PwC Health Research Institute Unveils Impending Top Health Industry Issues of 2020

In PwC Health Research Institute’s report, “Top health industry issues of 2020: Will digital start to show an ROI?” researchers highlighted the forces that will most powerfully affect the health industry in 2020, with a chief focus on the concern emerging from revisions to overseas tax provisions.

The report distinguishes a variety of issues that will impact current standards employed by US health industries in the upcoming year. Researchers focused on 7 headline items:

• A looming tsunami of high prices
• Regulation trumps policy
• Consumers inch closer to do-it-yourself healthcare
• US health organizations are seeking opportunities overseas and through innovation—beware of the tax risks
• A whole new you: Deals as makeovers
• Equity and inclusion, not just diversity, as a business imperative

One issue in particular, the growing innovation of US-based healthcare organizations overseas, has become concerning amid changing tax provisions, primarily among based-for-profit provider companies, tax-exempt provider organizations, payers, and life sciences companies. According to the report, 85% of these top US-based companies are operating overseas. As 90% of this group is also seeking income in innovation, whether it is venture capital funds, operating accelerators, or partnerships, potential tax provisions curbing their profits threatens to not only harm their respective operations but also those benefitting from their services in places worldwide.

To assist members’ tax profits where business activity takes place, the Group of 20 and the Organization for Economic Cooperation and Development (OECD) have taken initiative by publishing guidance, called BEPS 1.0, which educates member nations on base erosion and profit shifting. However, BEPS guidance is being adopted unevenly across nations, even though it addresses issues including treaty abuse, transfer pricing, and mobile workforces.

Adherence to these recommendations could prove vital as researchers noted that international taxation could be materializing. This past October, the Secretariat of the OECD published a proposal, called the Pillar 1 Unified Approach, that would allocate taxing rights to nations where digital consumers are located rather focusing on the location of the business. The Secretariat of the OECD additionally requested comments last month on its Global Anti-Base Erosion (GloBE) proposal, which would integrate common global minimum tax rules for nations part of the OECD framework, a move that could increase tax and compliance obligations for enterprises across industries.

These potential changes would affect the current state of large international businesses, particularly US-based companies with large ties overseas. Some examples provided by researchers are Centene Corporation, who operates in 32 states and 4 international markets, and Seattle-based Providence Health & Services, one of the largest tax-exempt providers in the United States. Providence operates 51 hospitals and more than 800 clinics in 7 states and has partnerships in Guatemala and Mexico.

The change in tax provisions will alter how organizations approach a myriad of functions, prompting a change in the international health industry landscape. “These issues mean extra planning by tax departments, human resources and C-suite executives. They could mean investments in expertise and technology to monitor and document the flow of workers traveling abroad, heightened awareness of changes around transfer pricing, and planning for deals that don’t result in adverse tax scenarios,” said the study authors.