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Healthcare 2019: Expert Expectations for the New Year The Financial & Business Case for Transformation By CINDY SANDERS

tive care across the continuum.

Despite a series of unexpected challenges to healthcare as 2018 drew to a close, experts who follow the industry in the United States forecast a number of trends for 2019 ranging from more investment in technology and artificial intelligence to business models driven by population health needs and a demand for increased access, value and convenience.

Uncertainty at the End of 2018 In December, a Texas judge ruled the Affordable Care Act unconstitutional in its entirety after Congress removed the tax penalty associated with the individual mandate, thereby setting off what is anticipated to be a protracted legal challenge that will ultimately be answered by the U.S. Supreme Court. On Dec. 30, 2018, Judge Reed O’Connor, who handed down the decision, ordered a stay so that those covered under the ACA would continue to have access to healthcare while the case works its way through the appeals process. While legislative and legal policy changes undoubtedly have a very real impact on consumers and the broader healthcare landscape, the shift away from fee-for-service to value-based care and an emphasis on population health strategies seem to transcend politics as the industry continues the steady movement toward a more holistic approach to efficient, effec-

The Money Trail Duncan Dashiff, head of U.S. Healthcare Services & HCIT Investment Banking for global financial services firm Canaccord Genuity, LLC, said he typically doesn’t worry too much about legislative change impacting financing for companies looking to transform healthcare. In fact, he noted, disruptors in the private secDuncan Dashiff tor often set the stage for later transformation at the state and federal level. “We’re in a place where the private sector is driving real change. If you’re a company meeting the ever-increasing demand for better outcomes at improved cost, there will be capital for your solution,” Dashiff said of funding healthcare services and IT companies that embrace disruption and innovation. “Stepping back, one of the relevant macro-level factors is what’s happening in the world of private equity,” said Dashiff. “There’s an abundance of capital. Healthcare is obviously a very large component of the economy, and as a result, there are a significant number of private equity firms seeking exposure to healthcare ser-

vices and HCIT from an investment thesis standpoint.” However, he continued, there is also a rise in funds that have not traditionally been healthcare centric but recognize the role the industry plays in the economy and have decided to jump into the fray, as well. “So, not all the firms chasing healthcare have a lengthy track record of experience in the space,” he noted. Dashiff added, “The current state of private equity won’t last forever. After the next generation of fundraising takes hold in a more significant way over the next 12-24 months, I suspect that the amount of private equity capital chasing healthcare in the subsequent years may not be quite as significant.” For those ready to strike while the iron is still hot, Dashiff said there appear to be three main drivers in the current marketplace. “One is there is clearly a continued interest in the opportunity for consolidation, which has always existed in healthcare services … in particular because of the fragmented nature of the industry and the benefits of scale.” Dashiff said there is a broad recognition of economies of scale and the advantage of creating critical mass to create value. “The other dynamic is there’s an interest in playing on demonstrable sector trends ranging across aging demographic trends, the influences of consumerism in service delivery, employer-driven change

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and industry demand for more holistic population management strategies,” he said of recent marketplace transactional activity. The third area where he sees interest is in companies that are willing to break away from ‘business as usual’ in healthcare and can demonstrate success in their approach. “We’re in this zone now where I think there are some transformative shifts taking place across healthcare services, healthcare IT … and importantly … tech-enabled healthcare services where there are pockets of opportunity to invest in things that are highly disruptive for the betterment of the delivery system,” Dashiff explained.

The Business Model Just as financing is flowing into innovation, the healthcare business model is also transforming. Last month, the PwC Health Research Institute released their 13th annual “Top Health Industry Issues” report, which includes survey findings from 1,750 U.S. adults representing a cross-section of the population. This year’s report, subtitled “The New Health Economy Comes of Age,” explores how the industry is transforming to more closely resemble changes that have been occurring for several years in other industry sectors. “The headline is that the U.S. health industry is finally demonstrating real progress in modernizing to be more digital, more consumer friendly and more transparent,” said PwC Health Industries Partner Nick Walker. “It’s finally starting to behave like other organizations,” he continued. “We feel like that is fueled by consumers.” With healthcare beginning to fall in line Nick Walker with other industries, Walker said this year’s report focuses on issues common across many sectors. “In every industry, there is the concept of digital transformation,” he pointed out. In healthcare, Walker said the movement is seen both in individual engagement and in larger population health and payment models. “Much more innovative partnership models are emerging,” he said of risk assessment and actionable data. Workforce issues, which have been a growing concern for healthcare, are similarly a concern across all industry sectors. The country’s low unemployment rates and a workforce that largely isn’t prepared for today’s technology exacerbate the problem. “The traditional education model hasn’t really been able to prepare for the digital transformation,” Walker ex(CONTINUED ON PAGE 17)

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