In a year that promises to be very challenging for the healthcare industry, health information technology spending tops the list, according to a survey released by PricewaterhouseCoopers. In addition to ongoing cost pressures and new customer demands, the report also predicts that payers and providers will likely need to undergo a strategy makeover as a result of new rules and payment models.

Below are the survey findings of the six top healthcare industry challenges in 2011:

#1–Booming business in health information technology
Boosted by new government regulations and tight deadlines by which to meet them, 2011 looks to be a record year for health information technology (HIT) spending. More than $88.6 billion was spent by providers in 2010 on developing and implementing electronic health records (EHRs), health information exchanges (HIEs) and other initiatives. This surge is a sign of technology’s critical place in health system improvement. Whether it’s establishing “meaningful use” of EHRs within provider organizations, working with multiple players to establish new population management models like ACOs, or using technology to drive down costs in pharma/life sciences companies, more skilled resources are needed to pull it all off.

#2–Gearing up to redefine health insurance: From MLRs to insurance exchanges
Legislating coverage was the first step. Implementing coverage is the next. And, that implementation has new guardians. The percent of insurance premium dollars allocated to providing care, known as the medical loss ratio (MLR), will be a primary focus of the government and the health insurance industry.

In 2011, health plans must start reporting their MLRs for individual and small group health insurance for each state in which they do business. The deadline won’t be until 2014 for state health insurance exchanges to connect individuals and small businesses with health insurance, but states must apply for certification by January 2013 or let the federal government set up an exchange for them.

#3–ACOs: Is this the next big thing or not?
The health reform law will create a new type of care model, called the accountable care organization (ACO). It has already created a large amount of buzz within the industry, although less than a third (28%) of consumers surveyed by PwC were familiar with the term ACO. That will soon change. Will ACOs be the next big thing? Are they the 2010s’ version of HMOs? Under the health reform law, ACOs focus on managing a discrete Medicare population. However, ACO has already become a metaphor for the larger issue of population health management by disparate parties within the health system—parties that are looking for a new way to provide care while managing costs. Under this broader description, ACOs encompass a spectrum of models that include physicians, hospitals, payers, and vendors under a basic premise of shared risks and rewards based on patient outcomes.

#4–Nowhere else to cost shift: Consumers could continue to reduce utilization
In 2011, for the first time, most employers are expected to have a deductible of $400 or more built into their employer-sponsored health insurance. The trend in rising deductibles has been remarkably fast. In 2008 and 2009, the most common plan had no deductible, according to PwC’s survey of 700 employers. By 2010, the most common plan among employers surveyed by PwC had deductibles of $400 to $999. In addition, according to the PwC survey, high-deductible plans are now the primary plans for 13% of employers surveyed in 2010, up from six percent in 2008.

#5–M&A: Deals will bond the familiar and unfamiliar as organizations look to fill strategic gaps
Deal activity in all health sectors is on an upward trend that will continue into 2011. Companies will be looking for growth as well as to fill in services along the continuum of care. With continued low interest rates and more cash on hand, healthcare organizations will be encouraged to discuss deals that help them manage future risks and tackle costs. The activity could traverse unlikely terrain as suppliers buy providers, as health plans team with providers, and as pharma/life sciences companies get into more services along the care pathway. However, healthcare organizations could have competition for acquisitions. The number of private equity funds interested in healthcare is on the rise.

#6–Follow-me healthcare: Patients look to health organizations that are always on
Rapid innovation and the adoption of digital technologies are dramatically changing customer expectations of the health industry. Physicians and patients expect increasing amounts of health-related information, anytime and anywhere. Organizations realize that the best way to influence outcomes is to engage patients. And to engage them, the industry needs to understand how patients want to connect.

To read the full PricewaterhouseCoopers report.

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