Outlook | December 2020

Outlook 2021 HealthcareThe Crystal Ball and the American Healthcare System in 2021

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Scare, Hope and a Silver Lining

THE CRYSTAL BALL AND THE AMERICAN

HEALTHCARE SYSTEM IN 2021

Outlook | December 2020

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This outlook reviews some of the interesting aspects of the US healthcare industry and shares SGA’s perspective based on internal research, survey and KOL feedback in Q4, 2020

Pandemic in the US in 2020

LESSONS LEARNT FROM THE YEAR 2020

Medical devices and surgical accessories suppliers registered

losses as elective and non-elective surgeries were postponed

extensively all over the US.

Demand for tele-health and tele-consultation rose by leaps and

bounds. Remote or virtual mode of care has become the new normal as we end 2020 and enter the new year.

Financial hardship started as more and more citizens were being laid off due to pandemic, indirectly impacting

their medical cover that, which was earlier paid by the employer.

Non-COVID-health care settings reported a major decline in all their

businesses, except for nursing.

Hopes of the vaccines to cure and pull the US citizens out of this menace are at a peak. Vaccine manufacturing is the most sought-after segment and shall remain so in 2021.



Demand for healthcare workers expected to surge1

GROWTH IN DEMAND FOR TRAVELING NURSESCOMPARED TO PREVIOUS YEAR

Post the pandemic outbreak, demand for nursing staff, respiratory therapists and lab technicians has surged; so has been the spike in demand for physicians who were ready to move to virtual or online care settings.

The demand for travel nurses is expected to remain the highest throughout 2021. Some of the key players in the medical staffing business may expect a surge in demand with two busier quarters approaching.

Source: https://fortune.com/2020/12/08/covid-health-care-workers-amn-susan-salka-coronavirus-us-america/

The silver lining in 2021

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Predictive analytics takes the center-stage – Mix of new and old companies ready with innovative AI/ML-backed healthcare products with FDA approval

• Thirty-three companies from USA, Germany and Singapore were granted FDA approvals in 2019–2020 and and more are ready to disrupt the healthcare market, especially in emergency medicine, radiology, ophthalmology, neurology, cardiology, etc.

• In 2021, a mix of new and old entrants are ready to take on big players in the healthcare diagnostic segment (a detailed list is available in the appendix).

• Predictive analytic tools used in diagnostic equipment will become the first choice of treating physicians. So far, predictive analytics has been predominantly approved in three segments, i.e. cardiology (6), radiology (5) and hospital monitoring (3).

• The adoption of these technologies in the US hospitals is more likely than in other parts of the world.

This is one of the potential segments full of opportunities for large, small, old and new players. Due to the rise in willingness to share personal data under situations where the benefits are clearly communicated to the end user, there is more data available for providers.

Source: https://fortune.com/2020/12/08/covid-health-care-workers-amn-susan-salka-coronavirus-us-america/

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Virtual care will be easier to avail, given the shortage of staff in hospitals3

Cardiology (6) Radiology (5) Hospital Monitoring (3)



• Nursing homes, hospitals and care homes could have been the major sources of outbreaks of resistant bacterial infections such as MRSA and VRE. Hence, a majority of patients opted for virtual care in 2020. This disruption has led to the exponential growth of care at home.

• Virtual care in 2021 is expected to grow as it enables home care providers to remotely monitor all of the vital signs and exacerbations while intervening early to save lives.

• Before the pandemic hit the nation, there were 10,785 home health agencies and 3.4 million estimated beneficiaries.

• By 2021, the number of beneficiaries is expected to remain high. Not only the number of tele-consultation service providers (for non-critical medical conditions) shall increase, but also segments such as tele-radiology, tele-dermatology, tele-pathology and tele-diagnostics are expected to gear up for a busier 2021.

• The market analysts have predicted a rise in demand for predictive modeling in healthcare, which will help hospitals, medical device companies and healthcare services and insurance sectors.

• In April 2020, the number of patients using tele-health had increased from about 11,000 people per week to more than 650,000 people per week.

• A total of 82 companies (mostly US based) went public during the third quarter ending 30 September, with one coming close to raising nearly $1 billion.

In 2020, the US healthcare market witnessed a 50% revenue fall as patients avoided hospitals and non-elective surgeries between March and November, while patient data sharing due to online healthcare services rose.

Source: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/telehealth-companies-push-healthcare-ipo-activity past-10b-mark-in-q3-20-60830273

Part of Teladoc Health

Financial gains for companies in healthcare IT and tele-health companies4



• Every company in pharmaceutical, medical device and diagnostic businesses faced the issue of restricted travel. Remote marketing became the only option for many months until few travellers risked commute.

• Companies spending little on online marketing and digital marketing are now forced to increase their budgets to make up for the losses incurred in 2020.

• Travel for marketing will be on need basis rather than sales driven in 2021.

• Key companies in digital healthcare marketing may find more patrons in 2021 compared to the previous year.

Pandemic pushes companies to increase their marketing budget5



Clouds that might hamper visibility



• Every company in pharmaceutical, medical device and diagnostic businesses faced the issue of restricted travel. Remote marketing became the only option for many months until few travellers risked commute.

• Travel for marketing will be on need basis rather than sales driven in 2021.

• Key companies in the digital healthcare marketing may find more patrons in 2021 compared to the previous year.

Unclear status of the much-delayed elective surgeries in the US – hospitals and device suppliers unlikely to recover their losses in 2020

More rebates or higher premium in 2021 – dilemma of the healthcare payers

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• Peak hospitalizations may not occur until mid-January, given holiday travel and the coronavirus’ incubation period.

• With additional confusion over who gets the vaccine first, the Q121 is expected to remain chaotic, with hospitals opting out and pushing their non-elective and elective surgeries further, creating another round of loss for the suppliers of healthcare products.

• The Illinois Hospital Association reported that COVID-19-related cancellations and delays caused the hospitals a loss of $1.4 billion per month.

• The Ohio Hospital Association also reported losses of around $1.27 billion per month.

• The Virginia Hospital & Healthcare Association reported a loss of $600 million for the period between late-March and late-April 2020.

• The Montana Hospital Association reported that hospitals lost $100 million in the first three weeks of the pandemic.

The postponement of elective surgeries in 2020 was a major blow to the medical accessories, surgical, consumables and devices segment in the US. On 8 December 2020, 160 hospitals across the country declared postponement of all elective surgeries due to the resurgence of the COVID-19 vaccine.

With the uncertainty of elective and non-elective surgeries, hospitals are unlikely to recover their losses in 2020. The new year may not start on a happy note for many in such healthcare segments.

• This year, the providers felt the pinch as they had to spend more to cover COVID-19 cases in the US. This also led to the speculations that companies would charge more in 2021.

• Based on a recent published survey, large self-insured employers have raised concerns on the delayed treatment in 2020 and anticipated higher medical claims in 2021 due to the rise in cost for acute care.

• Some insurance companies have provided rebates and cashbacks to retain the clientele; others are confused as a large pool of workers have been laid off in 2020 and may not have the desired medical cover.

We’re giving it back to the consumer and the employer up front, rather than waiting

- Michael Carson, President and CEO, Harvard Pilgrim Health Care, a New England-based not-for-profit health insurer



• Companies such as HPHC are planning to add an the additional premium till early next year. It will be totally dependent on the claims made in FY 2020 and the load of acute care, which has started increasing in some states since in Q4, 2020.

• Other companies such as Aetna have filed for an average increase of 7.4% for health maintenance organization (HMO) plans and 38% for preferred provider organization (PPO) plans.

• UnitedHealth has proposed an average increase of 17.4% for its two HMOs and 11.4% for its PPO plans.

• As per reports by Credit Suisse, majority of employers are using adjusted 2020 data to set rates for the next year, and expect net medical cost increases of 4.1% in 2021.

• Average employee premiums are forecast to hike 4.4% in 2021, compared to 5.4% a year ago and 6.1% the year prior.

The payers are going to witness a tough year as the confusion continues in the first half of 2021

• Payers in developed markets such as the US and Japan are constantly trying to pressurize the drug manufacturers to pay higher for these super drugs which are very expensive. However, in the emerging markets, the focus on cost containment is driving pharmaceutical companies to consider the pharmo-economic performance of drugs as the primary evaluation criterion for entering a market.

• In 2021, additional spending is expected in HEOR and related processes, and analytics companies serving these pharmaceutical giants may reach out to more clients.

• On an average, one in five Americans lives in rural areas and depends on the local hospital for primary care. Over the past 10 years, 131 of such hospitals have shut down. In 2020, 14 hospitals had shut down due to lack of funds and infrastructure amid the pandemic.

• More rural hospitals are expected to shut down considering the lack of clarity on funds and the shortage of physicians and care workers.

• This will raise the additional cost for the payer, and will require more travel cost to reach cities or better care facilities.

• There is a rising concern that potential reshoring efforts would increase costs in the life sciences manufacturing industry in the US, as margins shrink and trade relations with major suppliers from China hit roadblock.

• Make in USA may not bear fruits for key local life science manufacturers as they may face issues due to lack of clarity (regulations), motivation and buyers in the domestic market.

Pharmo-economic performances of drugs will be vital for acceptance among payers

Rural hospitals in US will find it difficult to survive, pushing more patients toward better care centers

Domestic manufacturing in life sciences shall continue to struggle

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About SG AnalyticsSG Analytics is one of the leading research and analytics companies to offer of data-centric research and contextual analytics services. With its presence in the US, the UK, Switzerland, and India, SG Analytics offers research and analytics services its customers across the globe. Awarded the ‘Regional Best Employer’ by the World HRD Congress for 2016 and 2018, SG Analytics’ collegial atmosphere and knowledge-based ecosystem help to consistently meet and exceed customer expectations.

About the Authors

Dr. Siddhartha Dutta, Practice Head, Pharmaceutical & Life Sciences Practice Dr. Siddhartha Dutta has been working in the Healthcare industry for the last 21 years. He has been involved with clinical trials, medical research, planning, and various roles in public and private healthcare domains. Besides working as a medical microbiologist, he has worked extensively in markets such as USA, Western Europe, India, Australia, Japan, Singapore, South Korea, Indonesia and has helped OEMs, VCs, banks and pharmaceutical companies expand their businesses in USA, EU and LATAM markets. Dr Dutta is an avid blogger, writer and industry speaker. His market outlooks have been published by various business magazines for the last 5 years. He has been quoted in more than 70 publications worldwide. Dr Dutta has tried to evaluate the global COVID-19 situation, and specially focused on the American businesses which might flourish or perish in these critical times. The whitepaper is relevant for all the healthcare industry stakeholders who supply medical devices or pharma products to the US market.

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Outlook | December 2020