Here at Union, our annually-updated State of Healthcare is the foundation upon which nearly all of our research builds. We know that in recent years, the sheer volume of healthcare industry coverage has expanded and fragmented—making information more accessible, but also making it more difficult for leaders to extract real insight. Our State of Healthcare addresses that challenge head on. We scan all of the developments from across the healthcare industry and distill things down to a much smaller set of key signals and insights that are worth knowing in any given year. This year is no different; the State of Healthcare 2024 covers 12 market signals, six insights, and three imperatives that any healthcare leader should have front of mind today.
Members have access to the full State of Healthcare 2024 in a variety of formats—as ready-to-use slides, as both live and on-demand presentations, and as a full written report. The full version touches on all of the major themes impacting the industry right now, including shifts in the health insurance/managed care market (particularly the erosion of the Medicare Advantage profit engine), the potential impact of artificial intelligence (particularly generative AI), the state of primary care disruption, the state of value-based care, and more. And it's intended to be cross-industry in focus, including updates and implications for all types of healthcare organizations, including hospitals and health systems, health plans, and life sciences companies.
In today's post, we're sharing an excerpt from the written report. This excerpt includes the introduction of the report, which covers the overarching argument of this year's State of Healthcare, and delves into how rising costs, shifting utilization of healthcare services, and emerging innovations are likely to reshape the trajectory of healthcare spending in the coming years. We've also included three (of twelve) market signals we think are worth highlighting for 2024. The three highlighted signals cover the "people" bucket of market signals, looking at how U.S. health outcomes and employee demands are currently shifting. Read on to preview the research, and click the link below if you'd like a PDF version of the excerpt.
Introduction: The State of Healthcare 2024
In the 1980s, as U.S. healthcare spending crept toward 10% of the country’s GDP, economists began raising the once-unthinkable prospect that the industry could eventually compose more than 20% of the nation’s economy.
By the early 2000s, Medicare officially projected that this milestone would be reached within the next two decades. Of course, such projections are particularly tricky given that they rest on assumptions not only about healthcare spending, but the entirety of the U.S. economy, something that even the savviest of economists have struggled to accurately predict. In the 2010s, that prediction proved a moving target as healthcare spending slowed relative to other parts of the economy.
But as of 2024, that milestone once again appears within reach, with CMS’ latest projections suggesting the industry may approach the 20% mark within the next decade. Even if healthcare’s share of the GDP remains stable, healthcare spending is likely to increase notably—and potentially even accelerate—in the coming years.
Rising input costs, driven in large part by notable clinical and technological advancements, are likely to put upward pressure on pricing. And despite increasing public and political pressure to curb price growth, recent attempts to do so have either been ineffective (as was the case with high-deductible health plans) or too limited in scope to make a significant dent in overall spending (as is likely to be the case with the recently-launched Medicare drug-price negotiation program).
At the same time, population aging, the return of Covid-deferred care, and surging demand for weight-loss drugs and behavioral health services are likely to drive increased utilization.
As is the case with pricing, utilization controls have to-date been limited in their efficacy, with little reason to believe this will change meaningfully in the coming years. In particular, the push to reduce avoidable utilization and improve population health through value-based care models has achieved uneven results at best. More hard-edged methods to control utilization—through claims denials and prior authorization requirements—are being met with increasing levels of backlash.
For industry leaders, projections of increased spending may appear on their face to be good news. However, we believe that the coming wave of spending growth is at significant risk of presenting as ”profitless growth” for many across the industry.
Ultimately, the financial impact of spending growth for any given industry sector or player will come down to four critical factors.
Union's State of Healthcare methodology
This report expands on these factors in more detail through our unique State of Healthcare research methodology. We recognize how challenging it can be to separate the signal from the noise in healthcare—and to move from information to insight to action. And we’ve developed a system to address this challenge head on.
Each year, we begin by first identifying meaningful (if granular) signals: data points, dates, and developments. From that curated set of signals, we’re able to distill a smaller set of core messages or insights about the state of the industry. And from those insights, we converge on a feasible number of action steps for senior executives to prioritize in any given year.
This report covers each of those critical layers in turn, to provide leaders with a clear sense of what they need to know to set strategy across 2024-2025.
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The State of Healthcare 2024: The market signals we're watching this year
Signal #1 | Changes in U.S. life expectancy
Over the past two decades, life expectancy in the United States has fallen below that of other developed nations, and the gap has generally widened with time. Even before the Covid-19 pandemic caused life expectancy to drop worldwide, higher rates of maternal mortality, gun violence, and deaths of despair were causing Americans to die earlier on average than their OECD counterparts (source, source, source).
On the positive side, deaths from Covid have fallen sharply since the early days of the pandemic, and learnings from the vaccine development process will likely have massive impacts on future disease prevention. Smoking rates also continue to fall, which has been reflected in lower lung cancer incidence and death rates (source).
Other forces are having a more mixed impact on U.S. health status. For example, behavioral health conditions such as depression and anxiety are on the rise (source), but awareness has also grown while stigma has declined, prompting more payers to expand access to care. Similarly, while many cancers and other chronic diseases are becoming more common (source), groundbreaking therapies such as CAR-T and GLP-1 agonists are changing the face of chronic disease treatment.
While many of these factors are outside the scope of influence for most healthcare organizations, they will all impact future utilization.
Signal #2 | Increasing age of the patient population (and workforce)
Rising chronic disease rates are due, in part, to population aging.
While this has been a major topic of discussion for some time, there a few key nuances to this trend that are worth revisiting:
Average age continues to vary significantly by geography, meaning some regions will be impacted more severely than others.
While the general population has been aging, the average age of the Medicare population has declined as large numbers of ‘young’ Boomers entered the program; that trend is now reversing, and the Medicare population is growing older.
Aging not only impacts patients, but also workers; many health professionals are retiring just as demand for care is rising.
Signal #3: Record numbers of frontline healthcare workers participating in strikes
Workforce pressures due to retirements are also being compounded by spikes in burnout and turnover (fig. 9, page 13). The latest available data (from 2022/2023) suggests that while those workforce stressors have fallen from their pandemic highs, they have not yet returned to pre-Covid levels.
For example: a closer look at burnout data, taking nurses as an example, shows that the share of nurses experiencing consistent or complete burnout has declined significantly since summer 2022. However, the share who are on the cusp of burnout—experiencing one or more symptom—has risen significantly. This suggest that the industry is at an important inflection point, and how employers choose to respond will have a powerful impact on whether those numbers continue to improve—or revert to their pandemic highs.
In the meantime, worker strife has not abated, manifesting in record-breaking levels of labor activity, which only accelerated in 2023 and into 2024.
Over 100,000 frontline workers participated in strikes of over 1,000 people across 2023 and early 2024, a statistic that would be significantly higher if it included smaller and threatened strikes. The last year also saw the largest healthcare strike in the industry’s history, when 75,000 Kaiser Permanente employees walked out for three days.
All of this union activity is notable for reasons other than sheer scale. The types of workers organizing and striking is increasingly extending beyond nurses (who have a long history of labor activity.) Residents, pharmacists, and even physicians are taking collective action in some form. Of particular note is the example of Bicycle Health, a digital behavioral health startup whose employees filed to unionized in March 2024. This is the second instance of virtual care providers unionizing, following Resilience Labs in February 2023, and highlights the ongoing momentum and reach of the present labor movement.
Equally striking is what workers are demanding from management. Many groups have been able to secure pay increases nearing 20% or even higher, often the highest bump ever negotiated by the groups in question. Beyond financial gains, almost every union is making their negotiations contingent upon non-monetary guarantees, including workplace safety protections, DEI commitments, and more permanent solutions to ongoing understaffing. In many cases, employees emphasize that these non-monetary measured are just as important as the pay raises, if not more so.
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Interested in the rest of the State of Healthcare 2024?
Members can access the State of Healthcare 2024 in its entirety in the following formats:
Depending on your membership, you may also have the option to bring the State of Healthcare 2024 to your organization through an in-person or virtual presentation. Please reach out to your main point of contact to discuss.
Not a Union member yet? You can reach out to us at info@unionhealthcareinsight.com or schedule time with us here to learn more about membership options.
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