There are significant challenges and opportunities ahead for the healthcare industry, whether it’s the rise of artificial intelligence, increasing cost pressures or M&A activity.
In a recent report, consulting firm West Monroe laid out three trends for the healthcare industry to watch out for:
Data strategy, advanced analytics and AI
Generative AI has great potential to improve workflows and simplify administrative tasks in healthcare. Some specific AI use cases for payers and providers in 2024 include customer service contact centers, provider management, provider credentialing and utilization management.
But in order to be effective with AI, “foundational investments in data infrastructure and operations are essential,” according to West Monroe.
“Sometimes the natural starting point isn’t so much the really cool and elegant deployment of a compelling use case. … In fact, it actually gets back to, what are the controls? What data are you collecting that isn’t governed, and what data should you be collecting when you look five years, 10 years down the line?” said Trevor Jones, managing director of healthcare and life sciences at West Monroe, in an interview.
Battling cost pressures
The healthcare industry is facing significant cost challenges, partially due to increased demand after the Covid-19 pandemic, as well as provider labor shortages. For example, there is a need for 1.1 million new registered nurses in the U.S., according to the Bureau of Labor Statistics. In addition, the Association of American Medical Colleges expects a shortage of 54,100 to 139,000 physicians by 2033.
Healthcare also lags behind other industries when it comes to cost issues, noted Ben Baenen, partner of healthcare and life sciences at West Monroe.
“The healthcare system is getting what other industries were facing in 2019 and 2020,” Baenen said in an interview.
Leveraging technology and AI is one way to ease these cost pressures, according to West Monroe.
“We see rising costs being a massive, massive theme. How do you use AI? And how do you start to streamline internal operations to reduce your operating expense? There are ways of doing that, AI is one of 100 different ways,” Baenen added.
Changing dealmaking landscape
West Monroe anticipates seeing an uptick in M&A activity in 2024, and private equity is a major influence.
“The driving forces behind these deals are changing: Private equity, with its approach of acquiring at lower prices and building value for a lucrative payoff, has become an undeniable force shaping the dealmaking landscape,” the report stated. “Strategic buyers, more focused on building assets that will generate value over time, are also making an impact.”
Looking ahead, M&A strategy will be more focused on “stable, mature, and profitable businesses,” particularly while there’s an unstable economic environment. There will also be a shift away from “unproven digital health solutions.”
“There was a flurry of excitement in 2021 on digital health,” Baenen said. “Interest rates were super low. So you saw tons of investment because it was a smart bet. I think we’re starting to see a little bit more necessity of healthcare companies with proven customer backlogs, satisfied customers, long tenured customers. The investment is looking more at stable healthcare companies.”
Photo: lerbank, Getty Images
