In the course of our research into the healthcare market this year, several prominent trends emerged from interviews with senior lawyers around the world. We begin with the significant changes in the world’s largest healthcare market, valued at $2.8 trillion: that of the USA.
Practitioners in the USA note that “the market is clearly evolving” in response to the fact that “the cost of healthcare has clearly been a concern for the past decade for successive administrations, with the traditional way of delivering healthcare prompting serious discussions regarding change”. Sources point to Obamacare as “the first step” in a new governmental approach to “keeping people out of hospitals and a much greater emphasis on paying to keep people healthy”. This new approach has resulted in “hospitals now seeing a reduction in how much they get paid by the government and insurers, in turn forcing them to band together”. This has translated into what sources call an “observable increase” in mergers and joint ventures in the space. Furthermore, this shift in the market is also generating a lot of research by hospitals, which is “a big focus now for providers as there is a lot of profit waiting there”. In addition, commentators note, “Pharma businesses can piggyback on the research from academic medical centres, so now you see them funding licensing and patenting efforts as well as joint ventures with pharma clients.” Lawyers also report, “Healthcare payments are slipping away from hospitals and moving to physician practices.” Perhaps as a corollary to this, there has reportedly been “a lot of activity in terms of acquiring physician offices” on the part of private equity funds in the healthcare space. This reveals a change in the business models of healthcare providers and investors; previously, their focus was “how many patients can you get into an operating room and then charge them for those services – but now reimbursements are the focus”.
The USA has also seen a dramatic change in healthcare enforcement from the current administration. One interviewee observed, “The previous administration was less aggressive in pursuing the healthcare system in terms of costs.” It was also noted, “There has been a lot of effort over the past decade to move care away from acute inpatient care to outpatient care and post-acute care.” This has taken many forms, such as incentivising people to provide nursing care rather than pursue acute services. This movement away from acute services and their intensive costs has reportedly been “sped up a lot under the Trump administration”. Such cutbacks by the US government have “opened up opportunities for firms and clients who are pushing back on the government as they seek to cut rates”. Specialists in the space also intimate “a shift in enforcement in terms of greater discussions around reimbursement for Medicare and Medicaid”, which will potentially have a significant impact on the new business models of investors in the space as outlined above. There are now “interesting questions around these old laws being enforced in a different way to catch fraud that doesn’t fit into classic senses covered by normal regulations”. Going forward, practitioners expect the government “to continue to be aggressive, with costs definitely remaining a focus”.
In conclusion, the US healthcare market is undergoing considerable change. Current legislation aims to reduce the burden on hospitals by improving people’s health at an earlier care stage. This has put a strain on the hospital sector, which has seen a number of mergers and joint venture projects. This change has also prompted investors in the space to adapt the focus of their business models, which now focus on out-patient care and reimbursements from Medicare and Medicaid. Going forward, the market can expect to see more aggressive enforcement and cost-cutting from the current admiration, with important ramifications for the market.