The evolving healthcare technology and services market—and why it matters
Technology and services have become the fastest growing profit pool in the healthcare industry over the past five years.1 With over $500 billion in opportunity for value creation available across the healthcare industry,2 the future growth potential for technology and service companies is substantial. In recent years, healthcare technology and service companies have harnessed technology including digital, advanced analytics, and artificial intelligence to create new business models that have delivered billions of dollars of value. This market has been defined across 4 major segments: 1) Business services 2) Consulting services 3) Data, analytics, and information services and 4) Software, platforms and technology services.Exhibit 1
In 2016, these companies earned an aggregate EBITDA of approximately $35 billion, rivaling other major segments of the healthcare economy (e.g., payers).Exhibit 2
We built upon the “Service vendor” market definition, as described by the McKinsey white paper by Singhal S, Latko B, and Pardo Martin C titled “The future of healthcare: Finding the opportunities that lie beneath the uncertainty.” We included “enabling services” (e.g., analytics, consulting, software, and platforms) to define this market, expanding the size of the services value pool from ~$20 billion to ~$35 billion in 2016 EBITDA.
Check back later this month for our forthcoming report on this topic, where we will provide an overview of the market landscape and profit pools. We will explore four key characteristics of companies that are achieving success in the market (e.g., accountability for business outcomes, the ability to integrate across a blurring healthcare value chain), and conclude with two sets of “five tests”—one for healthcare technology and services companies and one for their customers —that leaders can use to gauge how prepared and well positioned they are for the future.
- Growth here was measured in terms of the compound annual growth rate of profits (EBITDA has been used as a proxy for Profits)
- Singhal S, Coe E. The next imperatives for US healthcare. McKinsey white paper. November 2016.