PwC: Healthcare Spending Growth Flat in 2017, But Two Emerging Trends May Change That

Global consulting firm PricewaterhouseCoopers anticipates another year of flat growth for healthcare spending among employees in sponsored plans, but high performing narrow networks and the increased access to outpatient centers will likely move the needle one or the way other in the years to come.

And so on its face, PwC’s annual Behind the Numbers healthcare growth report for 2017 isn’t very sexy. Spending among the employer segment should rise again by 6.5 percent. The pharmaceutical segment, which still accounts for a significant portion of our spending, has mostly recovered from the huge spike from expensive specialty drugs to treat Hepatitis C and is steadying. Meanwhile, trends like retail healthcare and high-performing narrow networks are too young to gauge their impact on the country’s healthcare spend.

The report winds up focusing on those latter two—the new freestanding outpatient centers (or “access points,” in industry parlance) may influence additional utilization, which could cause costs to increase. They’re in Walgreens and CVS locations. They’re inching into neighborhoods where a majority of employer-sponsored plan holders live. They’re available via phone through apps. All this convenience should bring costs down, shouldn’t it?

“We’ve been big proponents of retail health and telehealth and all of these great new access points, so we’re certainly not saying they’re a bad thing,” says Ben Isgur, the lead of PwC’s Health Research Institute. “We’re being realistic to say the scenario of having an earache on a Friday morning and waiting until Monday to see my doctor is an old world scenario. The ache might be gone in the course of a weekend. But in the new world, I can go to the retail health center around the corner immediately.”

The report calls 2017 “a tough balancing act for the health industry,” which is charged with increasing access while decreasing per-unit cost. The employers are demanding better value for their dollar, which has prompted a response in the form of high-performing narrow networks. These can be tailored a number of ways: By location, by system, by provider. Employers are looking into these because they “may have squeezed all they can” from shifting costs to their employees through high deductible health plans.

These usually give employees access to a high-quality, reputable provider network that controls costs and proves it. Polled in 2016, just 9 percent of employers have implemented one of these networks. But 43 percent are considering it, a 9 percent increase jump since 2014. The potential savings are significant: According to the study, these networks have helped reduce costs by as much as 35 percent compared to the broader packages. Isgur drew parallels to the growth of high deductible plans. They started off as a choice in benefit packages, but have gradually become the sole plan available to the employee. Which, while Isgur says has tampered down utilization, has its own drawbacks as well.

“But employees are starting to reach their limit and employers are recognizing that. How much more cost can we push down our employees’ throats?” Isgur says. “They’re coming back at us and saying, this is like not having insurance.”

To adapt to this, PwC advises healthcare providers and insurance plans to pair up. This can drive value-based care arrangements so that the payers can present the benefits design folks with data showing the potential for a high-performance narrow network. After all, premiums are outpacing the growth in wages and the cost of healthcare won’t be sustainable at this rate. Ninety-five percent of all payments in this country are still volume-based instead of value, creating plenty of opportunity for those who want to break out.

But as noted by Marianne Fazen, the director of the Dallas-Fort Worth Business Group on Health, employers are not historically bullish about redesigning their benefits packages. It takes time for structural changes to become commonplace. It took about a decade for employers to fully warm to high-deductible plans.

“(Employers) loathe disrupting their employee workforce and they’re very competitive with the others in their industries, so they don’t want to weave out too far to try something too innovative, even with all the changes behind the scenes, the partners that we’re doing business with—providers and the health plans,” she said. “They’re still being very traditional in moving forward.”