and their family to choose which plan they get out on the open market. And these plans have grown by 30% in the last several years.
00:18:57:10 And with ICHRA, which is the acronym for individual coverage, health reimbursement accounts, they call it ICHRA. Employers provide these defined non-taxed reimbursements to employees for qualified medical expenses, which are most medical expenses.
00:19:12:01 And the consumer is free then to purchase this coverage in the individual health insurance marketplace. It's a different kind of consumer empowerment, possibly a different response to this consumer activism. And I think the most interesting thing is because of how it's targeted, the use of the marketplace, how the consumer starts to sit in the middle of it,
00:19:32:09 it is an opportunity for some disruption among legacy health plans and even with pay riders as it continues to grow, and they start to look at how is it they might penetrate different regional markets in a way that has been more challenging for them going up against some of the larger consultant groups that administer benefits.
00:19:54:09 So, I think it'll be something not just to keep an eye on, but actually to get in front of and as most organizations to have a strategy, A, how do you provide the coverage? B, how do you actually manage that population? And then on the provider side, how is it they respond to those folks that are in that coverage and ensure that how you've coordinated your contracts,
00:20:13:05 developed your networks to support these products are creating the kind of loyalty that you're looking for as a health system through this.
GLENN HUNZINGER:
00:20:23:07 Thanks, Thom. I think that's a great segue as we think about kind of the health systems and the payers and what they're doing to sort of bend that cost curve and obviously create value for all the different stakeholders that are out there, patients and otherwise. In recent years, we've kind of seen more of a treatment of acute diseases and I think the question is as we move forward in the next 1, 5, 10 years.
00:20:48:02 What are we going to see and how do we see health playing out? So, maybe we talk a little bit about that and then that could hopefully dovetail into how companies think strategically a little bit, sort of medium and longer term.
THOM BALES:
00:21:00:04 Thanks Glenn. It's a great question and we host a chief strategy officer forum for our health systems that we work with and it's a great dialogue. And they do most of the talking and one of the things that was really top of mind for them is where to place their bets in their investments and how to think about that in a time when the macro trends and sector dynamics are redefining value.
00:21:22:10 Should they be investing in these large next-generation EHRs? Should they be investing into next-generation ERPs? How do they think about consumer engagement? How do they think about developing their own products? And on the payer side, it's the same kinds of questions with a shift out of the back office into the front and the middle office and how to define those investments.
00:21:41:09 And the reality is, is that if you're in healthcare today, the current business models carry very significant large investment in operating costs and also come with environmental impacts that are leaving certain communities and patients behind. So, as an organization as PwC, we've started to think about how is it you bucket these questions, these strategic choices,
00:22:04:04 and the models that might be retired and those that could be replaced with something new, and how do you think about what that value is? And so, we've created our own four Ps around how do you think about what that value is? And just to get into this, we're doing this in the US but we're also picking this up globally.
00:22:19:03 And that value revolves around these four things. The first, prevention: with more focus on addressing the risk factors of health decline. There are vast opportunities for payers, providers, employers, and globally governments to engage with consumers and targeted health education and outreach to members, patients encouraging and incentivizing them to seek preventative care.
00:22:42:08 We have not finished the story on behavioral economics and there will be a lot that comes there related to engagement and tailing off of that, we've got personalization. Our second P, personalization, data-driven customized treatments based on factors like genetics and behavior. And at times in concert, in an ecosystem with payers, providers, pharma, life sciences,
00:23:05:07 really thinking about what an individual's need is and coming up with solutions that lead to personalized care. In a world where we have more data, we have the ability to exercise that data and we have the ability to engage with our members, patients, consumers in more ways than ever before. And we have an increasing battle for attention for those same individuals.
00:23:27:03 Getting this right, understanding personalization will drive value for the individual and it'll drive value for the organizations that invest in it. The third P is prediction. With the active analysis of well-being and early intervention to improve health outcomes, we can do more. Today, clinicians can intervene before medical crises occur by using predictive models that analyze patient data and activities.
00:23:52:10 They alert them to engagement, to intervention, they offer prescriptions, prescribing what actions they should be taking, and AI is helping this now, and I think that in the next 12 to 24 months, we're going to see a massive acceleration of the engagement in AI and the delivery, the decision making that is associated with clinical care.
00:24:12:09 And then lastly, our fourth P, as Alena referenced earlier, point of care with more accessible and convenient settings for delivery of care, there will be more options that are available for consumers. They will fit the other three Ps, prevention, personalization, and prediction and they'll be formed around that. And there will be a migration to lower cost and greater convenience.
00:24:38:06 That's already underway now, but with the technology that we have at hand and the ability for companies to be more transparent, to offer up more convenience, to really engage virtually, there will be the option to deliver the kind of experience that suits consumers’ busy lives and their comfort levels mixed with still the hands-on human nature of what care is and the right balance of that, that we know that they expect at times.
00:25:04:03 And they continue to tell us this in our surveys, but in ways that meet them where they are, including home health. And for us in the US, really meeting the needs of where some of our most expensive patients are in our aging population, and that is with our seniors as well. So, we look forward to this. So, the four Ps: prevention, personalization, prediction, and point of care we believe can set the tone for where value goes in the next 10 years.
GLENN HUNZINGER:
00:25:30:07 Thom, Alena, and Ruchita, very insightful thoughts on our sector and the priorities for 2025, and how we can all prepare for the future shifts in the market. I mean, there's no doubt the continued focus on access, affordability, and quality is here and there's a clear lens around bending the cost curve and tech is going to enable us to really drive and turn the corner in the most efficient manner.
00:25:55:04 The biggest takeaway I have here is there's no doubt the planning for the future and keeping an eye on what could be a very unstable sort of ground game here with possible stroke of the pen effect of impacting our health and the payers and providers from reimbursement and otherwise.
00:26:15:02 But the one thing that within their control is just to continue to execute flawlessly to sort of maximize the current business they have as far as to patients and otherwise. And that seems to be something within their control and I know everybody's sort of focused on that.
00:26:31:08 So, no doubt there's a dynamic out there of continue to focus on the ground game while looking ahead and keeping your eyes and ears open for how the landscape may change. So, it'll definitely be an interesting year for 2025. I look forward to seeing how things continue to evolve. Jenny, any thoughts from you here?
JENNY COLAPIETRO:
00:26:52:04 Yeah, no, I think this has been great and I really enjoyed reading both about the 10 predictions for 2025 and hearing more from our team here. I think Glenn, the one that really resonated with me the most is this accelerated adoption of AI, and I'm looking forward to see how we apply AI to address the affordability
00:27:13:02 and convenience to further enhance the workforce productivity, to derive deeper consumer insights, enhance consumer healthcare navigation and just general application across finance, customer, clinical, and core admin functions. So, certainly excited to see more.
GLENN HUNZINGER:
00:27:31:08 And as we sort of bring this session to a close, I'm going to ask Alena and Ruchita to just talk about how they think about resilience and reinvention as we set the path forward for 2025.
ALENA TAYLOR:
00:27:43:10 Yeah, thanks Glenn. First off, I'd say it's definitely not going to be an easy year. Well, 2024 was a tough one. 2025 certainly has a lot that's coming our way as well. And from a resilience perspective, it's all about really watching and acting quickly on the different sector dynamics that we've outlined
00:28:02:08 between the regulatory uncertainty, reimbursement pressures, rapid technology adoption, the consumer demands, and the never-ending cost pressures; healthcare organizations will certainly have their work cut out for them as we go through the next year.
RUCHITA KEWALRAMANI:
00:28:20:10 When I think about Alena and I, we always play the yin and yang in terms of the two sectors of the market that we focus on, and to the resiliency point that she made, I will make the point on reinvention where I really think that leaders in the industry have their sights set on how can they differentiate in a market that is very competitive.
00:28:45:07 And so we will see a lot of business model reinvention in the next two to five to 10 years. Payers and providers coming together and exploring new payment models to drive value to their consumers, new capability models, and really payers and providers taking what they do really well and putting it out in the market to commercialize on those capabilities.
00:29:10:04 It's ideas like these that will create new avenues for growth as well as profitability improvement for all sides of the market. And so, I feel really optimistic about reinvention and the idea of new business models that I think will continue to flourish in the healthcare industry over the next five years.
JENNY COLAPIETRO:
00:29:32:08 And there you have it, 2025, the year of resilience and reinvention. Thom, Alena, Ruchita, thank you very much for joining us today and sharing your perspectives.
THOM BALES:
00:29:42:07 Jenny and Glenn, thank you for having us.
ALENA TAYLOR:
00:29:45:10 Thanks so much.
RUCHITA KEWALRAMANI:
00:29:46:08 Thank you.
JENNY COLAPIETRO:
00:29:48:02 And we invite our listeners to read the 2025 Next-in-Health services report linked in the show notes and to follow us on social media. You can also find the latest updates from our health policy desk as Thom alluded to earlier.
00:30:03:06 For more on these topics and other health industry insights driven by policy, innovation, and care delivery changes, please subscribe to our podcast at pwc.com/us/Next in Health podcast. Until next time, this has been Next in Health.
FEMALE VOICEOVER:
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