Rohan Kulkarni — Healthcare Practice Leader, HFS Research[00:22]
Greetings and welcome. My name is Rohan Kulkarni and I lead the healthcare practice here at HFS Research. I’m pleased to welcome this morning Kim Dalla Torre, who is EY Global and Americas Health Leader. Welcome, Kim, and good to be able to chat with you again.
Kim Dalla Torre — Global and Americas Health Leader, EY[00:31]
Oh, it’s nice to be here. Good to see you again, Rohan.
Rohan Kulkarni — Healthcare Practice Leader, HFS Research[00:31]
Indeed, indeed. So, look, late in 2024, HFS Research published its HFS Horizon, the Healthcare Payer Service Providers 2024 study, that evaluated 45 service providers for their ability to impact the quadruple aim of care, which is to address the cost of care, experience of care, health equity, and health outcomes across three horizons. And some of the key lessons from that study included, number one, that it’s really a jungle out there with a new big game, which is the self-insured employer that continues to be ignored by service providers in general, despite being the largest segment and potentially the only growing one. Contrast that with the legacy commercial groups, group insurance that contributed to high margins in the past but have continued to decline for the better part of a decade. Medicaid lives are plateauing and will very likely decline based on the congressional blueprint from a couple of weeks ago. And though Medicare lives are increasing, Medicare reimbursements are decreasing as a function of the nominal inflation. And so it is very likely that the pressures on health plans will continue to exist as we look forward. And so, therefore, there’s no surprise — our second insight here is that there’s no surprise that costs and margins will continue to headline this story for health plans more prominently than before. Large to mid-size vertically integrated healthcare enterprises are reflecting a 1 to 3% margin, while stand-alone health plans are showing closer to a 1% margin, which is not sustainable or acceptable to their stakeholders. So despite the top line growth reflected by service providers, we expect that there will likely be some level of margin deterioration over the next 3 years, regardless of claims that AI will aid in that margin expansion. Because, look, some of us have seen the tech-enabled growth movie in the past with RPA, that didn’t quite pan out, but who knows, maybe AI is a new story. And lastly, number 3, in terms of employers, we do think that employers, self-insured employers specifically, will drive the next apolitical healthcare transformation. Because employers are underwriting the health of almost 30% of all lives in the US currently and increasingly seeking new models and channels to address their employees’ shifting demographics and needs globally. So, service providers who remain on the sidelines of this market, who are unable to fully appreciate the opportunity here, and continue to assume that servicing ASOs is servicing self-insured employers might be missing a trick out there. The fastest and largest segment of the market is getting the cold shoulder from most of the service providers, which I imagine at some point in time will begin to change. There is clearly more, but I’d really like to hear from Kim. So, Kim, let me start off with asking you, what were your thoughts on the study, and do please reflect on the fact that EY’s Horizon 3 position as a market leader has been consistent for a number of years at this point in time.
Kim Dalla Torre — Global and Americas Health Leader, EY[03:45]
Yeah. Well, first of all, I’ll just say our team is very proud when we were named for the 3rd year in a row in Horizon 3, especially knowing this comes from how our clients perceive us and the partners that we work with. So that just says the world to us. And the fact that in all four categories, as you’re looking at the quadruple aim of health, it’s really been a focus for us because we’re working with our clients. We’re touching on, first and foremost, how can we improve health outcomes, and in doing that, looking at the inequities of health that exist today in the ecosystem and always having that lens so that we can make improvements with that at the same time, knowing there’s a business to run and that you have to look at the cost and be able to look at ways to improve those over time, and look at the patient-consumer healthcare experience and what that means to them. Because when you’re talking to healthcare plans, it’s about retaining those members and making sure they’re having the best experience possible, and doing it in a way that, as you said earlier, that you’re still focused on the health of the business at the same time.
Rohan Kulkarni — Healthcare Practice Leader, HFS Research[05:04]
Thanks, Kim. So what is your take on the future of health insurance in the US and globally, and what role will EY play in it? And if you don’t mind, also touch upon the impact of the tariffs that seem to be consuming all of our time these days.
Kim Dalla Torre — Global and Americas Health Leader, EY[05:19]
Yeah, I’m happy to talk about all of those things. Thinking about, you know, in the US, where the impacts are going to be, how we’re thinking about health plans going forward, financial sustainability is top of mind for our clients right now. Just as you were pointing out earlier, managing the business is going to get more difficult given all the regulatory change, the geopolitical climate, and right now, honestly, the unknowns around some of those implications of tariffs. Looking at what could be added to medical supplies, drugs, medical devices, and that being passed on to the payer, which then ultimately will get passed on to the consumer — those are all very much concerns, and our clients are doing scenario planning right now, trying to understand what levers they can pull from a financial sustainability standpoint to be able to protect the business and ultimately the consumer patient at the end of the day. So what we’re seeing is clients really taking a step back in the US, knowing that that’s going on. At the same time, the push for value-based care — it’s not new, however, back at the forefront, and businesses are really rethinking their model. As you’ve seen over time, there’s been a lot of vertical integration, the question being, is that right? Is it working? Do we need to transform what is there today before moving forward? So some clients we’re working with are looking at making acquisitions for additional revenue streams while others are divesting to invest in the patient population that they manage and can be the best service providers to. So as we’re looking forward, those are a lot of things that our clients in the US in particular are focused on. Globally, governments around the world — because primarily a lot of the health insurance is many times government-backed in some form — a lot of what I would call health model evolution is taking place. Governments are investing in health right now. You’ve probably seen in the Middle East a lot of billion-dollar-plus budgets being put into place to support true change, because they’re seeing that health outcomes matter. And they want to address and protect their consumers, and doing that requires big investments from the ground up. So looking at the future of health and how to really be focused more on wellness and outcomes versus what we call sick care in the past, it’s really more of a global trend. And even taking it to the next level, with some of our clients in Asia already starting to use advanced AI technology and avatars as physicians in specialty cases to do some of that frontline early intake diagnosis type of connection and exchange, just to engage the patient early in a particular care cycle to help them with their future outcomes. So we’re seeing all layers of health and really what I’d call an overall health transformation taking place on the global stage at a time where the workforce is a bigger concern than it’s ever been. We did a projection that by 2030 in the world, we’re going to be short by 18 million clinicians. So the model that we’re using today will not sustain. That tells us that this health transformation is critical to being able to provide care in a way that really makes a difference and addresses health disparities globally at the same time.
Rohan Kulkarni — Healthcare Practice Leader, HFS Research[09:06]
It’s fabulous. It’s incredible that your global footprint allows you to cross-pollinate these ideas and possibly help some of the healthcare enterprises sort of accelerate their value back to the communities that they serve. Kim, thank you very much. Really appreciate your time, and congratulations again for being categorized as a market leader in our HFS Horizons.
Kim Dalla Torre — Global and Americas Health Leader, EY[09:34]
Thank you so much. It was great talking to you again.
