Transforming Healthcare: Emerging Business Models

KPMG’s recently released report, Transforming Healthcare: Emerging Business Models, reviews the results and findings of a survey of over 200  senior executives at leading U.S. healthcare systems, health plans and pharmaceutical organizations. The survey found that the largest percentage of respondents said their current business model was somewhat sustainable over the next five years, while 20 to 27 percent of respondents in each group said current business models were either not very or not at all sustainable over the next five years.

Despite their majority opinions that current business models are at least somewhat sustainable, many provider (65 percent) and health plan (41 percent) executives do expect major business model changes in the next five years, while a majority of pharmaceutical executives (63 percent) expect only moderate changes. According to the findings nearly half of providers and health plans, and a third of pharmaceutical executives would like to see a more rapid progression to some type of value-based payment, but most anticipate that transition will in fact be accomplished more gradually than not, with less than a quarter of all provider reimbursement fashioned as some type of value-based payment.

[Related Article: Impact of Shifts in the Healthcare Environment on Health IT]

Objectives of the KPMG Survery were to research new strategies for the transforming healthcare landscape to:

• Develop a point of view on future business models, with a three segment focus – healthcare systems, health plans, and pharma/biotech companies
• Use additional survey results on physicians, employers, consumers, and new entrants/disrupters to develop a point of view

KPMG commissioned Harris Interactive to survey U.S.- based executives in leading organizations in 3 parallel surveys  collected from January- June of this year.

Key insights from the survey reveal:

The majority of healthcare systems, health plans, and pharmaceuticals executives view their business model as somewhat sustainable or better.

• INSIGHT: The KPMG view is that the current business models are not sustainable.

Yet, industry participants, especially healthcare systems, see major changes coming in the industry. Despite the need for major changes, they tend to expect steady integration to occur.

• INSIGHT: The way for more rapid integration to occur is for these stakeholders to lead the change and make it happen.
• INSIGHT: There are significant opportunities for forward-looking healthcare organizations, including pharmaceutical companies, to develop and execute transformational business plans.

The techniques that these stakeholders are utilizing appear designed to sustain existing business models.

• INSIGHT: Given unsustainable business models that are being driven by the disruption of the cost shift equilibrium, these techniques may be counterproductive to achieving the necessary reforms in the next five years.