2023 Signaled Several Emerging Trends Across the Healthcare Provider Space

• The clash between payors and providers intensified, demanding strategic precision.
• Generative AI, which stepped into the spotlight in 2023, now commands a pragmatic examination of its impact on care delivery.
• Private equity’s abrupt reckoning with outlandish valuations demands a necessary recalibration.
• The rise of capitated arrangements raises questions – lessons learned, or failures repeated?
• In an era defined by vertical integration… industries intertwine, and markets consolidate.

From this evolving landscape, five key trends have emerged that will shape healthcare providers and payers in 2024. Understanding and adapting to these trends will be crucial for healthcare stakeholders in navigating the complexities of the industry and delivering efficient, patient-centric care.

1) ‘Win-Win-Win’ Economic Models Across Populations Will Separate Winners & Losers

Value-based care will increasingly become the only solution to solve payer and provider disruption as the result of ongoing payment / rate disputes. Providers will increasingly curate their managed care portfolios around payer partners that are willing to align around win / win models anchored in value-based care. These relationships will reward providers for high value “transactional” delivery of services but also require providers to have and share more accountability for managing the total cost of care. This will drive an expansion of comprehensive platforms to manage care across all populations (e.g., Commercial, Medicaid, Medicare). Payers may seek to shrink their networks, but employers will ultimately decide whether they will accept networks that are not broad (all-inclusive) and open access.

2) 2023’s Bright Shiny Object (Generative AI) Will Elevate Healthcare Delivery to the Top-of-License

Generative AI and Large Language Models will become more than just a topic of conversation in 2024 and fundamentally sit front and center to reshape how care delivery is resourced, delivered, administered, and paid for. While AI offers tremendous potential for clinical advances that will improve diagnostic accuracy and treatment outcomes, the oversight and governance this demands is significant. Providers will look first to back-office applications and 2024 will bring novel applications, including automated triage, population outreach, population engagement, and personalized shared plans of health between patients and providers.

3) Growth Without Profitability Will Go by the Wayside

Private capital strategies will diverge between VC / PE investors. VC will continue to focus on “value-based care” companies that have early product-market fit and have technology enabled service models that demonstrate the ability to create market efficiencies with significant avenues to achieving scalable, profitable adoption. Private equity investors will see an opportunity to capitalize on cash-hungry companies that cannot raise growth equity at their desired valuation. PE will consolidate mid and late-stage enterprises to create true platform plays. Both VC and PE will continue to focus on companies with profitability or clear paths to profitability. The “growth over everything” mantra will not return in 2024.

4) The Only Viable Formula for Accelerating Value-based Care Adoption Will Win the Day

Capitation will again be back on the radar. While the capitation experiment had significant challenges 15 years ago, the reality is that adventure in the late 90s/early 2000s was focused on capturing financial arbitrage and resulted in limited access, accountability, and results. 2024 will begin to show in markets across the country that we have technology platforms, data and exponentially more transparent information to deliver and execute on managing the total cost of care while ensuring the quality and outcomes of the service(s) provided. Advances in access to information on the totality of the consumers experience whether that is quality data to understand referrals, necessary use, or the outcomes of an intervention on a specific individual will lead some organizations to commit to unlocking this wealth of information to drive strength and efficiency in their provider network. These organizations will have an exponentially greater likelihood of success in achieving growth and sustainability. Marrying clinical, quality, experience, and financial outcomes into a “value” proposition that is clear to the three key stakeholders: consumers (patients), employers (purchasers), government (purchaser and policy maker) will begin to determine the winners and losers.

5) Aggressive Regulators Will Look to Tame Empire Builders

Regulatory scrutiny of all acts of market consolidation will increase. The FTC has experienced some losses in its regulatory challenges but will not step off the enforcement gas pedal. While provider organizations will continue to seek out partnerships that enhance their enterprise “scale” and payers will continue their journey to complete vertical integration, the FTC and DOJ will each continue to have a bullseye on doing their best to prevent combinations that even appear to create negative consumer and industry consequences.