CIT Healthcare CIT Healthcare Outlook Industry Outlook

Transcription

1

2 CIT Healthcare CIT Healthcare Outlook Industry Outlook KEY HEADLINES FROM THE RESEARCH z Build Favorable on Favorable Outlook for Outlook FY2016 Builds on from the Favorable the 2015 Addendum Survey from FY2015 z Mergers M&A is on and the Acquisitions Rise in the Healthcare (M&A) is on Industry, the Rise for in Better the Healthcare and WorseIndustry, for Better and Worse z Anticipated Increase in Investment and z Anticipated Financing for Increase Acquisitions in Investment and Financing for Acquisitions z The Industry Will Rely on Technology z The to Move Industry Forward Will Rely but on Must Technology Confront to Challenges Move Forward but Must Confront Challenges z Executives Demonstrate Modest z Support Executives for Demonstrate EHR and a Move Modest Support to Even Support Wider for EHR Communication - for and EHR a Move and to a Even Move Wider to Even Wider Communication Communication z Costs Continue to Overwhelm z Costs Consumers Continue and to Undermine Overwhelm Care Consumers and Undermine Care z Many Executives Feel Responsible and z Many Take Action Executives to Reduce Feel Responsible Costs and Take Action to Reduce Costs z Some Government Involvement z Some Increasingly Government Welcomed Involvement by Executives Increasingly Welcomed by Executives z Most are Right In Line with Industry z Most Standards are Right but In Disagreement Line with Industry on How Standards to Define Success but Disagreement on How to Define Success z Expectation for Third Party z Expectation Involvement for Is On Third the Party Rise Involvement Is On the Rise Healthcare executives maintain a relatively positive outlook for the upcoming year. The majority remain optimistic, expecting similar growth to last year in revenue, prices, volume and capital spending. Many other non-financial trends within the industry are also seen as having a beneficial impact on consumers and the quality of care being delivered. For one, trends around M&A are increasing from last year, with a general optimism about the impact, especially on the industry side, for efficiency and revenue. About three-quarters of executives also believe that increased M&A may result in a greater focus on care (over business administration). Second, most executives anticipate a continued and increasing reliance on technology that should improve quality and reduce costs. But with higher stakes, the challenge will be how to seamlessly incorporate technology industry-wide without compromising security. Despite the optimistic tone, however, healthcare costs continue to be an untenable uphill battle for consumers, with no improvement over last year. Executives perceive that these overwhelming costs are damaging care and that many consumers may be sacrificing care to save money. Many executives claim they are working to figure out ways to alleviate this problem. In addition, executives are more open to government involvement with regulating the industry, but there is very little consensus on how to measure success and utilize outcomes. In order to understand these current trends and challenges challenges for the healthcare for the industry, healthcare Harris industry, Poll on Harris behalf Poll of on CIT, a behalf leader in of financing CIT, a leader and in advisory financing services and advisory to the healthcare services sector, the healthcare conducted sector, research conducted online from research February online 18, 2016 from to February 29, 18, 2016 to among February 164 U.S. 29, healthcare 2016 among executives. 164 U.S. middle market healthcare executives CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 2

3 Build Favorable on Favorable Outlook for Outlook FY2016 Builds on from the Favorable the 2015 Addendum Survey from FY2015 When reflecting on fiscal year 2016, most healthcare executives are optimistic about various key gauges of business strength including: revenue, price growth and volume growth. Executives demonstrate the most confidence in revenue. About 7 in 10 envision at least some increase, and about 4 in 10 feel the increase will be sizeable (exceeding 5%). The expectation for volume growth is similar to revenue, though not quite as strong. And while, price growth receives a slightly less ringing endorsement, a slight majority still see it expanding in 2016; for the most part in the range of 1-10%. With a promising financial outlook, it is not surprising that about 1 in 2 executives also believe that capital spending will increase in the coming year. Moreover, the need for financing is expected to hold steady or increase. The key but not widespread priorities for financing and investment include: IT, new hires, and acquisitions. In fact, executives are significantly more likely to mention seeking financing for and investing in acquisitions in 2016 compared to Expectations for FY2016 (relative to FY2015) Total Revenue Volume Growth Price Growth SLIGHTLY OVER HALF (55%)... believe their company is likely to seek financing in the next year WHICH IS SIGNIFICANTLY MORE THAN 2015 (44%) Capital Spending Any Increase 71% 67% 54% 49% Increase Exceeding 5% 41% 31% 25% 18% Any Decrease 13% 8% 9% 20% OVER THE NEXT TWELVE MONTHS 46% think the majority of their growth will come from opening of new practices FOLLOWED BY ACQUISITIONS (29%) FORECASTS & PROJECTED EARNINGS Those indicating an increase in revenue for FY2016 mention forecasts and projected earnings as well as a larger patient volume as reasons. The projected earnings for that year seem to suggest the increase based on a quality sales year. Our projected budget for the year reflects financial stability and profit margins of 3-5% over the previous year. We are gaining more patients as well as expanding. Of those who think capital spending or financing will increase, the top plans are for: Capital Spending 43% 40% 36% 28% 26% IT New Goods/ Services New Hires Renovation Acquisition Financing 28% 20% 29% 16% 27% 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 3

4 Mergers M&A is on and the Acquisitions Rise in the Healthcare (M&A) is on Industry, the Rise in for the Better Healthcare and Worse Industry, for Better and Worse Just as observed last year, in the next year, a slight majority of healthcare executives imagine that M&A activity will increase across the industry as a whole; the remainder believes it will remain stable. More so than last year, M&A seems to be driven by purchase price multiples and valuation over strategy. When preparing for M&A, most executives believe companies are typically accurately valued; but when there are discrepancies, it tends to be slightly more on the side of companies being valued too high, not too low. Executives identify both pros and cons to this M&A trend, but generally cite the benefits on the company side (having to do with greater efficiencies, higher revenues, and loss of competition) and the detriments on the consumer side. That said, about 3 in 4 healthcare executives do believe that M&A allow companies to focus more on the provision of care rather than business management. Agreement Statements Regarding Mergers & Acquisitions OVER THE NEXT 12 MONTHS ABOUT 1 IN 2 53% industry expect M&A activity in the healthcare to increase similar to that observed in 2015 (56%) z Almost everyone else (41%) thinks M & A activity will stay the same Different from 2015 where strategy seemed to be the driving force (61%): HEALTHCARE EXECUTIVES ARE SPLIT on whether M&A activity in the healthcare industry is driven more by 11% 18% 22% M&A help to keep revenue up for companies in the healthcare industry 89% 17% M&A allow for efficiences to be realized 83% 82% 24% 76% M&A is removing compeition 78% 17% 83% M&A allow healthcare companies to focus on care rather than running a business STRATEGY PURCHASE PRICE MULTIPLES/VARIATION 46% 54% When companies in the healthcare industry prepare for M&A of Healthcare executives think companies are valued just right 59% 26% 74% 33% 67% Somewhat/Strongly Disagree ON THE NEGATIVE SIDE Somewhat/Strongly Agree Most healthcare executives believe that M&A typically benefit a company, but not consumers 2016: 74% 2015: 65% 25% For those who don t think they are valued just right, they are more likely to say... COMPANIES ARE VALUED TOO HIGH 16% COMPANIES ARE VALUED TOO LOW 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 4

5 Anticipated Increase in Investment and Financing Plans for Acquisitions Mergers and acquisitions continue to play a critical role in the growth of the healthcare industry. As mentioned previously, when considering investment and financing plans, significantly more executives are considering acquisitions than even a year ago. And behind the opening of new practices, acquisitions are pointed to as a source of growth in the coming year. Nearly 2 in 3 healthcare executives have personally been part of a merger or acquisition in the past year, much more commonly as the purchaser than the purchasee. Among this group, most describe the experience as relatively favorable and don t collectively cite any one prevailing challenge (though when pressed, finances tops the list, followed by operations). 63% HAVE BEEN PART OF A MERGER OR ACQUISITION IN THE PAST 12 MONTHS much more on the purchasing side (50%) than being purchased (13%) The percentage of executives who were on the purchasing side has grown since : 50% 2015: 38% Of those who have been part of a merger or acquisition: z The vast majority (93%) have found the experience to be at least somewhat positive. 40% say very positive. z Nearly 6 in 10 (57%) would consider the nature of their acquisition activity mostly a large transformative acquisition rather than a small tuck-in acquisition (40%). When prompted, executives mention finance (49%), operations (44%), and human resources (34%) as the greatest challenges of M&A integration. EXECUTIVES ARE SIGNIFICANTLY MORE LIKELY... to consider investment and financing plans for acquisitions in 2016 z Among those anticipating an increase in capital spending for 2016, nearly one quarter (26%) mention investment plans for acquisitions compared to 16% in z In addition, those seeking financing within the next year mention establishing financing plans for acquisitions (2016: 27%, 2015: 14%) THERE IS NOT ONE CLEAR STRATEGY FOR MERGERS & ACQUISITIONS Vertical Merger a customer and company or a supplier and company 2016: 33% 2015: 29% Market Extension Merger two companies that sell the same products in different markets 2016: 32% 2015: 22% Horizontal Merger two companies that are in direct competition and share the same product lines and markets 2016: 17% 2015: 24% Product Extension Merger two companies selling different but related products in the same market 2016: 13% 2015: 16% 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 5

6 Executives Demonstrate Support Modest Support for EHR for EHR - and and a a Move to to Even Wider Communication Seven in 10 executives say their business has already switched to an electronic health record (EHR) system, which (more often than not) goes beyond their own system and communicates with other providers. In general, the transition to an EHR system has been smooth and on track financially, and any obstacles with implementation have been relatively uncommon, primarily involving personnel (like convenience, training or ease). Communicating outside of their own network appears to be a key goal for the future. Most executives with currently limited communication say their business would like to expand the level of communication and is considering putting an even greater IT investment behind this goal. For those with experience using an EHR system that communicates more widely, the big concern (raised by most executives) is the security of the information being exchanged. Nearly one half (48%) of US physicians can share medical records electronically with clinicians outside of their medical practice. However, only about one quarter (27%) are satisfied with their EHR system Strategic Health Perspectives Study conducted by Nielsen; June IN 10 SAY THEIR BUSINESS HAS AN ELECTRONIC HEALTH RECORD (EHR) SYSTEM Of those, most say their EHR system can be used to send communications to other providers regardless of their network/system (53%) AMONG THOSE WHO HAVE AN Electronic Health Record System AMONG THOSE WHO HAVE Limited Communication Between Systems 56% HAVE INVESTED about what they anticipated in their EHR system compared to their original budget/expectations. z Of those who didn t, they typically invested more (34%) not less (7%). z Among those who have an EHR system that communicates with others, over 2 in 3 (67%) are at least somewhat concerned about the security of the information being exchanged. 70% 70% SAY 7 IN 10 are considering other IT investments so that their EHR system can communicate with providers within and outside their network/system 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 7

7 Costs Continue to Overwhelm Consumers and Undermine Care The majority of executives continue to believe that current healthcare costs are too high, including within their own sector. Executives overwhelmingly feel that consumers will be unable to endure any higher costs than what they face right now, and that these elevated costs have already forced consumers to make more selective or creative choices for their care. More than 8 in 10 believe that consumers occasionally avoid follow-up visits, even when potentially necessary, to dodge any extra costs. On the industry side, most executives see overpowering costs as causing a deterioration in the quality of care that consumers receive. And, most do not believe that the industry can continue to spend more money even at a lower rate. The vast majority of executives believe that high healthcare costs have impacted consumers in the following ways: Agreement Statements Regarding Healthcare Costs NEARLY 2 IN 3 (63%) healthcare executives think healthcare costs are too high similar to 2015 (69%) z In their healthcare sector specifically, most (70%) continue to think that healthcare costs are a problem. 20% characterize costs as a very big problem. z For those who were insured prior to the ACA, more than three-quarters (77%) say out of-pocket costs have become a problem. 19% say they have become a very big problem. Consumers are looking to find new ways to manage healthcare spending and minimize out-of-pocket costs 5% 95% Consumers can't endure any higher costs to healthcare than they are facing now IN TERMS OF THE INDUSTRY, MOST BELIEVE THAT 9% 91% Consumers are selective when deciding which medical care to receive due to additional costs 13% 87% 87% Recent increases in healthcare expenditures are not sustatinable Patients are not following-up with additional appointments to avoid added expenses 19% 81% Somewhat/Strongly Disagree Somewhat/Strongly Agree 86% The pressure of healthcare costs is impacting quality of care Three in four (73%) consumers mention their overall medical care is a financial burden and 58% are concerned about paying a bill that is not covered by insurance. Strategic Health Perspectives Study conducted by Nielsen; June % is The lower growth rate of healthcare spending not sustainable 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 8

8 Many Executives Feel Responsible and Take Action to Reduce Costs Most healthcare executives feel that healthcare providers, insurance companies and pharmaceutical companies all share some responsibility for bringing healthcare costs down. Most have personally witnessed their own company taking steps to minimize the rising costs within the macrolevel system and for their employees. About 1 in 2 have explored negotiating with insurance companies, updating their technology, and eliminating some procedures. And about 4 in 10 have offered (or seen other companies offer): prescription plans, wellness programs, and potentially different carriers or vendors. A similar proportion of executives have observed other companies (more so than at their own company) altering the level of competition by reducing their number of plans or moving to the marketplace. Solutions Adopted to Minimize Healthcare Costs for Employees At least 1 in 2 executives believe the following groups are primarily responsible for bringing down healthcare costs: INSURANCE COMPANIES 56% PHARMACEUTICAL COMPANIES 50% HEALTHCARE PROVIDERS 52% Offering prescription plans that include generic/low cost pharmaceuticals Adding wellness programs for employees Exploring different carriers/vendors Increasing co-pays and deductibles Offering discounts Encouraging employees to take more responsibility for their healthcare 43% 43% 40% 43% 36% 35% 29% 29% 33% 40% 38% 45% 49% US consumers indicate the following have a lot or some of the blame for the high costs of healthcare. Insurance companies (88%) Pharmaceutical companies (86%) Hospitals (77%) The way doctors and hospitals are paid (76%) Strategic Health Perspectives Study conducted by Nielsen; June 2015 Reducing number of plans offered Moving to marketplace instead of providing private insurance Self-insuring 21% 26% 25% 30% 39% 41% Providing telemedicine options for employees 18% 28% Their company Other companies Significant difference ABOUT 1 IN 2 HAVE EXPLORED the following solutions to take costs out of the healthcare system 52% negotiating with insurance companies 46% updating technology 46% eliminating unnecessary procedures 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 9

9 Some Government Involvement Increasingly Welcomed by Executives For the most part, executives believe that the government should maintain at least some role and authority over the healthcare industry, with this desire increasing over the past year. And, the majority believes that current regulations have had a positive impact on their company s growth, revenue and costs. Looking ahead to the next year, most executives can envision any additional regulations and changes being quite impactful, though there is no agreement on what exactly will have the greatest effect over their business. Healthcare executives continue to be relatively supportive of the Affordable Care Act. Approximately 1 in 5 believe the ACA should remain in place without any changes, and another 1 in 2 like the basic framework, but just want to modify some of the details. How Much Authority Should Government Have Over the Healthcare Industry % 5% 8% 7% 17% 11% 17% 11% 10% 12% 56% 22% WHAT WILL HAVE THE GREATEST IMPACT ON BUSINESS... 31% 15% Additional regulations and guidelines added to current healthcare reform 15% Potential change in healthcare reform impacting consumer out-of-pocket costs 15% Repeal of the ACA Current healthcare reform staying in place Potential shifts in technology and new regulations 12% impacting its usage % 9% 6% 7% 5% 7% 13% 16% 18% 19% 6% 3% ACA 53% support modifications to the ACA but want to keep the basic framework 21% are significantly more likely to mention the ACA should remain in place vs. last year's 14% 1 (None) (A lot) Significant difference z Among those who want the ACA to remain in place, 8 in 10 (80%) say they have always been in favor of the ACA, are happy it is in place and feel it should remain so z Most think regulations have had a positive impact on their company s growth (65%); revenue (64%); and costs (57%), similar to last year (59%, 59%, and 47% respectively). } 11% weren t always in favor but wouldn t change it given that it is working 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 10

10 Most are Right In Line with Industry Standards on Outcomes but Disagreement on How to Define Success Approximately 3 in 4 healthcare executives feel that their sector is on track with the rest of the industry on how to best measure outcomes. And there is near unanimity that technology, data and quality of care will all play a role in measurement. But that is where the consensus across executives ends. They diverge on the best way to measure success now and in the near-term future. Between 1 in 5 and 1 in 3 executives place a priority today (in descending order) on satisfaction, profits, customer retention and clinical outcomes. And there is no uniformity (either philosophically or in actuality) on whether to align healthcare payments to outcomes, though the inclination is somewhat more positive than negative. 72% believe their sector is ON TRACK compared to the total healthcare industry in terms of determining how best to measure outcomes This is a significant decrease from 2015 in which 83% indicated their sector was on track. Of those that are not on track, they are slightly more likely to be behind (17%) than ahead (11%). Ways of Measuring Success Today and in the Future 29% 21% 16% 31% 3% Now 31% 21% 17% 27% 3% In the next 3 years 33% 20% P r o fi t Customer retention Clinical outcomes including value Satisfaction Other Agreement Statements Regarding Patient Outcomes & Role of Technology in Measuring Outcomes 17% 28% 2% In more than 5 years ON AVERAGE, EXECUTIVES SAY 28% of their organization s revenue is tied to risk (e.g., clinical outcomes) There is increasingly mixed sentiment about the current desire to align healthcare payment to specific outcomes, but more positive (43% in 2016 and 37% in 2015) than negative (27% in 2016 and 24% in 2015). Many are taking actions to align payment to outcomes, in particular having to do with the economy (cost reduction) or service (e.g., interaction/communication with customers). ACTIONS THAT ALIGN PAYMENT TO OUTCOMES 43% Strongly Agree 33% 36% Very Important Cutting unnecessary cost and expenses Customer satisfaction surveys 91% 87% 91% 48% Somewhat Agree 54% 54% Somewhat Important Communicating more freely; extending alternatives Somewhat Disagree 6% 9% 9% 13% 9% 3% Strongly Disagree 4% Patient Outcomes 7% 2% Importance of Role in Measuring Technology Not Important Not at all Important 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 11

11 Expectation for Third Party Involvement Is On the Rise When reflecting on the future of various types of insurance (Medicare, Medicaid, Commercial), most executives believe that third party authorizations; claim remittances; claim denials; and collection costs will hold steady or increase. Very few anticipate any declines. In Medicare and Medicaid in particular, there is an even stronger sense (from about 1 in 2 executives) that these third party activities will trend upward. MEDICARE MEDICAID COMMERCIAL Changes within Type of Insurance Medicare Managed Care Medicaid Managed Care Commercial Third Party Prior Authorization Increase Stay the same Decrease Third Party Claim Remittance Increase Stay the same Decrease Third Party Claim Denials Increase Stay the same Cost to Collect Third Party Claims Decrease Increase Stay the same Decrease CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 12

12 Methodology This study was commissioned by CIT and conducted online by Harris Poll within the United States between February 18 and February 29, 2016, among 164 executives within the healthcare industry. Defining characteristics are: Executive title: Board member (9%), CEO (22%), COO (6%), CFO/Treasurer (11%), Other C-level executive (7%), SVP/VP/Director (11%), Head of business unit (11%), Head of department (21%) Company revenue: $25 million to $99 million (66%), $100 million to $249 million (19%), $250 million to $499 million (10%), $500 million to $749 million (4%), $750 million to $1 billion (2%) Industry: Those represented include hospitals/medical centers (36%), healthcare technology (16%), primary care facilities (9%), skilled nursing facilities (9%), specialty care facilities (8%), medical devices and medical supplies (6%), pharmaceuticals (5%), home health and hospice (4%), biotech (3%), other inpatient hospital (2%), behavioral health facilities (1%), outpatient treatment facilities (1%), and other healthcare-focused (1%). To ensure that the data are balanced and that they accurately reflect the population of interest for this study, the sample was weighted to ensure that it accurately represents the U.S. Healthcare industry. Figures for industry and revenue were weighted, where necessary, to bring them into line with the population of U.S.-based healthcare-related companies with annual revenue of $25 million to $1 billion, based on information obtained from D&B database sources. All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, the Harris Poll avoids the words margin of error as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal. About the Harris Poll Over the last 5 decades, Harris Polls have become media staples. With comprehensive experience and precise technique in public opinion polling, along with a proven track record of uncovering consumers motivations and behaviors, The Harris Poll has gained strong brand recognition around the world. The Harris Poll offers a diverse portfolio of proprietary client solutions to transform relevant insights into actionable foresight for a wide range of industries including health care, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant and consumer packaged goods. Contact us for more information: ConsumerInsightsNAInfo@nielsen.com. ABOUT CIT Founded in 1908, CIT (NYSE: CIT) is is a financial holding company with more than $65 billion in assets. Its principal bank subsidiary, CIT Bank, N.A., (Member FDIC, Equal Equal Housing Housing Lender) Lender) has has more more than than $30 $30 billion of deposits and more than $40 billion billion of deposits and more than $40 billion of assets. It provides financing, leasing of assets. It provides financing, leasing and advisory services principally to middle and advisory services principally to middle market companies across a wide variety of industries market companies primarily across in North more America, than 30 and equipment industries primarily financing in and North leasing America, solutions and to equipment the transportation financing sector. and leasing It also solutions offers products to the transportation and services sector. consumers It also offers through its products Internet and bank services franchise to consumers and a network through of its retail Internet branches bank franchise in Southern and California, a network operating of retail branches as OneWest in Southern Bank, a California, division of CIT operating Bank, N.A. as OneWest cit.com Bank, a division of CIT Bank, N.A. cit.com To subscribe to the CIT View from the Middle newsletter, please send an to: viewfromthemiddle@cit.com. FOR PRESS INQUIRIES, PLEASE CONTACT Matt Klein Vice President, Media Relations matt.klein@cit.com FOR BUSINESS INQUIRIES, PLEASE CONTACT Dan Infanti Senior Vice President, Marketing and Advertising dan.infanti@cit.com Debbie Haeringer Director, Content Marketing debbie.haeringer@cit.com 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc. 13