In 2018, healthcare spending in the U.S. topped $3.6 trillion — more than any other country worldwide. And that’s not expected to slow down any time soon. According to Health Affairs, spending is projected to continue at an annual growth rate of at least 5% through 2027. Concurrently, life expectancy continues to climb. Right now, 11.6% of the world’s population is over the age of 65. As baby boomers continue to age, the need for more care will increase, but so will the need to keep a close eye on spending.

With this growth comes a desire for healthcare providers to provide better quality care with an increased focus on prevention. Financing medical equipment will continue to be a viable option as providers look to rein in costs while continuing to provide patients with the best care.

Several trends that shaped healthcare in 2019 offer a good sense of what we can expect to see in the coming years.

Shift from Treatment to Prevention

According to the CDC, chronic diseases account for 70% of deaths in the U.S. They also account for 75% of all healthcare spending. An increased focus on prevention of these diseases and earlier detection could dramatically reduce spending on treatment.

This shift to value-based care can increase the overall wellness of patients while saving money on health insurance costs. By the end of 2019, we could see up to 15% of global healthcare spending tied in some form to value or
outcome-based care concepts.

As we move into 2020, the value-based care initiative will transition from an economic model with cost-effective measures to an increased focus on health outcomes and treatment by means of data-driven, risk-sharing frameworks and sustainable reimbursement models that benefit both providers and payers.

The equipment finance industry can expect to see a continued shift toward pay-per-use models and servitization as value-based care becomes more prevalent. As providers are increasing focus on outcomes and placing more emphasis on prevention over treatment, the importance of assets alone is diminishing.

Consolidation

As the industry continues moving more toward value-based care, consolidations are on the rise. In 2018, Definitive Healthcare tracked an astounding 803 mergers and acquisitions and 858 affiliation and partnership announcements in the U.S. Two-thirds of community hospitals are now part of a multi-hospital system or a diversified single hospital system.

We are also seeing more care being provided in outpatient settings, such as surgery centers, that are owned by hospitals or health systems. These offer lower costs and a better patient experience.

While the shift to value-based care is most evident in the U.S., the trend is beginning to gain traction globally. Countries such as the Netherlands, Sweden, France, Germany, Canada and Japan currently spend approximately 10% or more of their GDP on healthcare and are under pressure to reduce costs. Providers are rapidly combining to realize cost efficiencies, increase market share, gain purchasing power with vendors and increase negotiating power with insurers.

In addition, vendor rationalization is pressuring device manufacturers and technology providers to consolidate. Healthcare providers are reducing the number of brands in the network to benefit from economies of scale and reduce costs and variations — particularly where they see patient outcomes consistent across various brands. Manufacturers and technology providers have a better shot at maintaining their customers by offering a broader variety of offerings, contributing to the consolidation trend among device manufacturers and technology companies.

Consistency and Predictability

Dynamic change will always be a component of healthcare. In the early part of the decade, there was significant energy around the Affordable Care Act (ACA). Many healthcare providers delayed acquiring major capital equipment because of the uncertainty surrounding how the new system would work and the ramifications for cash flow and reimbursement.

With the ACA generally intact, so far, during the Trump administration, certainty and consistency have leveled out and contributed to a strong and growing healthcare market.

Areas of Opportunity in 2020 and Beyond

As we move into the next decade, the shift to value-based care will continue to rapidly evolve. Focus will continue to increase on disease prevention to reduce the number of instances and thus treatment costs. This lends to the importance of life sciences and genomics — being able to identify early risk factors and drive patient behaviors that lead to healthier lives.

Globally, the life sciences market is estimated to hit more than $1.3 trillion in 2019 and is expected to reach $1.5 trillion by 2022. Interestingly, this growth is driven in part by massive disruptors like Google, Amazon, Facebook and Apple making heavy investments in R&D partnerships. Six of the top 10 tech giants are diversifying into healthcare and life sciences, developing both diagnostics and therapeutics, and using their deep understanding of consumers in an effort to enhance and simplify the patient experience.

The next generation of technology startups will continue to threaten the status quo. Currently, more than 250 startups are focused on gene-based therapeutic solutions alone.

Transformative technologies will continue to rapidly progress and become more widely adopted, including the use of artificial intelligence, the Internet of Medical Things (IoMT), software-as-a-medical-device (SaMD), blockchain and DIY diagnostics and virtual care.

Patients will continue to seek greater convenience and better experiences. The telehealth market, for example, is expected to double by 2022.

With the increased emphasis on patient experience and providers focusing on providing the best outcomes while reducing costs, innovative financing models will continue gaining popularity. As the healthcare market continues to boom, equipment financing can support that growth by providing new avenues to acquire assets that improve patient experience without tying up available capital. •