‘Rewiring’ the health care industry: How tech plays a key part in 2024

A new report from PwC examines the challenges the health care sector will be facing this year and says that “compression” is the best single word to define the industry, as cost pressures continue to challenge health care companies.

However, the analysis found that there are still opportunities across an industry that continues to change and innovate. Pursuing new approaches and partnerships could be helpful for health care players across the board, it said. “The sector looks like a scene from a science fiction movie, where the walls steadily close in on the heroes looking for a way to escape,” the report said. “On one side is the Centers for Medicare & Medicaid Services (CMS), trying to slow the trend and pushing requirements for providers to adopt value-based care (VBC), while consumers and employers continue to push for value. On the other side is the inflationary environment of higher wages; high costs of labor and business; and the rising cost of pharmaceuticals.”

This “big squeeze” between economic trends and the need for value will dominate health care news in the coming year, the report said.

Higher cost puts more pressure on companies to innovate

The report used PwC data to show that value remains a top priority for purchasers and patients. Two numbers jump out: a projected 7% increase in the medical cost trend, and 59% of health care CFOs saying reducing cost is a top priority—up from 38% of CFOs in the 2023 analysis.

The report noted that the U.S. continues to spend more on health than peer countries, while experiencing worse outcomes. On the other hand, economic concerns continue—such as attracting and retaining talent. The PwC data showed that 82% of health industry leaders said attracting and retaining workers is the top risk to their business.

Scale is also an issue. The study said that large health organizations have greater market influence and the ability to “rewire” the industry. “They are equipped with technology infrastructure to harness the power of AI, ability to attract leading talent, and positioned to re-engineer whole processes to create new value,” the report said.

Traditional sector-focused health care organizations should “move beyond the current transactional, competitive system to cross boundaries and share responsibility, resources, data, and risk,” the report said.

If that sounds like a recipe for more consolidation, the PwC analysis seems to agree. “M&A is the mother of reinvention,” the report said, suggesting that “leaders turn to transformative acquisitions to reinvent their businesses for long-term success.”

Technology a key part to transformation

The report’s authors stress technology as a way for industry players to cut costs, manage risk, and modernize health care infrastructure. Artificial intelligence (AI) is of course seen as a key part of those transformations. The PwC approach suggests using the “AI factory” model, described by the Wall Street Journal as “an assembly-line approach to artificial-intelligence development, where small teams use a common set of software tools and procedures to speed the production of AI applications while cutting costs.” This approach can be an effective way to achieve value at scale, the PwC report said.

Using the cloud is also a way to modernize and cut costs, the report said, but there is still work to be done in finding the right mix. “While 81% of health services executives have adopted the cloud, nearly half have yet to realize all the value from their investment,” the report noted. “Companies that have become cloud-powered are characterized by C-suite involvement and

commitment; strong trust and control measures in place; and a formal data, analytics and AI strategy,” the study’s authors added.

Related: What employers can do about increased health care costs in 2024

Trust is another important issue in current health care delivery, and interestingly, the PwC research suggests that trust can be built through effective use of technology. The PwC data showed that 91% of business executives agree that their ability to earn and maintain trust improves their bottom line. And when asked about whether their investments in emerging technologies are helping to build trust with stakeholders: 93% said they agreed or strongly agreed.

That trust can be built in a number of ways, including an emphasis on cybersecurity and strategies such as ESG tax incentives.

“Trust is the foundation of society,” the report said. “How companies respond to climate, sustainability, and other social and governance issues, and report on their progress, matters to consumers and other stakeholders.”