This article is one in a series covering investments, transactions and general trends in healthcare and healthcare analytics.
The global market for healthcare analytics reached $6.2 billion in 2016. This market should reach nearly $7.2 billion in 2017 and $14.9 billion by 2022, at a compound annual growth rate (CAGR) of 15.8% [i]. In North America, healthcare analytics spending is expected to total $7.2 billion by the end of the decade [ii].
Demand for Healthcare Analytics in the United States is primarily determined by the following factors:
Total Healthcare Expenditures
Increases in total healthcare expenditures are directly correlated with increases in demand for healthcare analytics services. Research from the Centers for Medicare and Medicaid Services estimated healthcare spending to be 17.9% of total U.S. Gross Domestic Product in 2016, and projects spending to comprise 20.1% of U.S. GDP by 2025 [iii].
Maturing Population Demographics
As residents ages 65 and above represent an increasingly larger percentage of the population, the need for analytics services will increase considerably. With old age comes a high likelihood of chronic and infectious diseases; therefore, the need for descriptive, diagnostic, and prescriptive analytics will continue to be in high demand.
Pressure to Reduce Costs, Federal Healthcare Mandates & Digitization
To reduce costs and improve patient care, federal mandates such as the American Reinvestment & Recovery Act (ARRA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act have provided incentives to increase collaboration between providers and government programs. The HITECH Act defines the implementation and meaningful use of Electronic Health Records (EHR) as a critical national goal. Ensuring the proper use of Electronic Health Records will help “reduce [record] disparities, control chronic diseases, and build a health promoting healthcare system that is accountable for the health of our communities and our country” [v].
Factors which may restrict industry growth could be:
In 2016, the European Union passed a new law called the General Data Protection Regulation (GDPR) which imposes new requirements regarding the handling and privacy of personal data. The law will become effective in May 2018, and could result in hefty monetary penalties being levied against non-compliant firms. Firms that conduct business outside the United States could see an increase in the cost to provide certain products and services; additionally, the increased costs could limit the industry’s ability to provide certain products to the consumer.
The Healthcare Analytics industry is in the growth stage of its economic lifecycle; Revenue growth within the industry is notably higher than the growth rate of the overall economy. A very high degree of technological innovation characterizes the industry, with smaller firms having the potential to disrupt larger players by adapting quickly to fill market needs. Larger firms may opt to develop new solutions in-house or through acquisitions of smaller companies. As the United States population matures, demand for Healthcare Analytics will continue to expand. As services and product capabilities are enhanced, the industry will experience a self-reinforcing network effect: as more data collected and analyzed, the further costs will be reduced, which will increase demand, etc.
Britton Sorensen contributed to this article.