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Drive Innovation Infographics February 25, 2021

What to Expect in 2021

Five Healthcare Predictions

Partner, Health and Life Sciences, Oliver Wyman
Managing Partner, Health and Life Sciences, and Global Chair for I&D, Oliver Wyman
Key Takeaway
The “population pyramid” for pharmacy costs is also very different, with one percent of the population accounting for more than one-third of pharmacy costs. #OWHealth

In early 2020, who would have predicted we’d experience a global pandemic, economic recession, social unrest, extreme weather, and unprecedented political division? One only needs to re-read our 2020 healthcare predictions to see that we certainly didn’t. So, isn’t it hubris to try and predict what will happen in 2021?

In some ways, yes – and we’re certainly not going to get it all right (see assessments, for example, of our 2018 predictions here and 2017 predictions here). Yet, despite the uncertainty of what the coming months hold, there are inevitable and inspiring Future Truths about healthcare that can help us navigate this unique landscape. Drawing from those Future Truths, we share five predictions for 2021:

1. COVID-19 remains endemic

After more than a year with a global pandemic, there appears to be a light at the end of the tunnel when it comes to COVID-19. In many places, new cases are on the decline after a brutal winter, and we have effective vaccines available to the public. Yet the crisis is far from over. Life will start to return to normal soon. But it will be a long haul before we’ve fully put COVID-19 behind us – if ever. Despite all the excitement surrounding vaccines, even flu shots only have a 45 percent uptake, so herd immunity is a ways off. And even then, we’ll have geographic hot spots with outbreaks. We need to plan for COVID-19 to be endemic, with regional shutdowns, a gradual return to work, and a gradual return to normalcy.

2. Pharmacy steals the population health spotlight

For commercial populations, many insurers and employers now spend more on pharmacy than on hospitals. Pharmacy costs are growing at over six percent annually – faster than US healthcare costs overall. The “population pyramid” for pharmacy costs is also very different, with one percent of the population accounting for more than one-third of pharmacy costs. The industry needs a different approach to population health management than traditional care models focused on keeping people out of hospitals. Big players acknowledge this – it’s why, in recent years, we saw Cigna buy Express Scripts (now part of Evernorth), CVS bring together Aetna and Caremark, and many health plans invest significantly in pharmacy cost management capabilities. In 2021, we’re going to see continued steps towards greater medical-pharmacy integration and new approaches to managing pharmacy costs.

Spend concentration: Commercial population

Source: Oliver Wyman analysis

3. Virtual care winners and losers start to shake out

In the thick of the pandemic, we saw record growth in telehealth utilization. At their peak, telehealth visits for Medicare beneficiaries were up from 13,000 per week to 1.7 million per week, due to both increased consumer demand and sudden changes in reimbursement. Although numbers are now coming down, most systems expect 20 to 50 percent of visits to be delivered virtually long-term.

Due to this normalization of virtual care, pure-play telehealth companies saw sky-high valuations in 2020. But just offering a “video visit” won’t be enough to remain differentiated. To maintain their valuations and differentiate, virtual health companies are going to need to build superior consumer experiences, better data-based insights, more specialized care, and continuous engagement and condition management. This is why we saw deals like Teladoc-Livongo and Amwell getting a strategic investment from Google. We should expect to see more such activity in 2021, with virtual care winners and losers starting to shake out as a result.

COVID-19 has increased telehealth usage ...

How often will you use telehealth services after stay-at-home orders are lifted?

Source: Oliver Wyman analysis

How has COVID-19 impacted how much you use telehealth services?


Source: Oliver Wyman analysis

4. Hospitals feel the squeeze

Hospitals were hit hard by the loss of elective procedures during the pandemic. But volume seems to have recovered in most places. The new challenges in 2021 will be a shift to government-paid and uncompensated care associated with unemployment (and as people come off COBRA), new pressures from price transparency, and increased government scrutiny of mergers and acquisitions. To survive, health systems must address the underlying cost (not price!) issue and embrace partnerships, less labor-intensive models of delivering care, and right-sizing supply. Primary care can no longer be a loss leader, either – systems need new models to make it sustainable.

Outpatient volume, which has returned to pre-COVID-19 levels, may reflect pent-up demand and be short-lived

Healthcare utilization by IP admissions

Source: Strata Decision Technology analysis of billing encounter data for 209 hospitals from 49 health systems. Oliver Wyman analysis.

Healthcare utilization by OP visits

Note: OP billing data excludes telehealth and ED
Source: Strata Decision Technology analysis of billing encounter data for 209 hospitals from 49 health systems. Oliver Wyman analysis.

5. Big tech makes missteps – but then recovers

Amazon, Google, Apple, Microsoft, and Facebook have all been making major inroads into healthcare. That said, we’ve already seen some missteps. And we’re sure to see more, especially given big tech’s reputation regarding privacy (already, a reported one in three Americans refuse tracking on most apps). Inevitably, at least one major tech company will do something with health data that causes controversy – and maybe even regulatory intervention. It will be tempting to dismiss big tech’s healthcare efforts as a result – but do so at your peril. They will keep trying until they get it right, and they’re already in consumers’ pockets, purses, and homes.

People are less willing to share health data

So, what to do?

First, be ready. Make sure your executive time and investments are focused on the future, not just the crisis. Second, look forward more than one year ahead. No one has a crystal ball for 2021 (we’ll certainly be wrong about some of the above). Yet the path of the industry is clear. And healthcare’s Future Truths light the way. We just have to take them seriously.

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