PwC Global Capabilities Opportunities In A Converging Healthcare Industry

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www.pwc.com/global-healthFaster, better, cheaperCreating opportunities in aconverging healthcare industryBringing a world ofexperience to deliverresults for our clients

Over 70 trillion and risingA combination of growing, ageingpopulations, increasing levels ofchronic illness and poor healthoutcomes is pushing up healthcarecosts at an unsustainable rate. Thefigures make stark reading; overthe next decade OECD and BRIC1nations are expected to spend over 70 trillion cumulative on healthcareinfrastructure and services, withhealth expenditure in developedmarkets rising from 9.9% to 14.4%of GDP2 during the same period.Such huge outlays will put a furtherstrain on governments already strugglingwith crippling national deficits, andseverely hinder the goal of affordablehealthcare for every member of society.Bending the cost curve is a universalchallenge facing health systems in thequest for greater efficiency and higherquality treatment. As they strive tobecome faster, better and cheaper, publicand private providers alike are lookingfor new, innovative approaches to care.1 PwC 2010–2020 spending projections. TheOrganisation for Economic Cooperation(OECD) includes 34 member nations. BRICnations are Brazil, Russia, India and China.In 2011, the grouping expanded to BRICSto include South Africa.2 PwC modeled spending projectionsfor 25 OECD countries. Chile, Estonia,Hungary, Israel, Korea, Slovak Republic,Slovenia and Turkey were excludedbecause of a lack of historical data.2Faster, better, cheaper Creating opportunities in a converging healthcare industry

Common prioritiesAlthough healthcare challengescan vary from region to region,health systems of every typearound the world have the sameobjective: to finance and deliverthe highest possible quality ofcare to the maximum number ofpeople at the lowest possible cost.As a consequence of these commonpriorities, solutions are evolvingthat transcend borders and cultures.With traditional parochial attitudesto healthcare breaking down,there is a move towards far greatercollaboration amongst policymakersand practitioners, as they shareand adapt ideas that have provedsuccessful elsewhere. This trend isalso contributing to a globalisationof healthcare, with providersoffering similar services acrossmultiple geographies.3

Emerging trends in healthcare“The global investment in healthcare is huge, andnew market participants are staking their claimsby introducing new business models that arechanging the competitive landscape.”Dr. David LevyPwC Global Leader, HealthcareThree major forces aredriving change in the market:1 A revolution in care,enabled through thepower of connectivity toachieve greater efficiencyand improved outcomesto satisfy demanding,informed consumers2 Regulatory reform,driven by demographicchanges—includingageing, chronic illness anddiseases of prosperity—and the need to redressthe public versus privatebalance as governmentsexplore new ways tocontrol costs and changepractitioner behaviour3 The march of science,produced by the genomicrevolution that is pushinghealthcare toward aprecision-based industry4Faster, better, cheaper Creating opportunities in a converging healthcare industry

How do these forcesaffect health-relatedbusinesses?A revolution in careConnectivity will reduce dependenceon large, expensive facilities andgive individuals greater control overtheir health and well-being. Thispatient-centric health system opensthe door to new market participantsfrom industries such as mass retail,telecommunications, health/wellness/spa and travel and tourism.Regulatory reformNew pay and reimbursement modelswill focus on outcomes, quality andcost savings. And public and privatesector partnerships will expand innumber and scope, creating a multitrillion global market for the privatesector and helping governmentsprovide sustainable healthcare fortheir citizens.The march of scienceProgress in genetic mapping andadvancements in both science andtechnology will make care morepersonal, predictive and preventive.As health solutions become highlycustomised, individuals will besegmented into ever-smaller groups,requiring tailored treatment regimes.“A revolution is transforming traditionalapproaches to care. Ubiquitous connectivityis creating new and flexible models of mobilehealth that can be delivered virtually anywhere,at any time, to most anyone in the world. Mobileconnectivity is also empowering and encouragingindividuals to become more actively engaged inmanaging their own health through the use ofapplications, sensors and other devices.”Christopher Wasden, EdEGlobal Healthcare Innovation Leader5

Why PwC?PwC is one of the largest healthcareprofessional services firms and one ofonly four global consulting networkswith leadership positions in each ofthe key sectors of Pharmaceutical andLife Sciences, Payer, Provider, andGovernment Healthcare consulting.3Our global network of more than5,000 health professionals includesleading minds in medicine, bioscience,information technology, clinicaloperations, business administrationand health policy. PwC’s thoughtleadership and extensive researchgives our engagement teamsaccess to competitive intelligence,perspectives on leading practices, andanalysis of trends affecting healthrelated industries.3 Kennedy; “Healthcare ConsultingMarketplace 2010-2013: Key Trends,Profiles and Forecasts;” BNASubsidiaries, LLC. Reproducedunder license.6“PwC a specialist in negotiating convergence ofconsumer and life sciences industry trends thatbrings fields of healthcare and non-healthcareindustry knowledge and activity into greatercontact, and integration.”Kennedy; “Healthcare Consulting Marketplace 2010–2013: Key Trends, Profilesand Forecasts;” BNA Subsidiaries, LLC. Reproduced under licensePwC’s global reach and resourceshelp governments, businessesand healthcare industry playersaccomplish their missions in today’sdynamic, competitive environment.We provide health organisationswith professional guidance notjust on healthcare issues in theirlocal markets but also on operatingin global markets, developing abroad mix of service lines thatmay include foods, manufacturedgoods, mobile communicationdevices, and information systems.We have a proven track record inworking with clients to improveoperational performance in manyfunctional areas.PwC’s global network of firmsprovides comprehensive advisoryFaster, better, cheaper Creating opportunities in a converging industryservices: management consulting,business assurance, tax, finance,advisory services, human resourcessolutions, and business processoutsourcing services. PwC’s breadthof experience in many industries andfunctional areas is especially valuableto clients as healthcare becomesincreasingly interconnected withother industries.Our clients benefit from ourthought leadership initiatives. Weshare lessons learned and relevantleading practices that emerge fromengagements with other industriessuch as consumer products,telecommunications, and manufacturing. PwC brings a world ofmultiple-industry experience toits healthcare engagements.

PwC’s uniquequalifications in thehealthcare industry PwC’s experience and expertise goesbeyond geographic and functionalboundaries. We understand the entirehealthcare system and the dynamicsthat drive it. With a global networkof firms that advise governments andprivate enterprises on every aspectof business performance, we applyintellectual capital developed inengagements around the world andacross industries to our clients’ mostcomplex problems.TrustedadvisorsWith engagements in every sector of the healthcareindustry, PwC has earned the trust and confidence ofgovernments and healthcare organisations worldwide.We have helped governments with major health reformsand public health policy initiatives. We have helpedprivate enterprise implement strategies and solutions toachieve their performance objectives.Industrydepth andspecialisationPwC’s client teams consist of a broad range of experts,including medical practitioners, nurses, clinicians,biomedical and pharmaceutical specialists, health policyexperts and others with deep industry knowledge. Webring to healthcare engagements a depth of understanding and practical experience that can come onlyfrom people who have dedicated their professional livesto this industry.ThoughtleadershipThe Health Research Institute (HRI), PwC’s dedicatedhealth research unit, conducts original, fact-basedresearch and publishes analyses and viewpoints ontopics of vital interest to a healthcare industry that isincreasingly going global. Thought leadership also comesfrom PwC’s experiences with clients in diverse industriesthroughout the world; through our international CEOroundtable series, Bending the Cost Curve, collectinglessons and viewpoints from the top minds in theindustry; and from our network of PwC firms, whoseexperts collaborate across borders to address nationaland regional issues in healthcare.PwC is acknowledged as a global leader in acquiringknowledge and applying it to clients’ challenges. A panelof Fortune 500 senior executives recently ranked PwC asone of the Global Most Admired Knowledge Enterprises,above all other professional services organisations.4PwC has won this prestigious acknowledgement ninetimes, cited for “transforming enterprise knowledge intoshareholder value.”54 2010 Global Most Admired KnowledgeEnterprises (MAKE) Report.5 Ibid.7

“PwC has invested heavily in intellectualcapital in the area of personalised medicine.PwC sees opportunities to wed biotechnology,predictive analytics, preventive care, and patientparticipation with innovative business modelsthat transcend healthcare sub-industries ”Kennedy; “Healthcare Consulting Marketplace 2010–2013: Key Trends, Profilesand Forecasts;” BNA Subsidiaries, LLC. Reproduced under license deliver businessinsights andopportunities.PwC can help health industryorganisations meet the challengesof tomorrow’s world. Competitiveadvantage will accrue to thoseorganisations best able to operateinnovatively in a global marketplace. for payers for providersPublic and private payers need toprepare themselves to operate in acompetitive market. Develop strategies to decelerate rising medical costs.Maximise return on IT investment.Simplify administrative practices.Transition from one coding system toanother, such as from ICD-9 to ICD-10.Introduce innovative new productsthat grow market share. Develop endto-end management of each member’soverall health. Work collaborativelywith employers, members andproviders for mutual benefit.Providers need to adapt their servicesand business processes to keep bothpatients and their bottom lineshealthy. PwC can help providers: Maximise benefits and return oninvestment from adopting healthinformation technology Enhance revenue and acceleratecash flow Capture a bigger share of acompetitive market in whichboundaries between providersand retail businesses arebecoming blurred Minimise risk and reduce thecost of regulatory compliance Leverage scientific advancesto offer personalised, preventive medicine Explore mergers and acquisitions to expand service offerings,build scale and improve financial performance8Faster, better, cheaper Creating opportunities in a converging healthcare industry

“New rules, roles and responsibilities—driven byhealth reform and market forces—are a catalystfor greater collaboration and convergencein healthcare. The silos between traditionalhealth sectors are breaking down, and newmarket participants and business models areemerging that put patients at the centre of careand shift the focus from treatment to wellnessand prevention.”Dr. Ronald LingAsia Healthcare Leader, PwC for new entrants for strategic investorsThe healthcare field is no longerlimited to such traditional providersas hospitals and physicians.Increasingly, makers of specialtyfoods and nutritional supplements,manufacturers of fitness apparel,telecommunications and technologycompanies, retailers of consumergoods, wellness clinics, fitness centresand health spas, financial servicescompanies, and many more areinvolved in providing products andservices—sometimes in competitionwith traditional providers, other timesin partnership.Neither the public nor theprivate sector alone can affordthe entire financial burden ofproviding healthcare. Increasingly,healthcare systems are turning topublic-private partnerships (PPPs).Traditionally, PPPs financed thebuilding of hospitals, clinics andother infrastructure. PwC estimatesthat OECD and BRIC nations willspend 3.6 trillion on healthcareinfrastructure between 2010 and2020. Though that’s a sizableopportunity, health spendingbeyond infrastructure will totalmore than 68.1 trillion, or 95%of health costs.6Both traditional players and newmarket entrants need to understandhealthcare’s complex market forces,anticipate industry trends, and capitalise on consumer demands andregulatory reforms that are enablingrapid change.PPPs are emerging as a new andcompelling model for funding notjust infrastructure but also businessoperations and care delivery.In PPPs, public and private sectorsenter into long-term contracts toshare accountability for managinglocally sustainable health systems.They share the benefits too; profitsfor investors, and better quality andvalue for the health system. In fact,all healthcare stakeholders win.6 PwC, Build and Beyond:The (r)evolution of healthcarePPPs, 2010.9

PPPs create: A more sustainable means forgovernment to provide for thehealth of its citizens An enormous market with areliable, multi-year revenuestream for private investors Better outcomes, value andaccessibility for patients,especially historicallyunderserved populations Reduced financial burdenon taxpayersPwC expects to see significant andaccelerated growth in the number andscope of PPPs over the next decade.Despite their promise, implementingpublic-private partnerships can bechallenging. Government healthsystems and private industry oftenhave conflicting priorities, and localmarkets differ. PwC plays a leadershiprole in the growth of PPPs, the resultof many years of experience designingand negotiating some of the world’slargest and most complex publicprivate partnerships.“Across the globe, public-private partnerships(PPPs) are being crafted to make governmentand private industry more accountable for maintaining the health of each nation’s citizens. PwCexpects that the number of PPPs in healthcarenot only will increase significantly over the nextseveral years, but that the PPP model is evolving,moving beyond being a means to finance healthinfrastructure to a means of delivering healthcare services in the long term.”Ian WoottonGlobal PPP Healthcare Leader, PwC for private equityAs private equity (PE) investorsscreen the global economy forgrowth, healthcare emerges as arare bright spot.Economic resilience, organicgrowth, and increasing infrastructureinvestment make healthcare amongthe most attractive sectors in asluggish global economy. Evolvingbusiness models present a range ofhigher risk/higher return investmentopportunities for PE investors, just aswell-capitalised funds are seeking toput new capital to work.At PwC, we expect deal flow acrossa variety of healthcare sub sectors:Convergence among payers,providers, and the healthcare10Faster, better, cheaper Creating opportunities in a converging healthcare industrysupply chain is likely to increase asnew integrated models are tested inthe United States. Strategic buyersseeking market share expansion,product line extensions, productadjacencies and innovation willcontinue to drive mergers &acquisitions (M&A) activity in thepharmaceutical and medtech sectors.Innovative healthcare deliverymodels providing care faster, betterand cheaper are likely to attract newcapital. Higher growth expectationsin emerging markets and an increasein geographic-focused PE fundssupport an increasing trend towardscross-border deal activity. Privateequity will play an important role inhealthcare M&A activity across allhealthcare sectors.

Faster, better, cheaperhealthcareA combination of demographic, economic, political, andtechnological factors is pushing the healthcare cost curveever upwards. The challenge facing healthcare playersis to bend this curve without compromising access tocare or quality, which calls for innovative new productsand models. Regardless of their industry or geography,stakeholders should develop a truly global perspective toidentify emerging leading practices, and have the speed andflexibility to embrace new ways of working.11

PwC solving complex challenges for our clientsPwC can help public and private organisations anticipate and capitalise on market drivers and consumer trends. Here’s how:Issue or challengeClient needHow PwC can helpImproving financial performance:Cures for an ailing bottom lineProviders struggle to lower costs whileimproving quality, without making undesirabletrade-offs. They need to:PwC helps clients operate so that cost andquality are not mutually exclusive goals. Wework with each client to develop a sustainablecost reduction plan that incorporates: Add value to patient care, improvingproductivity and customer satisfaction Financial position analysis Develop a turnaround plan when expenditureincreases exceed revenue growth Cost improvement program Drive out existing inefficiencies, improvefinancial and operational performance Project management office Financial turnaround plan Supply chain strategy Business process outsourcingHealth system reformChanging demographics, increasing demandand consumer expectations drive healthcarereform as governments strive to: Improve accessPwC helps all healthcare stakeholders worktogether to succeed in a complex and rapidlyevolving regulatory environment. We helpclients with: Equalise quality Human resources strategy Create greater accountability for quality Health policy Investigate new care models Facilities planning Offer new incentives to improve value Supply chain management Health information technology International tax advisory Performance improvement Governance modelsRealising maximum benefit fromHealth Information Technology (HIT)Investment in HIT competes with existing ITneeds. Although the long-term benefits of HITare obvious, the near-term return on investmentis less so.PwC helps clients invest wisely in HIT, a“must-have” capability. We can help with: IT/business strategy alignment andapproaches Enterprise architecture Privacy, security, and reporting Business intelligence and clinical informatics Integration with Internet, social networking,and other portals Strategic planning and operationalimprovement Intellectual property12Faster, better, cheaper Creating opportunities in a converging healthcare industry

Issue or challengeClient needHow PwC can helpTapping into the potential ofpersonalised medicinePersonalised medicine offers the potential forsafer, better, more cost-effective healthcare.Payers and providers must become adept atcapturing, sharing, and analysing patient andscientific data.PwC works with scientific, academic, businessand government leaders to define profitablemodels for personalised medicine. Wehelp clients: Conceive, plan and execute businessframeworks Build and optimise strong teams with crossfunctional skillsUse of public-private partnerships(PPPs) to finance health infrastructureand deliveryInnovative financial arrangements between thepublic sector and private investors can benefitboth service providers and consumers. Butconflicting objectives and risks can make itdifficult to structure deals.PwC is a leading advisor on PPPs. We can: Reconcile investors’ need for profit withgovernments’ requirements for political andfinancial transparency Scope, develop and structure partnershipdeals Negotiate through to financial close Assist with ongoing partnershipmanagementTransformational shift towards wellnessand innovationA sustainable healthcare system requiresfundamental changes to spending priorities.Integrating wellness and health maintenanceinitiatives into an overall health managementprogram costs societies less to keep theircitizens healthier.We can help clients: Devise and implement benefit programsthat educate and motivate members towardhealthier behavior Collect and analyse population data todesign an effective wellness strategy Assess the effectiveness of existing wellnessprograms Integrate profitable wellness initiatives into acontinuum of careInvesting in growthStrategic and financial investors increasinglyseek growth across the health industries in themidst of a sluggish global economy. PwC provides a full spectrum of integrateddeal services designed to help corporate,private equity funds and government clientsto effectively and efficiently source, execute,and integrate transactions.13

ContactsTo have a deeper conversation on this subject,please contact:David Levy, MDGlobal Healthcare Leader 1 646 471 1070david.l.levy@us.pwc.comRonald Ling, MBBSAsia Healthcare Leader 65 6236 4021ronald.jw.ling@sg.pwc.comIgnacio Riesgo, MDEurope, Middle East and Africa LeaderHealthcare 34 915 685 747ignacio.riesgo@es.pwc.comIan WoottonGlobal PPP Healthcare Leader 44 (0) 20 780 45735ian.wootton@uk.pwc.com14Faster, better, cheaper Creating opportunities in a converging healthcare industry

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Subsidiaries, LLC. Reproduced under license. "PwC a specialist in negotiating convergence of consumer and life sciences industry trends that brings fields of healthcare and non-healthcare industry knowledge and activity into greater contact, and integration." Kennedy; "Healthcare Consulting Marketplace 2010-2013: Key Trends, Profiles