The document discusses several secular trends in healthcare, including the shift towards value-based reimbursement models, increasing consumerism, and rapid advancements in technology and use of big data. Major trends include growing consolidation across healthcare sectors, 50% of Medicare payments transitioning to value-based models by 2018, a large increase in high deductible health plans, and billions in investments in digital health, technology, and analytics.

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Secular trends in healthcare
Consolidation
Consumerism
Value-Based
Reimbursement
Technology & Big Data
• Rapid shift from FFS towards value-based reimbursement
• Significant investments in cost-saving, efficiency, patient experience, and quality
• 50% of all Medicare payments to transition to value-based by 2018
• 60% of value-based payments are shared savings; moving towards capitation
• Labs continue to see downward pricing pressure in FFS model
• Major consolidation across all sectors of healthcare
• Payers will forward integrate into care coordination & clinical services
• 50% of health systems are applying/ have applied for an insurance license
• Expect to have 50% fewer independent hospitals & health systems in next 10 yrs
• Fewer than 25% of physicians will remain in small practices in next 5 yrs
• 20% of covered population is on a high deductible plan
• Employee deductibles have tripled to $4,500 over the last ten years
• Personal connected health market is a $4-5B market today
• HHS & private payers have released big chunks of price transparency data
• Nearly 2K retail clinics and 10K urgent care centers and growing rapidly
• Significant shifts in technology and analytics: NGS, proteomics, metabolomics,
clinical tools, consumer tools, artificial intelligence, big data, predictive analytics
• Billions of dollars in investment in tech, big data & analytics across health plans,
health systems, ACO’s, technology and data companies – biggest M&A sector
• Healthcare informatics market is $8B and one of fastest growing segments
• $4B in digital health venture investments in 2014
• Telemedicine market growing from $20B to $40B in next four years

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Payer
$700B** market growing at 3-4%
Top 5 payers control >50% of market
Rapid growth in lives from 50M uninsured
Some form of VBR* for 135M lives and growing
Rapidly moving toward “defined contribution”
Notable technology/ analytics/ data investments
Increased investments in public & private ACO’s
Creating “narrow” & “ultra-narrow” networks
More scrutiny around new drugs/ devices/ tests Source: Levin Associates, McKinsey
(*): VBR = Value Based Health
(**): Gross revenue – 85% is pass-through medical costs

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Hospitals
$1T market growing to $1.6T by 2022
Outpatient accounted for 43% vs. 24% in ‘91
$200B of reimbursement cuts to fund expansion
Value & quality focus shifting business models
Hosp. acquired conditions & readmits penalized
Significant horizontal & vertical integration
Stronger cost controls & more centralization
Viability hinges on  15-30% cost cutting ahead
>50% own health plans or expected to by ‘18
Source: Levin Associates, Leerink

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ACO
750 ACO’s w/ 25M lives since 2011
75-100M lives covered by end of decade
Reimbursed via shared savings & capitation
50% of ACO’s view labs as crucial value drivers
Pop. health is key focus but limited capabilities
$411M in net savings in ’14 by Medicare ACO’s
Savings/ ACO doubled to $6M/ ACO since ‘11
Major consolidation expected ahead
Cost cutting will remain a priority
Source: Levin Associates, Goldman Sachs

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Types of Medicare ACO’s
Medicare Shared Savings Program
ACO’s
• If the ACOs reach certain quality measures,
they share in a portion of Medicare’s
savings (enrollment now closed)
Pioneer ACO’s
• For organizations who already have
experience coordinating patient care across
several types of providers
Advance Payment ACO’s
• Organizations that would like to create an
ACO but do not have the capital can
receive upfront financial support in the form
of an advance on their shared savings
Source: G2 Intelligence

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Consumer
Seniors drive >75% of costs (60M > 65 by ’20)
Top 1% -> 22% of costs; top 5% -> 50% of costs
Chronic disease -> 85% of costs; 7/10 deaths
20% of covered folks on high deductible plans
OOP expense >$300B; Wellness industry >$6B
Telemedicine $20B; Personal wellness tech $5B
95% of consumers search for health online
12M getting home health; 7.5M in mobile clinics
>2K retail clinics & >10K urgent care centers
Source: PWC, Deloitte

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Technology
US HIT is $22B; health data/ analytics is $8B
25-30% of $3T spend can be avoided with tech
Telehealth to grow from $20B to $40B by ‘20
Global mHealth at $23B by 2017
(Monitoring $15B; Dx $3.4B; Treatment $2.3B; DocSupport $1.1B)
$4B in digital health venture investments in ’14
Global precision medicine at $40B
(biomarkers, genomics, proteomics, metabolomics, CDx, big data)
Global POC market -> $17B in ‘15 to $20B by ‘18
Wearable tech at $10B by ‘20
Pop. health & quality improvement top priorities
Source: G2 Intelligence, Rock Health