2018 Forecast: Another Theranos, Hospital Hiring Slows & Successful HIT Exits

Bryan Roberts
Bob Kocher MD

For what is now an annual tradition, we are once again attempting to be healthcare soothsayers. We are proud to share with you our 10 healthcare predictions for 2018. In 2017, amaz-ingly, eight of our predictions came true.

For 2018, we are betting on the following:

1. Another Theranos

We think at least one healthcare information technology company with an enterprise value of more than $1 billion (not including Outcome Health, which we could not have predicted tanking so spectacularly quickly) will be exposed as not having product results to support their hype. It will also expose embarrassed investors who did not do careful diligence and founders with poor integrity.

2. Hospital hiring slows

After a decade of sustained hiring every month, hospitals will stop. Many will downsize their administrative staffs as admissions continue to slowdown and reimbursement pressures intensify. We expect multiple months with net healthcare job losses which would be the first time this has occurred since the Bureau of Labor Statistics started tracking the data.

3. Successful HCIT exits

After a long wait, and more than $10 billion of venture capital invested in startups over the past five years, we will begin to see successful IPO and M&A exits. These will reassure growth investors to keep pouring money into companies with traction.

4. Amazon does not disrupt PBMs

Despite daily rumors, we think Amazon will not shake up the PBM sector. Instead, Amazon will limit its healthcare market footprint to its existing consumer products and distributing non- regulated healthcare goods to healthcare providers (adopting a B2B and not B2C strategy).

5. AI makes a big impact

While we don’t think bots are going to replace doctors anytime soon, we are bullish that AI and machine learning are going to go from an R&D project, to meaningfully improving cancer diagnostics, pathology, and image recognition. We think that training data sets and technical capabilities have gotten to the point where new products will be created that begin to make a difference.

6. The ACA is repaired, finally

In 2018, a bipartisan effort will pass to improve the functioning of the ACA and we predict that Congress will act to help stabilize marketplaces and premiums. We will move on to focus more on MACRA and bending the cost curve which is beginning to bend in the wrong direction.

7. Medicare Advantage gains popularity

We think Medicare Advantage will gain in all dimensions. Seniors will increasingly choose it since it is more affordable, startups and incumbents will make big bets on growth, policy makers will enact favorable policies, and margins for payors and primary care providers will grow.

8. Payors become acquirers

With the crumbling of the Anthem/Cigna and Aetna/Humana mergers, and emergence of Aetna/CVS, we think that Anthem, Humana, Cigna, and Optum will all aggressively acquire “higher margin — less regulated than insurance” businesses.

9. CRISPR commoditizes

CRISPR has been one of the great technical advances in biological and medical research in a long time, and the CAS-9 enzyme that enables it is the source of much IP litigation and conflict. In 2018, it will become obvious that there will be many enzymes that can enable gene editing and the CAS-9 IP limitations will fall away.

10. Big Pharma gets bigger

We think that after a few years of smaller acquisitions, the mega- mergers will ramp back up in 2018. We predict that both BMS and Astra Zeneca will get acquired by other big pharmas.

We look forward to seeing what happens in 2018 and hoping that we can resist regression to the mean!

The authors are partners at Venrock capital. This post first appeared on Fortune.com. You can follow Bob Kocher on Twitter at @bobkocher.

3 replies »

  1. I enjoyed this. Of course the ACA won’t be “fixed” as in really made into a “working” piece of legislation, whatever that may be. But I think most of your predictions, including CVS/Aetna, are directionally correct. Good work.

  2. I am somewhat skeptical of your prediction that the ACA will be fixed

    I think this one is going to come down to how we define “fixed” …

    Do we define “fixed” as any non-catastrophic outcome where the system continues doing what it is currently doing? If so, I agree

  3. Meanwhile, using the other OECD nation’s as a plausible comparison, excess health spending will continue to worsen ($1 Trillion excess in 2016), longevity shortens again, and our nation’s maternal mortality incidence continues to worsen for poorly understood reasons ( >500 women died in 2016 because they lived in the wrong nation before their pregnancy started). Meanwhile, our zip codes predict their citizens level of health, our citizens health insurance enrollment is decreasing, the healthcare industry had a shortage of IV Saline this last year, and MACRA implementation has been deferred again because MedPac finally decided that the CMS attribution algorithm really was flawed, seemingly the last to finally understand its implications. Again, Parkinson’s Law will continue to govern the C-Suite. And, the deficiencies of Trust, Reciprocity, and Cooperation within our nation’s Primary Healthcare will continue to interfere with its ability to connect with the social adversities that drive the cost and quality problems of our nation’s healthcare.
    Over-all, not a good omen for February 2019, as our nation’s financial institutions now adapt to a new Chairman of the Federal Reserve.