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Next in health services 2025: Secure your future with resilience and reinvention
Learn from 2024. Gain control over 2025. Go beyond in the rest of the decade.
Major events shook the industry in 2024 and led to predictions for 2025 along with a vision of value creation over the five-year horizon. You can rise above the challenges of the new year by acting on the 10 sector dynamics we outline for 2025. Forge your future by creating a business model capable of delivering value for a healthier business and healthier patients and consumers.
Sector insights, issues and imperatives for 2025 and beyond:
2024 in perspective: What a year
At the start of 2024, we expected a calmer year for healthcare. The COVID pandemic was winding down, industry deals and investments had stabilized, government policies were clear, profitability seemed to be improving, and there was limited political discussion on healthcare. As the election loomed, both parties appeared aligned on “saving Medicare” while prioritizing economic, social and foreign policy issues.
However, 2024 hit harder than expected as questions intensified about the role of Pharmacy Benefit Managers (PBMs) in drug pricing, the US Department of Justice increased scrutiny of deals, clinical labor shortages persisted, and a new administration’s healthcare agenda added uncertainty. Mounting stakeholder frustration over healthcare costs and barriers to care continue to grow, pointing to 2025 as a year of increased government scrutiny and consumer activism that health plans and health systems will need to be ready to respond to with broader resilience strategies.
The likelihood of radical change in healthcare is rising as we begin 2025. The financial markets are a good indicator of what’s ahead: as the election outcome became clear, stocks of companies with concentrations of Medicare rose, those with concentrations of Medicaid fell, and the expectation of reduced funding drove down health system and hospital stocks.
Predictions: 10 sector dynamics for 2025 and what you can do
With greater change at the door requiring transformation and resilience, here are 10 sector dynamics you should watch and act on in 2025.
Control costs and make healthcare more affordable
Medical cost trend will continue to rise. Pharmaceutical costs, GLP-1s and other specialty drugs will increase in cost and utilization. The challenge can be daunting: seven out of 10 healthcare consumers say they either can’t afford healthcare and medications now or couldn’t afford to pay more if their costs increase. Shifts in policy and coverage are likely to raise the consumer burden even further.
What you can do: Meet affordability head-on through total cost of care management. Health plans should focus on reducing wasteful spending, developing new pharmacy benefit management models, integrating medical and pharmacy benefits and enhancing transparency and member navigation. Dive into next-generation capabilities like investing in AI or augmented reality to help streamline operations. Educate patients on healthcare choices to help reduce unnecessary costs by following evidence-based guidelines. Providers can continue to take part in value-based care arrangements that often reward reductions in wasteful spending and promote efficiency. Employers should use transparency and detailed reporting to evaluate the effectiveness of health plan cost management. Empower consumers to compare costs for tests and procedures and choose sites of quality care that come at a lower cost. Build health ecosystems tailored to patients with complex social, medical and behavioral needs, enabling holistic assistance and better outcomes.
Affordability in healthcare by the numbers
Source: PwC’s 2024 US Healthcare Consumer Insights Survey. Q: Which of the following responses best reflects how you feel about your healthcare costs? Base: All consumers = 2,036
Reap the benefits of data and AI
The new administration is signaling the easing of regulatory actions that could accelerate AI adoption. AI will power the organizations of the future, with 77% of health executives ranking AI among their top three investment priorities in the next 12 months. AI is already improving patient diagnosis and treatment, while payers are using it to enhance population health strategies and influence health behaviors. Health systems are using AI to boost physician productivity and are exploring ways to address health plan denials.
What you can do: If you don't already have a strong infrastructure to support AI adoption, you should make sure it’s in the works. Success in accelerating AI adoption depends on strong data foundations, value-driven strategy, workforce readiness and application of AI in areas that help drive value. Resolve tech debt and implement modern systems and architectures to use AI across financial, customer, clinical or core administration functions. Identify a lead technology partner to help improve access to and quality of underlying data and apply AI for business transformation.
Artificial intelligence (AI) is making its way into healthcare
Source: PwC’s 2024 US Healthcare Consumer Insights Survey. Q: Overall, which of the following activities would you be most comfortable with a GenAI-powered tool performing? Base: Consumers comfortable with at least one activity = 1,407
Treat the consumer as king
Respond to consumers’ shared desire for care that is convenient and affordable. Leading the way is the 30% growth in the individual coverage health reimbursement account (ICHRA), an alternative to traditional group health plans. With ICHRA, employers provide defined non-taxed reimbursements to employees for qualified medical expenses and the consumer is free to purchase coverage in the individual health insurance marketplace. Anticipated shifts in Medicaid funding and Medicare adjustments likely will mean more consumer movement across plans. The growing burden of consumer cost-sharing will continue to shape healthcare decisions.
What you can do: Strengthen consumer relationships amid changing coverage. Use customer attraction and retention strategies to deliver personalized, convenient healthcare experiences tailored to individual needs. These core capabilities include new care delivery models that provide care where consumers prefer while reducing administrative costs. Create “digital front doors” to access care solutions, account management and payments in one centralized place. Use advanced analytics powered by AI and GenAI to aggregate customer insights. Understand consumers’ preferred engagement channels, anticipate their needs and help the entire care team create a unified experience that can help reduce costs.
Prepare for changes in Medicare and Medicaid
Nearly 70 million Americans are covered by Medicare and 90 million are on Medicaid, including the Children’s Health Insurance Program (CHIP). The new administration pledged to protect Medicare in principle. However, the chasm of $100 billion in Medicare underpayments to hospitals — who receive $0.82 for every dollar spent on Medicare — and CMS risk adjustment changes to rein in health plan profitability remain. For payers, potential changes to Medicaid’s funding structure, such as transitioning to block grants or per capita caps, could reshape service delivery and funding. These shifts could give states greater flexibility to design and manage their Medicaid programs.
What you can do: You should use defensive strategies for Medicare. Medicaid will continue to vary by state as the number of enrollees shrinks. If you aren’t already one of the industry’s leading market players, it can be tough to gain a foothold. The landscape potentially favors more deals and consolidation and — for those plans and health systems with strong cost positions — growth opportunities. For all participants, 2025 is a year when administrative costs should align with market competition and capabilities that manage member and patient relationships.
Brace for pressure on pharmaceuticals and PBMs
The rising spending on pharmaceuticals can continue to drive policymakers and the broader public to seek solutions to curb spending, even as drug innovation helps improve the quality of life.
What you can do: PBMs will likely be the first target to manage this spending amid a growing flurry of new models. PBMs should expect even greater pressure to demonstrate value, provide transparency as it relates to group purchasing organization (GPO) revenue and drug-level reporting on rebates, and document that the incentives of the PBM are aligned with those of the plan sponsor.
Remain vigilant on cyber and risk
In 2024, the US experienced the highest number of significant cyber attacks in healthcare, with the greatest disruption on record. The industry remains exposed and can expect ongoing disruption. Many systems have addressed exposure and resilient strategies for future attacks; yet aging infrastructure remains an issue. Mission critical applications, often the most protected, remain vulnerable. Only 15% of executives significantly measure the financial impacts of cyber risks in a big way.
What you can do: Continue to invest in first- and second-line defenses and strategies that bolster operational resilience and technology infrastructure. The move to the cloud should continue, and vendor strategies should reflect potential vulnerabilities. Integrated risk management is essential, connecting data, enhancing analytics and leveraging global risk technologies.
Jump on the growth trend in home health
Home health is expected to grow at breakneck speed, with employment of home health and personal care aides projected to grow 21% from 2023 to 2033, much faster than the average for all occupations. All signals from the new administration point to policies that are likely to favor labor and funding strategies that enhance home health as a site of care. Home health care can be less expensive, more convenient and just as effective as hospital or skilled nursing facility care and keep patients safe at home.
What you can do: Prepare to be part of this growth trend. As the US population ages, more patients want accessible, convenient care at home, from nursing care, speech, physical and occupational therapies, to home health aide services and personal care services. Entrants to this market should understand the health needs of an aging population and be prepared to train or hire a specialized workforce, navigate complex regulations and leverage technology for remote patient monitoring.
Reenergize strategies for the workforce of the future
The healthcare workforce of more than 20 million people will likely be vastly different in 10 years. Multiple forces point to a shift in the health industries’ future workforce with the culmination of ongoing clinical labor shortages, the high cost of clinical education, the acceleration of digital workers in the form of AI agents shifts in sites of care, longer duration chronic diseases and treatments and the rising need for mental health services.
What you can do: Workforce efforts should be enterprise-led, with C-suite engagement to understand labor strategies, training and education, the role of the caregiver community, and the impacts of technology at every layer of the workforce. Your workforce must be at the table, not only helping and thinking beyond the short-term reaction of massive technology and economic pressures but engaging with management and leading change.
Stay on high alert for major policy changes
The $4.5-trillion healthcare industry has historically underperformed during election years because the prospect of major policy changes affects stocks. Immediately after the election, concerns surfaced about subsidies for health insurance exchanges and vaccines while optimism rose on potential changes in Medicare reimbursement policies. The new administration also outlined a series of initiatives aimed at reshaping various aspects of the healthcare industry and broader economic policies that may become administration priorities.
What you can do: Stay informed and ready to pivot as needed. Monitor events closely and modify scenario planning to prepare for shifts in healthcare policy under the new administration. Build resilience into existing business models or explore new ones, identifying new profit pools more resilient to potential political and policy headwinds and exploring new business relationships to find paths to growth. Prepare for evolving regulatory and compliance requirements, including shoring up data protection and cybersecurity risk management and adopting Responsible AI practices.
Make deals
We predict a $1 trillion shift away from traditional payers and providers to new ecosystems that expand beyond product partnerships to include closer connections with technology hyperscalers, AI disruptors, value-chain solution providers and patient-focused innovators.
What you can do: The generally pro-business stance expected from the new administration provides additional optimism for increased deal activity in 2025. Take advantage of opportunities for continued provider consolidation, although on a smaller scale; diversification of investments targeting employer-sponsored insurance programs, and significant potential for AI and tech-enabled solutions across administrative functions (for example, revenue cycle, call center) — as well as utilization management, care coordination and other related programs supporting value-based care.
Stay informed and ready to pivot as needed. Monitor events closely and modify scenario planning to prepare for shifts in healthcare policy under the new administration. Build resilience into existing business models or explore new ones, identifying new profit pools more resilient to potential political and policy headwinds and exploring new business relationships to find paths to growth. Prepare for evolving regulatory and compliance requirements.
Competing in the future: New value, new business models
Macro trends and sector dynamics are redefining value, leading to the reshaping of business models in the healthcare ecosystem. It will be essential to conduct organizational soul-searching to determine if your current business model is capable of delivering a healthier future for your business and those you serve.
Consider that 90% of US annual healthcare expenditures are for people who have chronic diseases and mental health conditions, despite advancements in medicine, technology and access to information. Current business models carry significant investment and operating costs and environmental impacts and are leaving certain communities and patients behind. These models should be retired, replaced by new business models that can help create value in the direction of 4Ps:
Prevention: with more focus on addressing the risk factors of health decline. The need for prevention remains great as evidenced in our healthcare consumer survey, which reveals that 65% of consumers – two-thirds – say they don’t seek healthcare until it’s urgent. There are vast opportunities for payers, providers and employers to engage consumers with targeted health education and outreach to members and patients — encouraging and incentivizing them to seek preventive care.
Personalization: with data-driven, customized treatments based on factors like genetics and behavior. Consumers experience healthcare differently based on their generation, health status and ability to pay for care. As you work to personalize care, it will be important to improve targeting messages to consumers and patients through the right channels at the right time.
Prediction: with the active analysis of well-being and early intervention to improve health outcomes. Today, clinicians can intervene before medical crises occur by using predictive models that analyze patient data and activities. AI can help lead to better patient diagnosis and treatment by analyzing vast amounts of data, identifying patterns and providing personalized insights. Looking ahead, AI is expected to play an important role in predictive analytics, precision medicine and better overall patient experience.
Point of care: with more accessible and convenient settings for delivery of care. Consumer preferences for care settings vary widely. For example, 50% of consumers ages 55 to 64 prefer a doctor's visit over a virtual visit compared to 34% of those 25 to 34. The sector can explain and offer transparent and convenient digital, virtual and other care options that suit consumers’ busy lives and comfort levels, including home health care to meet the needs of an aging patient population.
Don’t wait to make your future healthy
Contact us to help you respond to sector dynamics and changes on the policy, regulatory and tax front; to help initiate the strategies and actions that can help you succeed in the new year and to help you determine the right business model that can deliver value over the five-year horizon.
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