US healthcare management consulting market tops $50 billion

17 September 2018 Authored by Consulting.us

The US management consulting market relating to healthcare is booming. Last year it was valued at around $45 billion, with that figure projected to break the $60 billion barrier by the end of 2019.

Consultants are set to continue to benefit from on-going pressures faced by hospitals, health systems, medical device and pharmaceutical manufacturers, payers, insurers, and physician groups. In order to cope with their large change programs, health industry players are increasingly seeking external help, which has seen healthcare management consulting boom over the past few years.

According to Consulting.us analysis of figures from The Black Book, the main drivers of growth are dominated by the need to adopt new technology. Healthcare IT infrastructure upgrades can help facilitate broader changes in organisations, and it is unsurprisingly the top driver of growth for healthcare consulting as a result. Healthcare IT demand drove 81% of growth, followed by the adoption of cloud technology in healthcare at 74% and increased industry digitalization, at 71%.

This aspect of demand is largely being emphasized by healthcare providers having to adapt to new disruptive presences in the industry. New market competitors often boast an improved understanding of innovative technology, allowing them to be more agile and responsive to patient and client needs. One example of this is trillion-dollar company Amazon, which announced it was entering the fray in the sector this year.

Thanks to these pressures, nearly two-thirds of providers participating in a survey by market research professional services firm The Black Book said they will seek advisors to optimize their current EHR & RCM systems (61%), while 46% said they plan to access experts in software training and implementation in 2019.The US healthcare management consulting marketIT consulting is therefore around 64% of a $53 billion industry, involving the implementation of software, information systems, systems integration, and optimization. This is because while organizations can purchase an advanced piece of software, they are not always able to implement it with existing infrastructure systems, or they may not have the staff on-hand to solve such a compatibility issue.

Elsewhere, the demand for value-based care was also a key driver, with 39% of respondents suggesting they will seek advice in this area, alongside compliance issues (33%) and big data, decision support, and analytics (31%). Another area that is in demand in healthcare is mergers & acquisitons, and so M&A support is on the rise, too.

Although increasingly concerning health organisations, cybersecurity, interoperability, and healthcare consumer initiatives in provider and payer organizations were not among the top ten consultant engagements prioritized for 2018 and 2019. 

With huge issues related to ballooning costs and aging populations, healthcare consulting can expect to see continued growth in the coming years. Healthcare management consulting has expanded by 18% in the past year, growing by $8 billion to hit a value of $53 billion in 2018. The rise of the sector is anticipated to continue, as well, with Consulting.us estimating that it will be worth around $63 billion by the end of 2019.

Multi-sourcing

When engaging consultants, clients can of course plump down cash for large firms such as McKinsey, BCG, the Big Four, and other major players in the global consulting industry. However, among 1,586 buyers of healthcare consultancy services, many said they will be seeking multiple-sourced consultants to work on engagements and projects together. These include single shop consultants, single freelancers, group purchasing organizations, HIT vendors, networks of freelancers, and boutique advisory firms, as well as major consultancies. As such, they don’t want to become pigeonholed into one method or one preferred vendor.

The findings ultimately point to the fact that healthcare buyers are trending away from using single large consulting groups to execute a substantial project to one with more arrangements where healthcare clients press multiple consultants and advisory firms to collaborate on project engagements. While it risks the dominance of the large consulting firms in the market, it also means niche, highly specialised firms should revisit their strategy.

Healthcare executives are now increasingly thinking that their organizational interests are best served by retaining niche firms. The key is that cooperation between boutique consulting firms with complementary portfolios can make for the good of provider ecosystems, which can engage in initiatives with track records of cooperation and collaboration for research updates.

The researchers further highlighted that freelance and very small niche advisors are “redrawing the industry lines, as healthcare buyers are more and more open and given tools to tap into the gig economy.” Ultimately, this is pushing traditional consulting firms – from large to small – to explore innovative business models, while forcing more collaboration in the market. One of the solutions consulting firms are trying to use to their advantage is the incorporation of more technology-based solutions – leveraging tech that automates consulting capabilities and embraces digital tools for operations.

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