Looking back on how the healthcare industry has progressed over the last two decades, U.S. healthcare now comprises 18 percent of total gross domestic product, up 13 percent from twenty years ago. The composition of that spending has remained (remarkably) stable since 1960, with 38 percent to hospitals, 23 percent to physician services, and 12 percent to prescription drugs. Pharma accounts for less than one-sixth of total healthcare spend, while deriving almost half of healthcare ecosystem profits.
Fritz Heese, Partner in Oliver Wyman’s Life & Health Sciences and Organizational Effectiveness Practices and David Fries, Senior Knowledge Expert in Oliver Wyman’s Life & Health Sciences Practice, predict healthcare’s migration to value will continue. Margin pressure and intense competitive pressure will push efficiency among incumbents (like automating and transitioning care to lower acuity environments). Oliver Wyman is an affiliate of Guy Carpenter.
Is this share of profits in the industry stable, or is it about to be turned upside down over the next decade?