Cambridge, Mass., Oct. 28, 1999 - Consumerism, e-business and genetic mapping will bring about disruptive changes in the way U.S. healthcare is provided and paid for in the 21st Century, according to PricewaterhouseCoopers' HealthCast 2010: Smaller World, Bigger Expectations report released today at the PricewaterhouseCoopers Thought Leadership Forum in Cambridge, Mass.

"Dynamic forces will threaten the status quo of U.S. healthcare providers, insurers and the government, but also will create exciting opportunities for improved quality of care, greater efficiencies and e-business," says Woodrin Grossman, chairman of the healthcare practice, Americas Theatre, for PricewaterhouseCoopers.

To compile the report, PricewaterhouseCoopers, the world's leading professional services organization, interviewed and surveyed 400 thought leaders and healthcare executives in the U.S., Europe, Canada and the Pacific Rim to determine the factors shaping the future of healthcare. Those surveyed were top executives from hospital systems, physician groups, insurers, government, insurers, employers and medical supply vendors. HealthCast 2010 represents an unusually candid account of future risks, but also provides solutions and action steps for healthcare organizations entering the new millennium, Grossman notes.

E-Business, Electronic Medical Records and Online Doctoring

The penetrating impact of the Internet will recast the distribution, financing, speed and production of traditional medical products and services as well as creating increased competition for capital investments.

"The Internet gives the advantage of speed over size and bureaucratic healthcare organizations could fail in this race to smaller, adaptive entrepreneurial ventures. We foresee new types of business models such as virtual medical records warehousing or insurance products through the Internet," says David Chin, M.D., principal-in-charge, PricewaterhouseCoopers' Boston Health and Welfare Practice. For example, 35 percent of U.S. respondents thought that by 2010 individuals would store their electronic medical records on a source that is not part of the current healthcare system. Twenty-four percent of respondents thought that source would be an Internet portal site while 11 percent thought individuals would use non-healthcare third-party businesses, according to HealthCast 2010. Another way in which e-business will change the healthcare system is interaction between providers and patients. For example, 89 percent of respondents predict that in-office visits will decrease if physicians routinely offer Web-based consulting tools. The reduction, estimated by 59 percent of respondents to be at 20 to 30 percent, will shift to attending to patients' needs via the Web.

The Consumer Rules

With the impact of the Internet and increasing levels of education, consumers in the next decade will understand more about healthcare issues and make more decisions about their own treatments. This knowledge thirst will intensify as out-of-pocket spending (the amount consumers spend on health insurance premiums, deductibles and co-pays) increases in the next few years. However, among the survey's findings was the belief that hospitals and insurers are unprepared for the coming surge in consumerism. Only 25 percent of those surveyed by HealthCast 2010 thought hospitals were prepared and just 14 percent thought insurers were prepared to deal with empowered consumers.

"The 2010 consumer will demand speedy, customized healthcare and will frequently turn to the Internet or other intermediaries to sift through or even broker these needs," says Sandy Lutz, author of the HealthCast 2010 report. "To prepare, healthcare organizations will need to restructure and adopt retail-like branding, delivery efficiencies and incentive systems."

Genomics and the Shift to Prevention

Perhaps the biggest change in the next decade will be the type of screening and diagnostic tests that stem from the completely mapped human genome. In the U.S., third-party genetic mapping businesses will spring up and become the primary source for an individual's genetic map, according to 38 percent of HealthCast 2010 respondents in the U.S. Such businesses outpolled physicians, viewed as the primary source by 36 percent of HealthCast 2010 respondents in the U.S.

Paying for Tomorrow's Healthcare

Healthcare financing trends are converging in the industrial world as the U.S. becomes more governmental and privatization efforts increase in Europe and Canada, the HealthCast 2010 report concludes. In addition, increasing costs and consumerism are likely to spur insurance changes. For example, 60 percent of survey respondents believed that most U.S. employers will offer employees the option of medical savings accounts by 2010. Also, HealthCast 2010 respondents believed defined contribution programs, which have been popular among corporate retirement plans, would transition to health benefits. Of those surveyed, 64 percent thought employers would move to defined contribution programs for health benefits and 56 percent of the respondents predicted that Medicare would move to such a system by 2010.

Copies of the HealthCast 2010 Report are available on request or visit our website ( www.pwcglobal.com/healthcare ). Please review a sampling of the survey results in the attached addendum.

PricewaterhouseCoopers is the world's leading professional services organization. Drawing on the knowledge and skills of 150,000 people in 150 countries, PricewaterhouseCoopers helps clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance.

ADDENDUM

HealthCast 2010 Survey Results

E-Business

1. Which of the following has the most opportunity to leverage the benefit of E-business?

TotalEU-C-PRUSAHospitals25%44%14%Insurers31%22%36%Physician specialists7%3%9%General Practitioners8%12%7%Outpatient care providers8%3%11%Medical Suppliers11%13%11%Pharmacists9%3%13%

2. Which one entity should regulate healthcare goods and services sold on-line?TotalEU-C-PRUSAGovernment27%30%25%A new quasi-governmental agency22%29%20%Professional organizations25%24%25%Consumer advocacy coalitions11%4%13%There should be no regulation15%12%17%

3. Assume that, by 2010, there is data warehousing of medical records for storage and retrieval. Which one group is most likely to have primary responsibility for storing/retrieving Patient's Universal Medical Records?TotalEU-C-PRUSAA third party10%9%11%Internet portal services17%1%24%Total non-healthcare third-party27%10%35%Individual Patients10%18%6%Hospitals & Provider Networks37%60%26%Government14%12%15%Private Insurers11%0%17%

4. With the expansion of E-business and information technology, which sector would require the largest restructuring of human resources between now and 2010?TotalEU-C-PRUSAHospitals47%69%36%Physicians20%12%23%Insurers11%5%15%Suppliers5%5%6%Outpatient care providers16%9%20%

5. Assuming that by 2010 most physicians will routinely consult computer-based decision support software before ordering a treatment or procedure, which of the following is likely?TotalEU-C-PRUSAQuality will increase71%85%64%Costs will decrease24%25%24%Malpractice will decline33%41%28%Patient confidence will increase47%54%44%Consumerism

6. Are hospitals or hospital systems prepared to address the demands of increasingly empowered consumers?TotalEU-C-PRUSAStrongly disagree9%9%9%Disagree32%41%27%Neutral35%26%40%Agree18%20%17%Strongly agree6%5%8%

7. Are private insurers prepared to address the demands of increasingly empowered consumers?TotalEU-C-PRUSAStrongly disagree14%14%15%Disagree34%33%34%Neutral37%46%34%Agree10%6%12%Strongly agree4%2%5%

8. Which of the following will be most impacted as a result of increasingly empowered consumers?TotalEU-C-PRUSADemand for existing services & products8%0%11%Demand for new services & products29%20%34%Location and setting of service delivery14%14%13%Communication & Interaction between different providers12%17%10%Communications between patients and physicians21%25%19%Use and reporting of quality standards17%24%13%

*With each hospitals, insurers, employers, vendors and policy makers, "demand for new services and products" ranked first. However, "communications between patients and physicians" ranked first with physicians.

Genomics

9. Genetic mapping could be seen as the first phase of genomics. Which segment of the healthcare industry will be most impacted by the opportunity of genetic mapping?TotalEU-C-PRUSAGovernment5%5%5%Insurers18%18%18%Hospitals/hospital systems16%24%12%Physicians specialists41%31%47%General Practitioners5%6%4%Medical Suppliers15%17%14%

10. After the human genome mapping is completed in 2002, which entity is most likely to be the primary source for consumers to get their individual genetic map?TotalEU-C-PRUSAGovernment5%2%7%Insurers7%11%5%Hospitals/hospital systems18%25%14%Physicians36%37%36%Third-party businesses34%26%38%

Paying for Healthcare

11. When do you expect most large employers to implement defined contribution systems? (U.S. only)TotalBefore 200524%Between 2005 and 201040%Between 2011 and 201410%In 2015 or beyond4%Not in the foreseeable future21%

12. When do you expect Medicare to move to a defined contribution program? (U.S. responses only)TotalBefore 200521%Between 2005 and 201036%Between 2011 and 201411%In 2015 or beyond8%Not in the foreseeable future25%

13. On a scale of 1 to 5, where 1 is unlikely and 5 is very likely, how likely is it that most large employers will offer medical savings accounts as an option by 2010? (U.S. responses only)TotalVery unlikely4%Unlikely17%Neutral19%Likely33%Very likely27%

By segment:

DocsHospitalsVendorsEmployersInsurersPolicy MakersTotal% likely or very likely63%66%66%58%64%34%60%

14. Which hospital activities will have the most opportunity to be outsourced to commercial companies by 2010?TotalEU-C-PRUSANursing Services6%3%8%Medical Records/Transcription Services24%15%28%Financial Transactions13%10%14%Lab Diagnostics13%26%6%Imaging/Radiology4%1%5%Medical Supply Management11%14%10%Information Technology29%31%28%

15. Which of the following actions are healthcare providers most likely to take to address labor shortages in the next 10 years?TotalEU-C-PRUSAIncreasing wages12%14%13%Recruiting employees from abroad15%6%9%Employee empowerment36%10%19%Rely on lower-paid technicians13%19%17%Use computerization to replace personnel11%24%19%Outsourcing13%27%22%

16. If health premiums continue rising at double-digit rates for the next 5 years, which of the following changes are most large employers likely to make? (U.S. responses only)USAIncrementally passing along more cost to employees46%Slashing entire benefit categories, such as dental8%Restructuring benefits such as moving to defined contribution8%Dropping coverage altogether7%

Other Drivers or "Forks in the Road"

17. How likely is it that, by 2010, the U.S. federal government will legislate healthcare as a right of its citizens? (U.S. responses only)DocsHospitalsVendorsEmployersInsurersPolicy MakersTotalVery likely or likely49%51%36%33%56%28%42%

18. Using a scale of 1 to 5, where 1 is strongly disagree and 5 is strongly agree, would you say that the collaboration between healthcare providers and pharmaceuticals companies will increase by 2010? (U.S. responses only)DocsHospitalsVendorsEmployersInsurersPolicy MakersTotal% who agree or strongly agree73%70%59%80%72%69%71%

Editor's note: "Total" figures refer to responses from the U.S., Europe, Canada and the Pacific Rim. "EU-C-PR" indicates survey results from Europe, Canada and the Pacific Rim. The HealthCast 2010 survey included 390 top executives of health systems, physician groups, health insurers, medical supply vendors, professional groups, employers and policy makers. PricewaterhouseCoopers interviewed executives during August and September of 1999.