Healthcare Trends Mirroring FedIT
Federal budget challenges. Cost pressures. Heightened oversight. Uncertainty.
Sounds like the vanilla government contracting article, seminar, or industry-rag article these days, right? Perhaps, but not this time. These were some opening panel sound bites from the GE Healthcare Conference last week in downtown DC.
Over the past few years we have witnessed an increased convergence of federal and commercial markets in a variety of areas, to include hot lanes such as healthcare and cybersecurity. However, when discussing healthcare, the convergence connection in my mind was usually the policy vs. provider relationship. I now better appreciate, that relationship is significantly more intertwined given the magnitude of the federal government as the payer. As the healthcare industry becomes increasingly reliant upon federal programs as the payer, the healthcare providers (e.g., hospitals, nursing facilities) resemble government contractors, with a sprinkling of utility characteristics.
Healthcare providers, just like FedIT contractors, are experiencing pricing pressures via reimbursement, increasing costs of oversight, and the customers’ / stakeholders’ expectation to do more with less. As patients, we expect greater access to care, better medicine, and more personal attention while insurance companies and the government continue to squeeze the providers of those services. While there may not be a catch phrase like sequestration, the healthcare industry is being similarly forced to drive efficiencies. In federal contracting, we call it, “keeping wrap rates down to be more price competitive.” In commercial healthcare, we are seeing and expecting consolidation to drive scale and efficiency beyond the bedside of the patient.
From an investment perspective, the growth opportunities in FedIT and commercial healthcare are also similar. Cloud migrations and shared services models that drive back-end IT efficiencies, data analytics, virtualization, visualization, and dashboards are all technologies that present profit opportunities. These are the mission critical capabilities consistent with doing more with less, albeit delivering greater value to that government or commercial customer. While a stretch, the ability to play in the crossover areas of these markets may also expand the market size for contractors. No, we are not encouraging contractors to drop their copy of the FAR and rush towards commercial. However, these perspectives did reaffirm to us the importance of the aforementioned technologies and the direct correlation to driving mission success for the foreseeable future.