6 predictions for healthcare in 2017 – what you need to know. Our January 2017 Healthcare Market Update

Jan 26, 2017

6 predictions for healthcare in 2017 – what you need to know. Our January 2017 Healthcare Market Update

Healthcare IT, Healthcare Newsletter, Market Update, Uncategorized 0 Comments

Dear Clients and Friends,

Click here for our January 2017 HIT Market Update.

It is a new year. Time again to take out our crystal ball and share our top predictions for 2017. In keeping with our tradition, we have tried to think beyond some of the headlines such as the repeal of Obamacare and how that could slow down IT adoption. Instead we have attempted to enumerate the more subtle shifts that could impact the most active sectors for capital raising and M&A.

AI will move beyond the brute force of using lots of processors and large memories. The number of investments in healthcare AI companies reached a record high in 2016. Through combining deep learning + reinforcement learning + Monte Carlo tree search, AI techniques have gone from programming designed to capture human expertise in algorithms, to algorithms which learn themselves; i.e. developing intuition and feel. Many expect that by 2025, AI could be involved in everything from population health management to digital avatars capable of answering specific patient queries.

Vendor consolidation at the largest providers will start quietly but will accelerate in the second half of the year. The growth in non labor costs is fast outpacing revenues at many hospitals. Providers are beginning to focus on reducing the number of vendors and decreasing complexity. We believe the trend to centralize control will hit both the administrative and clinical vendors equally. Expect increased M&A activity as a result.

Patient recruiting, patient engagement and healthcare marketing companies will continue to be one of the biggest bright spots. Providers, as well as payers, are trying hard to reinvigorate their understanding and relationships with their patients. With patient empowerment comes choices, and in this competitive environment, healthcare companies have begun to appreciate the value of customer loyalty and reputation management.

New business models focused on bringing automation and increasing productivity will continue to proliferate. Despite great progress on many fronts, the US healthcare system is still delivering less, for more. On the providers side, we believe narrowly focused centers of excellence such as ambulatory surgery centers, foot clinics, or dialysis centers can offer better value at a much cheaper price. On the payer side, solutions that can streamline claim processing and systems that can help the payers enter into risk sharing contracts with providers would be in high demand.

We will begin to see Apple’s emergence as one of the most influential players in the healthcare industry. Apple’s healthcare initiatives such as HealthKit or ResearchKit are plays at the margin. Apple has everything going for it to become the major force in consumer healthcare. Due to the sheer reach of iPhones, coupled with the capabilities of Siri, ApplePay and numerous healthcare apps in its app store, Apple can single handedly disrupt the industry and rewrite the rules. We believe they will make their first serious move this year.

Despite the regulatory and political uncertainty, valuations of many HIT companies will maintain their high altitude. Companies with sticky business models and good management will continue to command premium prices. Coupled with the fact that the number of investors in healthcare is still growing at a rapid pace, there is ample money for the right opportunities.

Wishing you a prosperous year with unity, creativity and an urge to serve humanity.

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