2019 Predictions: M&A, Big Tech, and the Fate of ACOs
The Meaningful Use gravy train finally came to an end in 2018. As the strongest EHR vendors struggle to define new revenue streams, weaker ones faded from view through acquisitions or leveraged buy-out. Meanwhile, funding for ‘digital health’ start-ups continued to increase, though it likely hit the high water mark in 2018. And lest we forget, Amazon, Apple and Google continue their forays into the healthcare sector as the market is simply too big to ignore.
So what’s in store for 2019?
We brought together our analysts’ brain trust and came up with the following baker’s dozen of 2019 predictions. Over the near decade of making these annual predictions, our batting average has consistently been well above .500, so don’t ever say we didn’t give you an advanced warning on the following:
Revenue cycle management M&A activity will continue to pick up with the most notable acquisition by Optum as it doubles down on its Optum 360 managed revenue cycle business and acquires Conifer Health Solutions from Tenet.
Despite the hype and media attention around alternative primary care clinics (e.g. Oak Street Health, Chen Med, One Medical), the actual number of physical locations serving patients will remain paltry at less than ten percent of the number of retail health clinic locations.
Walgreens will likely make the first move to acquire Humana in 2019, but Walmart will outbid Walgreens to win Humana over.
The number of FDA approvals for algorithms in 2018 was impressive and shows no signs of abating. Additionally, 2020 will see a further tripling of regulatory approvals for AI.
Consumers’ use of telehealth will continue to see rapid growth and rising competition leading to significant consolidation among the plethora of vendors. By year-end, a major non-healthcare-specific consumer brand will join the mix, and the market will be down to five direct-to-consumer (DTC) nationwide brands.
By the end of 2019, every major healthcare analytics vendor will provide a cloud-hosted offering with optional data science and report development services.
Cloud offerings have become far more robust, concurrent with HCOs’ struggles to recruit IT talent and control costs. Amazon’s AWS and Microsoft’s Azure will be clear winners while Google’s own cloud infrastructure services will remain a distant third in 2019.
Laws and regulations to-date have not compelled providers to freely share data with patients. ONC’s information blocking rule, which will be released before the end of 2018, will make it easier to transfer data to other organizations but will do little to open the data floodgates for patients, clinicians, and developers.
Despite loud protests, the vast majority of provider-led MSSP ACOs will take on downside-risk as CMS shows flexibility in waivers. However, hospital-led ACOs, who continue to struggle with standing up a profitable MSSP ACO, will exit the program in 2019.
Continued changes in post-acute care reimbursement, especially from CMS, combined with the migration to home-based services, puts further economic strain on these facilities. Nearly twenty percent of post-acute care facilities will shutter or merge in 2019.
The warning signs are there over the last couple of months that the stock market has become skittish. This will extend well into 2019 (if not lead to a mild recession). It will hardly be an ideal time to do an IPO, and those planned by Change Healthcare, Health Catalyst and others will wait another year.
Elon Musk will have a nervous breakdown leading him to reinvent the healthcare system from his bed during his two-week recovery at Cedars-Sinai.
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Blockchain in Healthcare: Enthusiasm is growing, but still a long way to go to realize impact
The speculative craze around Bitcoin and the Initial Coin Offering (ICO) market for startups in the digital currency and blockchain space has heightened the interest in blockchain beyond the crypto-community and into the mainstream. The speculation in the ICO market has driven investment in these vehicles to reach nearly $7 billion in 2017 virtually dwarfing venture capital for startups across all sectors including healthcare. Among the hundreds of startups in the blockchain ICO count are over 70 dealing with healthcare according to industry observer Vince Kuraitis. But speculative capital rarely translates into long-term sustainability and the disruptive business models that startup founders espouse. Limitations with scalability, transaction speeds, energy consumption have been some of the dominant concerns. This is particularly true in healthcare and we have reached an important point in the evolution of the blockchain space where it is worth pausing to take stock of how blockchain applications are evolving and what specific pain points in health IT can current blockchain infrastructures realistically address.
Blockchain can be valuable in contexts where there is dependency between transactions and an asset, such as data, passes from one party to another. Furthermore, when verification of the integrity or provenance of the data is valuable the immutability and time stamping features that blockchain provides are very useful.
Chilmark Research is releasing our “Market Scan Report (MSR) on “Blockchain in Healthcare” with this goal in mind. We wanted to explore the first generation of use cases and startups in the blockchain space and provide a strong foundation for understanding the potential applications in areas that speak to the core capabilities of blockchain as they relate to payers and providers: identity management, data sharing/exchange, provider directories, patient indices, claims adjudication, supply chains and revenue cycle management. We can think of blockchain as having a role in addressing pain points in the healthcare system where we see some of the following challenges:
Contexts where there is dependency between transactions and an asset, such as data, passes from one party to another are important areas where blockchain can be valuable. Furthermore, when verification of the integrity or provenance of the data is valuable the immutability and time stamping features that blockchain provides are very useful.
Our research into the current applications in development and most-ready for prime time in the next year include companies working in the following areas of the provider-payer nexus:
We provide brief vendor profiles of consulting firms, large tech providers and startups working in the blockchain space and an analysis of where we see this market going in the coming years. These also include some of the larger consulting and tech firms offering enterprise Blockchain-as-a-Service offerings including IBM, Accenture, Deloitte and T-Systems. The startups profiled include PokitDok, Simply Vital Health, Solve.Care, MedRec, Change Healthcare, Factom. There are also alternatives to blockchain or a growing number of companies that have chosen to develop “blockchain friendly” applications until the blockchain ecosystem reaches a higher level of maturity. Google’s DeepMind Health is using an alternative distributed ledger technology with patient records in the UK’s National Health System after creating an uproar over perceived misuse of patient data without approvals or prior consent. Blockchain offers an auditable way to address this controversy. A supply chain/cybersecurity offering by Cloudface provides an analytics solution for hospital supply chain with plans to create blockchain applications in the near future. There is also growing interest in IOTA’s Tangle for the Internet-of-Things (IoT).
One interesting example that emerged at the end of our writing this report was the recently announced Optum-Quest-Humana-MultiPlan blockchain initiative to improve provider directories. This is part of an effort to streamline back-office operations for payers. The initiative was developed to address the problem that arises when claims from providers enter the system and there is a mismatch between the records payers have on providers and the provider identity. Often the payer directories are not up to date and the resulting lack of reconciliation of claims submitted by providers results in delays or non-payment of claims. The initiative will launch a pilot during the summer of 2018. What is important about this initiative is the involvement of multiple stakeholders making it a more salient use-case of blockchain for pain points resulting from lack of coordination and effective sharing of data across multiple companies. We view blockchain as a tool for industry transformation rather than disruption of companies, this is a prime example of how to begin thinking about utilizing blockchain in a transformative manner. Over the next decade, we expect to see fewer discussions of blockchain in isolation and it will be a component alongside the cloud, AI and other technologies used to automate administrative functions and enable more efficient sharing of data.
Over the next decade we expect to see fewer discussions of blockchain in isolation and it will be a component alongside the cloud, AI and other technologies used to automate administrative functions and enable more efficient sharing of data.
The example above also leads us to how Chilmark Research is beginning to think about the future of blockchain in healthcare. Blockchain is an inherently complex new technology that necessarily involves coordination across networks of stakeholders. This means that blockchain ‘disruption’ of healthcare that solves the interoperability challenge or other major pain points with a single technological quick fix is not anywhere even remotely close on the horizon, but we do believe the full impact of the transformative potential of blockchain will play out over the coming decade. 2018 will see a growing number of pilots and experimentation as the hype of 2016-17 spurred considerable interest.
Even government has gotten involved with a Blockchain Caucus in Congress. The ONC’s white paper challenge and recent Trust Exchange Framework bode well for blockchain’s future as well. Blockchain proponents would be well served in the long run by moving beyond a strict techno-centric approach and developing more robust thinking on managing consortia, governance mechanisms, and the broader cryptoeconomics of blockchain in the context of the health economy. Thinking is lagging on these fronts and the froth around easy money via ICOs in 2017 has not helped matters in developing the critical thinking tools towards long-term success for blockchain in the health IT ecosystem.
For those interested in learning more Chilmark Research will be attending the Second Annual Healthcare Blockchain Summit on June 11-12 in Boston where many of the vendors and use cases we analyze in our report will be represented.