With 2023 launched and well underway, we’ve identified key areas in the healthcare industry in which we project continued and increased investment and evolution as the result of new and emerging technologies. In this trends report, we’ll focus on technology modernization that can foster improvements to the member, employer, and provider experiences.
We predict continued normalization after the COVID-19 pandemic,
during which we witnessed both the good and bad of the
healthcare system (the resilience and efficiency in vaccine creation
and roll-out, yet the fragility of overburdened hospital systems)
and an increased desire for a healthcare experience overhaul. This
demanded change in the healthcare experience (led by patients
and some federal mandates) has spurred a great transformation;
nevertheless, this may still fall short of the rebuild likely needed.
This year should show an increase in investments in connected
healthcare ecosystems, with new capabilities and a more
streamlined experience. As we see demand for a more cohesive
and integrated system in an era of increased costs and negative
margins (up to 53% of hospitals are expected to end 2022 with
negative margins), healthcare organizations must create a
competitive advantage or risk slowing or no growth. Those
who adapt and leverage innovation and technology will be able
to respond quickly and meet consumer demands.
We expect to see a continued focus on mergers and acquisitions
(M&A) activity in 2023, in an attempt to consolidate and provide
more comprehensive services. Rather than increasing the number
of pass-alongs and upcharges in the chain, M&A activities should
ease costs and burdens from the system and allow a focus on
better health outcomes. These activities should also provide
leverage to provider groups as they grow practices, leading to
more advantageous reimbursement rates, providing capital
required to invest and grow ancillary service businesses (such as
outpatient procedure centers), and driving profitable outcome-
We will continue to see the influx of net new players in the
healthcare space – both well-funded and start-ups – as well as
emerging players who previously targeted other industry verticals now offering healthcare delivery solutions. It is these
players that historical industry titans should be wary of as they have
the ability to work in a technology greenfield, rapidly innovate,
and change healthcare at scale without being plagued by years of
technical debt hindering acceleration and transformation.
Areas We’re Watching Closely
We’ve identified several macro areas to watch, including the continued adoption of new technologies (artificial intelligence and machine learning), a greater emphasis on patient engagement, the continued expansion of the ecosystem, and actionable insights stemming from data. We also believe ongoing efforts to control healthcare costs, and an increased focus on preventative care and population health, will be areas to monitor.
Machine learning and artificial intelligence will drive the healthcare ecosystem to more optimized and affordable care models.
Healthcare is emerging as the next frontier for artificial intelligence
(AI) and machine learning (ML). How the industry embarks on that frontier is up to the leaders, disruptors, and consumers of the ecosystem. The healthcare ecosystem, comprised of payers,
providers, life sciences companies, and patients, engage in
trading the greatest commodity presently available – information.
Technologies such as ML and AI, properly leveraged by payers,
providers, and life sciences companies, can ensure a more
streamlined and cost-effective health ecosystem while also
improving the patient experience.
The key is maximizing the interconnectivity of patient interactions.
Used properly, this approach can provide a robust menu of options
available to patients, through a marketplace of information, by
using examples from patients sharing similar conditions. While
every patient has a unique story, decision points available to
consumers can reveal efficacy of treatments, as well as more
transparent costs. The overarching answer is better care models
through intelligent patient marketplaces powered by AI and
ML. As healthcare continues to emerge as an industry-leading
data generator, predictably, 80% of healthcare providers plan to
increase investment in technology and digital solutions over the
next five years to leverage its insights.
Addressing Patient Complexities
Let’s use the example of a patient newly diagnosed with Type 2 Diabetes, which impacts approximately 1 in 10 people, according to the Centers for Disease Control. Once diagnosed, the patient may anticipate a lifetime of managing medications and frequent visits to a healthcare provider and/or labs to monitor glucose, insulin and A1C (blood sugar storage) levels to track data. Patients with diabetes tend to be at an increased risk for other medical conditions as well, which can lead to additional office visits and hospital stays. The high cost of continued treatment is exacerbated by availability and affordability of healthcare options to those with financial access to healthcare and those who do not have that advantage.
However, if treatment also included transparency about alternatives based on data gathered from other diabetics and leading peer-reviewed articles, the patient would be empowered to have more informed conversations with providers about treatment options, the efficacy of those options, and associated costs.
People with diabetes and, indeed most patients, are challenged to understand their bills and treatment options. Navigating provider systems can quickly prove complex – adding the potential emotional state a patient may experience – so staying organized and making informed decisions can become a full-time pursuit. Doctors and technology systems often lack functional intercommunication, which adds to the complexity of billing, care models, and patient navigation. Many providers now agree; predictions indicate 20% of healthcare providers will shift from patient portals tethered to electronic health records in favor of a “digital front door”as their primary method of digital engagement.
Simplifying the patient experience early will undoubtedly have exponential benefits in market share, which can include improving patient journeys as they navigate common tasks such as enrollment, on-boarding, scheduling, appointment life cycle (pre, during and post) and payments, to name a few.
However, while data privacy is always at the forefront, we believe that recent history proves that many consumers will give up privacy, including their smart phone activity, for convenience and other benefits. When AI and ML are layered on top of consumer data, it will likely reduce costs and allow providers to create more comprehensive treatment plans targeted toward bespoke patient experiences. That said, data privacy application to laws, rules, and regulations is crucial to operationalizing this approach.
Embracing emerging technologies will help payers and providers understand their customers more deeply and deliver targeted care while reducing costs – and ultimately consumers will develop greater brand loyalty.
The recent rise in healthcare costs
is leading to an increase in big tech
M&As as margin pressures rise.
Healthcare is one of the fastest growing sectors in the world. From
2000 to 2020 healthcare has increased by 6.3% of total U.S. Gross
It is estimated that healthcare is now a $4 trillion (about $12,000
per person) market in the United States, with this investment
trajectory likely to continue well into the next decade These
staggering growth rates are accompanied by an equally aggressive
race to determine who shares ownership in improving the
healthcare experience and cost for the average American.
This rise in investment indicates innovation has become a leading
driver to answer healthcare consumer demands for digital
enhancements in telemedicine, record-keeping, billing, and
scheduling services. These demands, exacerbated by
COVID-19’s global impact, propelled the need for increased
contactless healthcare digital services and advancement. The
increase in demand for innovation has been a constant strain,
joined with consumer and government pressures to lower
healthcare costs for drugs and services. The result has challenged
healthcare executives to innovate technologically, while lowering
overall costs and seeking economies of scale.
The rise in cost of several healthcare products (e.g., insulin) has
increased pressure on the consumer, which has gained federal
interest, as recent legislation (i.e., Inflation Reduction Act) seeks to
cap and regulate the cost of commoditized healthcare products.
Critics are often quick to cite that federal cost controls stifle
innovation and investment. However, considering the aggressive
growth demonstrated over the past 20 years in this sector, most
economists do not share these concerns of an industry slowdown.
Cost efficiencies are needed to continue to drive down costs –
so that industry can self-regulate, without federal intervention.
Healthcare companies must be ready to address these cost
challenges while investing in innovation – or they will risk negative
public image issues, consumer flight, or federal cost regulations.
The Impact of M&As
In 2022, we saw numerous major healthcare and big tech mergers and acquisitions, many of which were intended to spur continuous technological innovations and decrease overall costs through economies of scale. The industry has already seen billion-dollar mergers and acquisitions from the following industry big hitters: Advocacy Aurora and Atrium Health, CVS and Signify Health, Walgreen’s VillageMD and Summit Health, Amazon and One Medical. With little indication of an activity decrease in 2023, tech giants such as Amazon, Apple, Facebook, and Walmart are all in similar pursuit of M&A actions. These progressions in the industry are potentially the first step to finding balance between providers, payers, and members in addressing competing costs and determining the industry-wide question of who owns decision-making surrounding rising prices.
For healthcare executives, the decision to pursue a merger or acquisition opens the much larger challenges of implementation and consolidation of corporate IT infrastructures (e.g., data centers, cloud), processes, and talent teams – all of which require careful orchestration, as well as program and change management. These downstream actions often take the form of hundred-million dollar phased implementations over two to three years to become one integrated organization.
In 2023, we anticipate the market will continue to encourage further M&A activity within the realm of big tech providers focusing on enhanced user experience and accessibility. Healthcare executives should seek economies of scale and process improvements to lower costs as additional drivers for M&A activity.
Continued improvements in
interoperability will expand data
sets for the “whole patient
approach” and increase AI-driven
predictive health, achieving greater
With the healthcare industry generating approximately 30% of
the world’s data volume, there is no shortage of data generated
by healthcare – from provider medical records to payer claims, to
patient-generated health data. The accessibility and usability of
this data, however, is another story. Interoperability – the ability
for multiple systems to utilize patient data – has long been a
healthcare industry goal, and new federal mandates, combined
with technological advances, only push us in that direction. As we continue towards a more connected and patient-centered
future, we will see expanded data sets and an increase in AI-driven
predictive health, resulting in more significant health outcomes.
Payers, providers, and patients face a multitude of blockers before
interoperability can be adequately achieved and leveraged,
primarily due to a lack of patient data standardization and data
stored in disparate and separate systems. The result is inconsistent
and siloed data that leaves providers and payers without a complete
picture and patients who cannot easily access their data. Layer on
privacy and security concerns, and interoperability becomes even
more of a challenge.
Payers may be well positioned to take the lead on reaching
interoperability as they collect, manage, and provide stewardship
of data throughout a patient’s life versus providers who may only
collect on an event-based basis. Payers should establish a common
patient marketplace, so they, patients, and providers would benefit
from a secure and interoperable repository. Payers would then
manage and provide access for authorized parties to obtain and
utilize the marketplace to support a holistic patient approach.
Shift the Marketplace
A key benefit to the marketplace would be the shift toward treating
the whole patient instead of treating a single issue. Healthcare
providers will be able to access data from different periods of a
patient’s life and act on that data – for example, predicting the
likelihood of disease or adverse health outcomes.
would also allow social determinants of health (SDOH) to play an
essential role in predicting health events. Layering in predictive
analytics would enable marketplace users to model outcomes and better understand what resources may be needed to promote
more equitable health outcomes.
Achieving data interoperability is not a one-size-fits-all solution.
Healthcare organizations must determine their goals for effective
data use for a whole-patient approach, which requires addressing
the challenges above and investing in technology infrastructure
and standardization initiatives. Healthcare organizations should
also make data more actionable through AI and ML, which can
help analyze and identify patterns, make predictions about future
health outcomes, and improve the patient journey.
Furthering access to patient data and using AI and ML has the
potential to improve the holistic patient journey. And increasing
data exchanges between patients, payers, and providers will
likely result in improved care delivery, better healthcare equity
among disparate populations, and improved patient health.
Now is the time to tackle the challenges due to the ever-increasing
volume of data, a growing aging population, and rising health
inequities, along with required federal regulations to make
Achieving data interoperability is not a one-size-fits-all solution. Healthcare organizations must determine their goals for effective data use for a whole-patient approach, which requires addressing the challenges above and investing in technology infrastructure and standardization initiatives. Healthcare organizations should also make data more actionable through AI and ML, which can help analyze and identify patterns, make predictions about future health outcomes, and improve the patient journey.
Furthering access to patient data and using AI and ML has the potential to improve the holistic patient journey. And increasing data exchanges between patients, payers, and providers will likely result in improved care delivery, better healthcare equity among disparate populations, and improved patient health.
Now is the time to tackle the challenges due to the ever-increasing volume of data, a growing aging population, and rising health inequities, along with required federal regulations to make interoperability essential.
Regulatory actions alone struggle
to affect substantial change in
healthcare; focusing on the end-
to-end patient experience will
differentiate successful payers and
providers from the competition.
Over the last decade, multiple federal legislative and regulatory
actions have been enacted that affect the healthcare industry.
While these actions solve specific pain points within the system,
they have not produced transformational change and, in some
cases, they have further entrenched established players in their
Traditional healthcare payers and providers have been slow to
modernize their digital experience and legacy infrastructure and
are beginning to be exposed by emerging technology-focused
competitors like Amazon, Apple, Google, and Microsoft. Initially
some of these companies may be seen as additional or value-add
services for employers and consumers, but as their services mature
and their offerings become more fully developed, they will
become true competitors to traditional health insurers and
providers without the burden of legacy systems and processes.
Success over the next decade for payers and providers depends
on the ability to understand how people engage across the
continuum of care as consumers, rather than simply patients or
members. Understanding how consumers use data and make
decisions regarding their health (taking into account cost, quality,
and additional services provided) will determine their ability to
satisfy consumer needs and attract business in an increasingly
Who are the players in any healthcare transaction?
What are their goals?
Consumer: Cheaper doesn’t equate to better. When making
decisions for my health, I want to know that the providers and
payers have my actual health outcomes at the center. My access
to high-quality care and accurate pricing information in an
easy-to-understand format will help me choose from my available
Provider: We want to provide quality care while increasing
revenue. The information presented to consumers will greatly influence consumer choices in which they seek care and lead to
increased competition between providers. Additional regulation
increases the administrative burden associated with operation of
my practice, especially around billing and insurance.
Payer: We want to increase our operating margins by lowering the
cost of providing care and increasing premiums. By encouraging
price competition among providers, we can reduce the cost of
providing care. By providing quality and easy-to-use tools showing
cost and outcome data to both providers and consumers, we can
encourage competition and lower costs while competing for new
business on value. As more of healthcare moves to the open market,
quality and satisfaction ratings continue to matter more to us and
allow us to command higher premiums.
Recent Healthcare Legislation
Hospital Price Transparency (HPT)
This legislation requires every hospital in the U.S. to publicly
provide information on cost for services and procedures performed,
both in a machine-readable format and in a consumer-friendly
display. HPT requires package pricing, but only for services
supplied by the hospital, which means ancillary services are not
included. In addition, HPT does not apply to ambulatory surgery
centers, free-standing imaging centers, individual practices, etc., so consumers cannot compare hospital costs against these
other provider options.
Consumers can now see what different hospital systems will charge
for standard procedures, but cannot see ancillary services, so they lack access to a full financial picture. On the provider side, this creates competition based on price and negotiated rates,
necessitating a focus on quality, experience, and additional services
to attract business. For payers, this encourages cost competition
and consumer-driven decisions, which can lower the cost of care.
They will need to answer questions that may arise when hospital costs
are different from negotiated rates displayed in payer systems.
Transparency in Coverage
The Transparency in Coverage rule requires health insurers to provide cost information for covered services, procedures, and prescriptions xi across two channels:
For consumers, insurers must make personalized out-of-pocket cost information (and the underlying negotiated rates) for all covered health care items and services available through a self-service tool.
For the general public, insurers must make available three datasets:
Details of in-network negotiated rates for all covered services
Historical payments to (and charges billed from) out of network providers for services
In-network negotiated rates and historical net prices for covered prescription drugs
There are a few gaps with this legislation. First, data made available from this act is insurer-focused and does not include charges and rates for the uninsured population. In addition, payments made to out-of-network providers are often subject to balance billing, yet datasets in this act do not take into account additional payments to out-of-network providers by insured members.
The good news is that consumers now have access to personalized cost information for covered services and procedures, allowing them to make informed choices rather than reacting to bills after the fact. But providers face additional competition based on price and negotiated rates, and they may need to increase their focus on quality, experience, and additional services to attract business. For payers, allowing consumers to make decisions, including real data on costs, will lower the cost of care and reduce abrasion and increase satisfaction.
No Surprises Act
The No Surprises Act prohibits out-of-network billing for emergency ambulance or air transportation, and surprise charges by out-of- network providers for services performed at in-network facilities. It also establishes a dispute-resolution process for insurers and providers to follow to resolve disputes around reimbursement amounts for out-of-network services covered by this act. On the downside, this act focuses on the insured population and does not cover uninsured individuals.
Consumers are protected from unanticipated out-of-network charges and risks are limited, due to emergency services provided. Payers face a limited direct financial impact; however, there may be additional administrative burden to process disputed reimbursement amounts from non-insured providers. For providers, this Act limits their ability to charge out-of-network rates and may impact cash flow when disputing reimbursement rates with insurers covered under this act, especially as dispute resolution backlog and timelines grow.
What else can be accomplished? Where do we go next?
Federal legislation and mandates intended to address the need for better price transparency are disjointed and burdensome. They often focus on solving problems of the patient, provider, and payers, but may fail to fully transform data into knowledge. The data required by these mandates must be combined with provider data (reviews, locations, etc.) and accurate quality measures to present a consumer-facing rolled-up service or procedural views (i.e., bundled cost for hip arthroplasty) that allows consumers to make informed decisions regarding provider choices.
Many leading providers and payers have already taken the
initiative to develop tools that address this need and incorporate
incentives (monetary or otherwise) to consumers for using these
tools to help them choose lower cost services.
Providers and payers not prioritizing beyond current minimum
requirements should recognize that acting now is crucial to
long-term success and reduces the likelihood of losing business
to competitors invested in maximizing information derived from
data they already have. Laggards will be less competitive in the
market and disadvantaged when competing against other
payers for employer benefits programs. Focus on the member/
patient journey through digital health solutions such as a digital
front door, which allows data to be captured, stored, and
transmitted to enable consumer engagement for lifestyle,
wellness, and healthcare services.
Principal, Healthcare & Public Services Portfolio Lead
Jason co-leads CapTech’s healthcare and public services portfolios, empowering consultant and client teams to innovate and develop scalable solutions that improve the customer experience and produce extraordinary results for our clients.
Principal, Healthcare & Public Services Portfolio Lead
Adam co-leads CapTech’s healthcare and public services portfolios, supporting strategy, relationship and business development. His deep technical experience and industry expertise drive solutions and growth for our clients.
Adam is a Director at CapTech and a leader in our healthcare portfolio. He specializes in healthcare innovation, digital transformation, and implementing best practices across our client partners. Additionally, as a thought leader, Adam brings novel solutions to help clients solve their most complex business challenges.
Anthony Beeker, Sr. Manager, Management Consulting