Becker's Hospital Review

31 Financial Management 0 20 40 60 80 100 dec nov oct sep aug jul jun may apr mar feb jan 0 50 100 150 200 250 dec nov oct sep aug jul jun may apr mar feb jan H ealthcare is in an era of change and that change is only going to become more dramatic in the next five years, accord- ing to Jeffrey Bauer, PhD, a health futurist and medical economist. "In the next five years, healthcare is going to move like it has never moved before," Dr. Bauer said. Dr. Bauer provided his healthcare forecast in Feb- ruary at the 12th Annual Healthcare and Life Sci- ences Private Equity & Finance Conference, host- ed by McGuireWoods and McGladrey in Chicago. Dr. Bauer knows a thing or two about forecast- ing: He has more than 40 years of experience as a healthcare consultant and a professor, and he spent six years as a meteorologist. He applies fore- casting techniques to healthcare by identifying variables, collecting historical data, categorizing outcomes for similar combinations and assigning probabilities to those outcomes. Here are the possibilities and trends Dr. Bauer sees on the healthcare horizon and his suggestions to weather the changes. Economic growth in healthcare will slow and likely come to a halt Dr. Bauer is forecasting healthcare will account for 15 to 19 percent of GDP by the end of the de- cade. He forecasts a 15 percent chance of growth, 45 percent chance of stagnation and a 40 percent chance of decline. He discounts previous estimates from the gov- ernment: Healthcare today accounts for about 17 percent of GDP, when estimates from six years ago put healthcare at 20 percent of GDP by 2015. This is a 25 percent overestimate, Dr. Bauer says, and using the same math, it means healthcare spending would hit 22 percent of GDP by 2022. The latest government estimate about healthcare as a portion of GDP came out in 2014, expecting 19 percent by 2023. "I think it is absolutely crazy. I cannot see it hap- pening, because it is inconsistent with the patterns. In fact, the overall healthcare economy is not a bul- letproof, will-grow-forever kind of sector," he says. Healthcare growth is over, he says, due to con- straints on general economic growth, the in- creasing demands from other sectors, the lack of disposable income for consumer spending and increasing diversification and competition. While these factors may bring down healthcare spending, they are also optimistic for investments. Reducing spending means the healthcare indus- try cannot continue to be wasteful, and it presents opportunities for innovation. As the healthcare delivery system transforms, only 25 percent of organizations will thrive Dr. Bauer's research suggests 30 percent of health- care organizations as we know them today will cease to exist. They will not be in business by the end of the decade, he says, be it by total liquida- tion or acquisition. "[Thirty percent of organizations] aren't sensitive to new opportunities to be more cost effective and to not waste people's money," he says. Stagnation With a Chance of Decline: Healthcare's 5-Year Forecast By Emily Rappleye

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