PricewaterhouseCoopers' Announces View of Healthcare Issues for the Year Ahead

Findings Include:

1. Medicare and the Prescription Drug Benefit

Medicare will account for an estimated 28 percent of prescription drug spending in 2006, compared to just 2 percent in 2005, as a result of the Medicare Prescription Drug Benefit, which went into effect January 1, 2006. The benefit introduces a powerful single purchaser of drugs in the U.S., which may eventually put negative pricing pressure on pharmaceutical manufacturers. It could ultimately affect the profitability of health plans, pharmacy benefit managers and drug manufacturers. Look for premiums to go up if the program does not attract a sufficient number of subscribers, and for Congress to rein in spending if Medicare costs continue to increase.

2. Care and Coverage of the Uninsured

As more and more Americans drop health insurance coverage, hospitals are seeing a corresponding increase in bad debt levels. While a few payers have begun to collaborate on pilot programs to develop low-cost health insurance coverage, providers will continue to face the issue of how to handle uncompensated care and its impact on their bottom line. In 2006, hospitals will need to develop an approach to charity and uncompensated care to improve their operational and financial performance and control regulatory and reputational risk.

3. Major Changes in Health Insurance

The simple days of $10 co-pays will become a distant memory for hundreds of thousands of Americans with high-deductible health plans and Health Savings Accounts. Research by PricewaterhouseCoopers shows that more than three-fourths of large employers believe they can cut healthcare costs by asking their employees to pay a greater share of those costs. In 2006, health plans will develop new product lines and lines of business to meet the changing needs of consumers. Pharmaceutical and life sciences companies may need to examine their product portfolios as consumers become increasingly price-sensitive and comparison shop for generic drugs and other alternatives.

4. Patient Safety

Calls for improved patient safety will intensify in 2006, and the healthcare industry will turn to technology to help reduce medical errors and improve tracking and reporting of safety and quality standards. The Patient Safety and Quality Improvement Act of 2005 removed some of the fear of liability that kept medical errors from being reported and addressed, and laid the groundwork for a national database for non-identifiable patient safety data. Annual investments in healthcare IT are expected to nearly double to approximately 5 percent of revenue from an average of 2 to 3 percent now.

5. Wellness and Obesity

Consumers who pay for more of the direct cost of their healthcare have an increased incentive to manage their health and lifestyle. Poor diet and physical inactivity rose by 33 percent over the past decade and may soon overtake tobacco as the leading preventable causes of death in the United States. In 2006, expect a significant increase in voluntary and/or mandatory health promotion and wellness initiatives. In addition, health industries are likely to see a growing market for drugs, treatments and services oriented toward wellness and prevention.

6. Pay for Performance

Accountability takes on more importance than ever as reimbursement and financial incentives are tied to performance. This will place new demands on health industries executives to develop and agree on quality measures so that payers can evaluate and compare providers. To win financial bonuses for quality, hospitals and physicians will need to work together to change behavior and measure their clinical performance against these standards. Pharmaceutical and life sciences companies will adopt greater vigilance in product safety from research through market adoption. All health organizations will need to rely more heavily on information technology to capture, store, retrieve and report quality information.

7. Report Card Fever

Reporting pressure for all sectors of the health industry is coming from the government seeking to justify hospitals' tax-exempt status and from consumers who are spending more out of their own pockets for healthcare. There will be increasing demand for more transparent information about pricing to make better decisions. In 2006, health organizations will need to focus on developing proactive, coordinated reporting of their prices, error rates and safety standards.

8. Technology Backbone

Information technology is crucial to resolving many of the issues plaguing the healthcare industry. Significant progress will be made in 2006 by government, industry coalitions and banks to build a technology infrastructure to improve claims processing, create electronic medical records, reduce medical errors and track performance. Healthcare organizations have little latitude for error and will to need to develop a system for making wise decisions about technology investments to ensure maximum acceptance, flexibility and return on investment.

9. Labor Shortages

PricewaterhouseCoopers' research found that healthcare executives rank staff shortages and training as the top problem facing healthcare delivery. Healthcare organizations will need to address this problem, and many will pursue the increased use of automation for administrative functions, outsourcing, subsidized training, aggressive recruitment and retention, as well as redefining staff functions.

10. Diminishing Drug Pipeline

With the cost of drug development in excess of $800 million, pharmaceutical manufacturers are under pressure from stakeholders to produce even as their margins erode. The imminent expiration of key patents could further decrease revenue by up to 60 percent. This is exacerbated by growing competition from generic drugs, production of inexpensive counterfeit drugs from markets such as China and India and the emergence of China as a low-cost manufacturing base. In 2006, the pharmaceutical industry will be focused on boosting R&D productivity and cutting costs; many drug companies will consider forming strategic alliances and joint ventures with biotech firms as a source for new products.

About the PricewaterhouseCoopers' Health Research Institute

PricewaterhouseCoopers' Health Research Institute provides new intelligence, perspective and analysis on trends affecting all health-related industries, including healthcare providers, pharmaceuticals, health and life sciences and payers. The Institute is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.


Acupuncture and Reflexology,
Echinacea and Golden Seal,
Gave him faith that this curse
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If I was forced to reinvent the wheel.

Sent him to a biofeedbacka,
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A chiropractor would push and shove,
Some pressure points below, above,
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Homeopathy failed and so did yoga,
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He even managed to gain ten pounds
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Finally found a cure without a pill,
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Cartoons and Poems following each article are created and copyrighted by Dr. Ackerman and cannot be copied or reproduced without his permission. Copyright 2005 by Marvin Ackerman, M.D.

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