Question

What is the economic cycle of the Medical Services industry? - Summary

What does the future outlook of the Medical Services industry look like? - Summary

Answer 1

Solution =

Q1)

With global health care spending expected to rise at a CAGR of 5 percent in 2019-23, it will likely present many opportunities for the sector. While there will be uncertainties, stakeholders can navigate them by factoring in historic and current drivers of change when strategizing for 2020 and beyond. Among these drivers are a growing and aging population, rising prevalence of chronic diseases, infrastructure investments, technological advancements, evolving care models, higher labor costs amidst workforce shortages, and the expansion of health care systems in developing markets. Health care systems need to work toward a future in which the collective focus shifts away from treatment, to prevention and early intervention. But, are stakeholders ready to respond to these trends and brace the smart health care delivery of the future? Deloitte's 2020 Global health care outlook takes a detailed look at the factors driving change in the sector and outlines suggestions that stakeholders can consider as they lay a solid foundation for the future.

The business cycle has four phases that reflect fluctuations in the economy, and each phase may have an effect on sector performance. This chart indicates the current business cycle of the U.S. economy based on Fidelity's analysis of historical trends.

INFLATIONARY PRESSURES / Red=High

Health care stakeholders are implementing payment reforms such as value-based payment models that help providers, payers, and patients achieve the best outcomes at the lowest cost.

Technology-enabled patient engagement strategies are enabling increased financial independence for patients in their health care decisions, in addition to improving interactions with their health care systems.

Governments are also moving the needle by adopting universal health coverage and introducing pricing controls on pharmaceuticals and medical technology devices.

Population health management (PHM) is being used to identify people’s health care needs and offer services accordingly.

Q2)

A widening demand-supply gap of skilled professionals is creating immediate challenges for public and private health systems, which may also have long-term, detrimental consequences in 2020 and beyond. The situation appears to be particularly acute within two pivotal medical professions—physicians and nurses.

• Consumers, employers, and the government continue to see the financial burden of healthcare grow faster than their incomes or revenues—a long-standing gap unlikely to change soon. Furthermore, new challenges, such as the ongoing opioid crisis, continue to emerge. The result has been a continuing search for fresh solutions and reforms, which has kept—and will keep—the industry in a state of flux.
• Major tectonic shifts are occurring, not only in regulations but also in three other areas: technology (both medical science and technology and the onward march of big data, advanced analytics, machine learning, and digital), industry orientation (the move toward B2C and rapidly rising consumer expectations), and reallocation of risk across the value chain. These forces are fundamentally altering the structure of the industry and basis of competition.
• The available headroom for improvement in healthcare (by most estimates, over $500 billion within the $3 trillion US healthcare economy) provides significant opportunity for value creation. Industry growth, major changes, and strong value-creation potential make healthcare an exciting industry. At the same time, cost concerns, uncertainty, and complexity make it an unnerving one. Substantial upside exists for players that can deliver value-creating solutions and thrive under uncertainty. Indeed, our recent research into industry profit pools indicates that, on average, the industry is delivering value-creating solutions and consequently showing attractive profit growth.