The pandemic is nearly over but not before upending every sphere of our lives. It has changed how we socialize and communicate, study and work, and plan and implement. It has ushered in disruption and galvanized innovation, especially in healthcare. As a result of the pandemic, approximately 80 percent of US health providers plan to invest in digital health, artificial intelligence (AI), machine learning, and the tools to support clinicians and caregivers.
Even as these changes in the healthcare industry bring in fresh air, a storm is brewing, threatening to put nearly half of the industry’s profit pools at risk. The pandemic’s combined impact created affordability and accessibility challenges, clinical staff shortages, and limited population-wide progress outcomes, creating a vortex of problems we must meet head-on.
Traditionally, we have underapplied best practices; in the new normal, healthcare entities that come up to speed have a better chance of leading the future. Organizations that redesign their operations for speed and productivity, reshape portfolios, innovate business models, and make resources agile will leverage the $1.5 trillion healthcare market.
Healthcare sector's golden opportunity
According to McKinsey & Company research, consumers are becoming increasingly interested in wellness, with 79 percent of respondents in six countries saying wellness is essential, while 42 percent consider it a priority.
This growing interest has seen the technology, telecom, and consumer sectors trucking with the healthcare industry, investing significantly in innovations, and launching new companies. A total of $44 billion was raised in 2021 – twice the sum in 2020 – through the acquisitions of 50 percent of medical technology and health services companies.
According to McKinsey, global wellness is estimated to be worth more than $1.5 trillion, with a five to 10 percent annual growth rate. This increase in consumer interest and purchasing power presents tremendous business opportunities, as spending on personal wellness rebounded after stagnating or even declining during the COVID-19 crisis. As the wellness market gets increasingly competitive, companies must plan strategic growth.
The two-track formula for healthcare leaders
In this highly re-energized environment, healthcare leaders must focus on two things simultaneously: preventing their organization’s profit pool from shrinking and thriving in a $1.5 trillion economy. Organizations must compete to win, and healthcare leaders must redesign operations for speed and productivity, enhance portfolios, launch new business models, and achieve a resource fit.
The healthcare industry faces a cost acceleration of nearly $600 billion by 2027, which could impact affordability and threaten the sustainability of its profit margins. However, the sector can ride out the storm by grasping the staggering $1.5 trillion opportunity.
By creating more significant value.
What does this imply?
The company must offer better care delivery, higher clinical productivity, more comprehensive application of technology, and simplified administrative procedures.
Tools for achieving these objectives exist; companies must employ them effectively.
The danger of dragging your feet is not just being left behind; it can push you to the bottom of the heap. A McKinsey study of the last global recession (2007–09) shows that challenging times separate resilient and non-resilient companies and reorder sectors. At the beginning of the downturn, the ‘resilients’ – the top-quartile performers in each industry – performed better than the non-resilients, leading by more than 150 percentage points in total return to shareholders by 2017 compared to those who did not. Few non-resilients joined the top-quartile performers by the decade’s end, as nearly 70 percent of resilients remained top-quintile performers.
The next few years will test the leadership of incumbents and disruptors in healthcare. Historically, companies that rise to the occasion have usually been rewarded with sustained overperformance, creating a strategic distance from their competitors and earning recognition as healthcare leaders.
So, what differentiates resilient organizations from non-resilients?
These four measures:
Redesigning operations for speed
Healthcare players must increase flexibility and speed of decision-making to weather the upcoming storm and avail of the $1.5 trillion opportunity.
An organization’s speed significantly impacts its profitability, operational resilience, health, and growth, among other factors.
Leaders must adopt bolder aspirations to increase productivity in the face of the coming storm. Action must match ambition to improve the treatment quality, accessibility, and patient experience. Healthcare executives always try to maximize efficiency, but incremental improvements are no longer the answer. Sweeping reform is the need of the hour.
Investments in strategic growth areas help resilient companies stand head and shoulders above competitors during challenging times. This strategy is necessary for healthcare, where profit pools rapidly shift away from the incumbents’ core market segments. Without a new strategy, healthcare entities will scramble to keep profits from shriveling because well-capitalized disruptors are capturing the fastest-growing and highest-margin segments. These companies are often not limited by legacy constraints or bureaucracies, nor are they required to manage separate core businesses. Venture capital and private equity fund some of these companies, so disruptors can often reach the market faster than incumbents.
Reallocate limited resources
A McKinsey study shows that companies that allocate resources actively perform better across economic contexts. Especially in challenging times, such a reallocation is essential, and it is not happening at the pace needed. To seed high-growth areas, successful reallocators follow a tested portfolio of processes.
The more things change, the more they remain the same. Speed, agility, resource utilization, and innovation have always been the building blocks of adaption to change; context and circumstance differ. The new normal has forced healthcare to examine its old ways of performance and find new ways of excelling at its fundamental purpose: to provide the best patient health experience.
The price of not moving ahead is high. As the $1.5 trillion healthcare-economy juggernaut moves ahead, companies that keep in step with it are the winners; the rest will fall by the wayside.