Four Years Later: The Empowered Consumer
In January 2005, we published our initial industry report on the evolving role of the
consumer in the U.S. healthcare market. The report, titled “The Power of Choice: On
the Brink of a Consumer Revolution in Health Care,” in addition to our three update
reports (“One Year Later: Rapidly Approaching the Tipping Point,” “Two Years Later: The
Evolution Continues,” and “Three Years Later: The Tip of the Iceberg”), provided our
expectations for the most signifi cant developments in the healthcare marketplace over
the next three to fi ve years.
Four years after publishing our initial report, our thesis remains intact and continues
to unfold at a rapid pace. More specifi c, we continue to believe that consumers will
soon have ample access to healthcare quality data and pricing information, which will
allow them to make more value-oriented healthcare purchasing decisions. In addition,
we expect consumers will continue to face increased fi nancial responsibility for their
healthcare purchases—in the form of increased co-payments, tiered provider networks,
and greater penetration of high-deductible insurance plans.
Accordingly, we believe patients will gradually take a more active role in educating
themselves on treatment alternatives and the cost of medical care; and—perhaps most
important—we expect consumers ultimately will realize that their own behavior is
often what drives their need for healthcare services. This, in our view, is the true
holy grail of consumer empowerment.
Given this backdrop, we continue to believe that consumer-centric healthcare
providers (or those companies that provide the technology and services to enable
more consumer empowerment in healthcare) will experience strong top- and bottomline
growth over the coming years. Moreover, we believe that investors—in both
the public and private-equity markets—will achieve superior long-term returns by
identifying and investing in these companies.
The purpose of this report is therefore threefold:
• To more fully explore the rapidly evolving U.S. healthcare marketplace
• To identify key industry developments and trends that warrant monitoring over the
coming years (including an analysis of key trends to monitor in 2009 and beyond)
• To provide a macro backdrop that healthcare services investors—regardless of
investment style or market-cap focus—can use to develop a mosaic regarding the
future direction of the U.S. healthcare system

Contents
Introduction and Macro Thesis ....................................................................................3
Consumer-Driven Healthcare: Four Factors We Believe Will Drive CDHC Adoption
Over the Coming Years ................................................................................................9
Factor I: The Escalating Costs of Healthcare in the United States ....................9
Factor II: Increasing Availability of Healthcare Price and Quality Information .......13
Factor III: More Financial Responsibility for Healthcare Consumers ..............19
Factor IV: Health Insurers and Employers Are Embracing Consumerism ......21
Top Trends for 2009 and Beyond ...............................................................................26
Comparative Effectiveness Research ...................................................................26
Pay-for-Performance/Value-Based Purchasing .................................................27
Workforce Health and Productivity Management ..............................................28
Looming Doctor Shortage ....................................................................................29
People Pay for Unhealthy Lifestyles ...................................................................30
On-Site Healthcare Clinics ...................................................................................31
Telemedicine .........................................................................................................31
Medical Tourism ....................................................................................................32
Consumer-Centric Healthcare .............................................................................33
Summary and Investment Conclusion ......................................................................33
Emerging Investment Themes .............................................................................34
Emerging Investment Risks .................................................................................35
Investment Checklist ............................................................................................37
Public and Private Company Profiles ........................................................................38