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5 must-know trends from PwC's Medical Cost Trend report

Looking forward to 2017, there are a number of factors that will either drive or deflate medical cost trend across the healthcare industry. As hospital and health system leaders bear increasing pressure to deliver the same quality care at lower costs, these factors will exert profound influence on how providers conduct business.

A recent report from PricewaterhouseCoopers' Health Research Institute — Medical Cost Trend: Behind the Numbers 2017 — examines short-term and long-term healthcare industry trends.

For this research, HRI interviewed industry executives, health policy experts and health plan actuaries whose companies cover more than 100 million employer-sponsored members. HRI included information gathered in its 2016 Health and Wellness Touchstone survey, which polled more than 1,100 employers from 37 industries, and its national consumer survey of more than 1,000 U.S. adults. This analysis does not include government-sponsored or non-group insurance.

The report defines medical cost trend as the projected percentage increase in the cost to treat patients from one year to the next. Cost trend is determined by the changes in cost of medical products or services, multiplied by product utilization. The report identified factors affecting medical cost trend as either inflators or deflators.

Below are five trends to know.

1. The report predicts medical cost trend to be 6.5 percent for 2017, the same growth rate as 2016. Medical cost growth has trended down since PwC first conducted its inaugural survey 10 years ago. In 2007, medical cost trend was 11.9 percent, compared to 9.2 percent in 2009 and 8.5 percent in 2012. In the past 10 years, medical cost trend only increased between 2014 and 2015, from 6.5 percent to 6.8 percent.

2. Consumer demand for increased medical convenience and access to behavioral health were considered inflators, as they may drive increased utilization during the next year. The demand for convenience has resulted in the proliferation of retail clinics, urgent care centers and standalone emergency departments. Despite offering care at lower costs than other sites, the ubiquitous locations and convenient access of these sites is increasing utilization and driving medical cost trend.

3. Behavioral healthcare benefits are becoming an increasingly larger part of employer health benefits. Expanded access to behavioral health services will drive new costs in the short-term. However, this trend has the opportunity to deflate medical cost trend in the long-term, as behavioral health is often correlated to chronic health conditions.

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4. High-performance networks and pharmacy benefit managers were considered deflators. As employees find it increasingly difficult to afford their high deductibles, employers are exploring new ways to control costs, such as high performance networks that have more limited provider choices and feature outcomes-based payments. These networks have the ability to reduce healthcare costs by as much as 35 percent, according to the report.

5. Pharmacy benefits managers may deflate medical cost trend for 2017 by aggressively negotiating drug costs, in part due to public and political pressures to hold down drug prices. The future of PBM contracting points toward paying for results and cures, rather than the volume of drugs dispensed, according to the report.

To access the report in full, click here.

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