PricewaterhouseCoopers identifies the top nine issues for health industries in 2009 financial crisis

NEW YORK, December 11, 2008 - The financial downturn, a new President and growing public demand for reform of the health system will force health organizations to react quickly in 2009, according to the Top Nine Health Industries Issues in 2009, published today by the Health Research Institute at PricewaterhouseCoopers LLP (PwC). In its annual review of the top concerns for health executives and policy makers, PwC says the health industry will face a plethora of challenges in the year ahead, including how to deal with more underinsured, adapt to new coding and payment methods, and fund new cures in a capital-starved market.

"The coming year will be a watershed for healthcare in the United States," said David Chin, M.D., PricewaterhouseCoopers' Health Research Institute Leader. "Severe economic conditions are placing pressure on hospitals, insurers, employers and patients alike. President-elect Obama has called for significant reform for healthcare and will have a Democratic Congress supporting him. The convergence of market and political forces will drive the greatest change in healthcare in a generation, changes that could benefit patients and make the health system stronger."

The report is an annual review of the most pressing issues for health executives and policy makers. According to PricewaterhouseCoopers' Health Research Institute, the top nine health industry issues in 2009 are:

1. The Economic Downturn Will Hit Healthcare
Although the health industry historically has been less vulnerable to economic downturns than other industries, the disrupted economy will hit healthcare in 2009. Hospitals and other providers, from family physicians to dentists, will experience an increase in bad debt and a drop in elective procedures. Investment portfolios for all health organizations have been affected. The payer mix is shifting away from relatively lucrative commercial insurers, as they are seeing a drop in enrollment and premium revenue - a trend that will likely continue if employment drops further. Charitable donations and investment income are down, and improvement projects involving capital outlays for IT, facilities and equipment have been put on hold. Pharmaceutical and biotech companies have seen their valuations drop, which could further affect their access to raise additional capital. Health organizations that need to find new sources of capital will have to demonstrate that they're improving their core businesses, improving efficiencies and delivering value.

2. The Underinsured Will Surpass the Uninsured as Healthcare's Biggest Headache
The uninsured draw most of the attention, but the number of underinsured is growing even faster - an estimated 25 million adults qualify as underinsured, an increase of 60 percent since 2003. With some but not enough health insurance, the underinsured often can't or won't pay the high deductibles and co-pays for the services they need. In 2009, we could see more bad debts for hospitals, more cost-shifting to commercial plans and more patients delaying or foregoing care.
With growing unemployment, self-pay is becoming a major part of providers' revenue cycle processes. Many hospitals have begun to prequalify patients. Some are using credit card-like swipe machines to verify eligibility and estimate insurance coverage. Others are using credit cards and extending their own lines of credit. Not-for-profit hospitals must tread carefully, as they don't want to further complicate the credit for uninsured and low-income patients. Business operations will likely look to technology and processes from the retail, banking and credit industries to manage self-pay patients and the underinsured.

3. Big Pharma turns to M&A to build the drug pipeline
With revenue from existing pharmaceuticals slowing down and the decrease of approved new drugs in the pipeline, Big Pharma is focusing on acquisitions of smaller biotech firms to reenergize the drug pipeline. Cash- rich pharmaceutical companies may be able to find bargains in the mergers and acquisition market as the financial markets continue to hit turbulence.

4. From Vaccines to Regulation, Prevention Is on the Rise
Prevention will get a boost from drug makers, regulators and nonprofit benefactors, making vaccines one of the few bright spots for pharma sales. In addition, more state and local governments are regulating health-related behaviors, such as banning smoking in public areas and trans-fats in foods. Next up for consideration: Nutritional posting requirements for fast-food restaurants, limits on where cigarettes may be sold and fees for sugary sodas.

5. Genetic Testing Reaching a Price Point for the Masses
The direct-to-consumer market for genetic testing may begin to take off in the year ahead as costs drop, enabling people to purchase a complete map of their DNA to identify markers for specific diseases such as Alzheimer's. A federal ban on discriminating the use of genetic data could accelerate the use of these tests by the public. Research will focus on how genetics can affect pharmaceuticals and enable personalized medicine. The marketing of these tests bypasses traditional clinicians, raising questions about how the information will affect diagnosis and treatment. Regulations regarding genetics at a state and federal level will continue to develop.

6. The Internet and Social Networking Is a Powerful Health Extender
Technology will empower patients in new ways during 2009. The increased information and growing patient-to-patient interaction over social networking platforms and Web sites such as patientslikeme.com and americanwell.com are changing how healthcare is navigated and experienced by consumers, especially as electronic health records become more common.

7. Hospitals Must Perform to Get Paid
Medicare, Medicaid and insurance companies are increasingly basing reimbursement to hospitals on performance, and, despite resistance to it, pay for performance isn't going away. In 2009, healthcare providers will have to get serious about not only improving performance but documenting it. The Centers for Medicare & Medicaid Services (CMS) has proposed adding a new index: the total performance score. It's part of Medicare's move to value-based purchasing. If Congress approves, CMS would replace the current quality reporting system with one in which Medicare withholds between 2 percent and 5 percent of its reimbursements to hospitals. They will need to focus on process improvements to improve safety and avoid unreimbursed medical errors, known as "never events."

8. Payers and Employers to Give Incentives for Wellness Programs
More employers will give incentives to encourage responsible health behaviors and participation in wellness and disease management programs. Wellness programs don't work if employees don't participate, and most of them don't, according to research by PricewaterhouseCoopers' Health Research Institute which found that less than 15 percent of eligible individuals enrolled in wellness programs actually participate. However, they found that workers are two to four times more likely to enroll in wellness programs if they receive gift cards or other incentives. In 2009, health plans will begin to play a more active role in wellness program design, tools and support.

9. ICD-10 Will Require a Major Resource Investment
The conversion to a new International Classification of Disease code sets, known as ICD-10 will be a painful and costly process that health organizations will begin in 2009. The federal government has proposed an accelerated timetable for increasing the number of code sets used for billing and clinical classifications from 17,000 to 150,000. In addition to clinical process changes, the entire healthcare system - from quality of care, to medical records, to incentive salary systems, to reimbursement - will have to be adapted. The good news: When it's done, providers and payers will have far more data on which to document diagnosis, decisions and reimbursement.

A full copy of PricewaterhouseCoopers' Health Research Institute's Top Nine Health Industry Issues in 2009 is available online at http://www.pwc.com/hri/top9.

About PricewaterhouseCoopers' Health Research Institute
PricewaterhouseCoopers' Health Research Institute (www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries.

About PricewaterhouseCoopers' Health Industries Group
PricewaterhouseCoopers' Health Industries serves as a catalyst for change and is the leading advisor to organizations across the health continuum, including payers, providers, health sciences, biotech/medical devices, pharmaceutical and employer practices in the public, private and academic sectors.

PricewaterhouseCoopers' Health Industries' clients include both 40 of the top 100 hospitals in the US and 16 of the 18 best hospitals as ranked by US News & World Report; all 20 of the world's major pharmaceutical companies; all of the top 20 commercial payers in the U.S.; municipal, state and federal government agencies and many of the world's preeminent medical foundations and associations.

PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide and 1,200 professionals in the U.S. dedicated to the health industries. Health industries professionals include a cadre of physicians, nurses, ancillary health providers and some of the nation's leading minds in medicine, science, IT, operations, administration and health policy.

About PricewaterhouseCoopers
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

© 2008 PricewaterhouseCoopers LLP. All rights reserved

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