Healthcare Trends That Will Shape 2023

April 17, 2023 – In more than 300 conversations with industry board members, CEOs, and C-suite leaders, Spencer Stuart recently explored many key trends playing out in healthcare this year — all with clear implications for leadership, especially at senior levels. The firm looks at the major themes from the week and how they will impact leadership, talent, and organizational dynamics in 2023:

After reaching record levels in recent years, deal volume and value declined significantly in 2022, and higher interest rates and macroeconomic uncertainty will likely keep some dealmakers on the sidelines in 2023 as well, said the report. “As a result, organizations are likely to focus on integrating the business units and companies that they’ve already acquired and finding ways to improve financial performance through organic growth,” said Spencer Stuart. “Companies will also focus on partnering with organizations rather than making full-fledged acquisitions or large-scale deals.”

To be clear, deals aren’t stopping, said the report. Private equity firms still have dry powder to invest, and the demand for healthcare innovation remains massive, especially in the U.S. “If and when signs appear that interest rates are stabilizing, we’ll see more capital deployment,” said Spencer Stuart.

Leadership Implications

  • Partnership skills will be in demand. Collaboration and influencing are crucial — particularly across organizations of different sizes, such as a small biotech firm working with a large pharma company, said the report. Appreciating differing viewpoints and understanding the priorities of different partners will be important for a successful partnership.
  • Integration and organic growth are the twin focuses for 2023. Organizations will be looking for proven growth leaders in the C-suite with deep strategic and commercial capability balanced with the need for core operating skills to drive efficiencies. Now is the time to integrate acquisitions, align cultures, and return to operational basics, said the search firm.

Large medtech and biopharma companies are reorganizing. As the pace of acquisitions slows, large incumbents are reorganizing. “In some cases, they are spinning off slower-growth businesses,” said Spencer Stuart. “In others, they’re reconfiguring the organization into standalone business units with their own profit-and-loss structures. In both cases, the goal is to be more operationally and financially efficient. The challenge is that the reorganization process itself can be complex, expensive, and time-consuming.”

Leadership implications

  • CFOs will need a more strategic lens. “As our research on the path to CEO success shows, organizations are seeking CFOs who go beyond measuring and monitoring financial health,” said the report. “CFOs who can proactively help reshape the business will be critical, particularly for companies going through a major reorganization or spin-off.”
  • Experience with spin-offs or reorganizations will matter. Top leaders who have executed these programs in the past will be more attractive candidates, said the report. Modeling the financial implications of a reorganization, anticipating challenges, and communicating a clear story to Wall Street will all be core skills for C-level leaders.

Home health continues to grow, due to an increased emphasis from payers, changing reimbursement models, and new technologies that allow more “hospital at home” services and procedures to be provided at home, including dialysis, infusions and more. “In the past, home-health companies have focused on human capital, deploying nurses and other certified staff,” said Spencer Stuart. “But the future of home health will require a different type of organization, grounded in technology and data.

Leadership Implications

  • A scarcity of sector-specific talent will require a rethinking of key capabilities. Traditionally, home health has been a slower-growth segment with a smaller pool of senior talent, so finding a leader with direct sector experience won’t be easy, said the report. Candidates from adjacent sectors such as digital health and biopharma could have the skills outlined above and ably fill the talent gap in home health
  • Hiring and developing will be based on potential more than experience. Companies will need to assess more for overall leadership potential and rely less on segment subject-matter expertise. “This will not only uncover ‘hidden gems,’ but will also help identify overlooked talent from underrepresented groups and communities,” said the search firm. “Identifying and developing internal candidates is important, as is seeking external candidates with relevant backgrounds like technology.”

After years of favorable market conditions, biotech companies now face a much tougher environment — a new experience for some management teams and younger organizations. Valuations are down, many firms are underwater (or close), the IPO market is essentially dormant, and financing is harder to find.

“For preclinical biotech CEOs at companies that need cash, the long timeline before having commercially available products means a lower valuation for their businesses and a reduction in their equity,” said Spencer Stuart. “Even companies that are well financed for the next two years may be only ‘kicking the can’ down the road, as one investor put it. And the FDA’s insistence for confirmatory trials as a condition for accelerated approval may mean that biotech companies need more cash than originally budgeted to get their products to market, one biotech board member pointed out.”

Optimism Reigns
“Despite the current uncertainty — in healthcare and across most of the global economy — attendees were almost uniformly optimistic about the industry’s future, and believe that it’s an exciting time for the industry,” said the report. “The fundamental principles still apply: Strong companies rise, the best ideas get funded, and people will continue to develop new ways to improve patients’ lives.”

“If an uncertain market validates one thing, it’s this: Inspirational leaders who can communicate a clear vision and build inclusive environments will thrive despite the challenges ahead.”

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