What the new health economy means for healthcare organizations

In coming years, consumers will move billions of dollars to businesses offering more affordable, simpler and more convenient care. Health organizations also will have to compete with industries such as travel, entertainment and retail for consumers’ discretionary dollars.

Here’s how to ensure your business takes advantage of these opportunities.

Here’s how to ensure your business takes advantage of these opportunities

For new entrants and traditional healthcare organizations

Start with the consumer and work backwards. Consumers will abandon companies unable to deliver care on their terms. Health organizations must understand consumers’ needs and desires, creating new options for access, information and products and services. Consider rethinking operating hours, availability of clinicians via digital devices and transparency of pricing and quality.

As Nasrin Dayani, Executive Director for AT&T ForHealth Solutions, told HRI, “We believe the ultimate jury of that game-changing app and that game-changing device are the consumers themselves. It will not be decided by the providers or payers.”

  • Be flexible. All organizations must develop strategies for both fee-for-service medicine and value-based models. Traditional healthcare companies must prepare to move from B-to-B to B-to-C-to-B, utilizing customer data to personalize experiences and care.

  • Engage risk management counsel early. Innovation requires striking the right balance of involvement by regulatory and legal counsel. Too much risk aversion can hamper experimentation. Airbnb launched its travel rental business in 2008 before many communities had decided whether it fit local ordinances. Today Airbnb has served more than 11 million guests in 192 countries.

Yet regulatory risks are real. 23andMe, a genetic testing service, learned this last year when it received a warning letter from the U.S. Food and Drug Administration (FDA). The agency cited an alleged lack of communication from the company over how it marketed its saliva collection kit and personal genome service.The company stopped offering its health-related genetic tests to new customers.

  • Don’t go it alone. Success will require inside knowledge of the complexities of the fragmented healthcare system, technological prowess and strong ties to consumers. Few organizations possess all of these.

Traditional health players should consider strategic partnerships with new entrants, which also may possess broad distribution networks. Aligning with new entrants may transform a potential competitor into a future collaborator.

Newer players can also benefit from smart alliances. As partners, traditional healthcare companies can serve as guides to the regulatory and payment maze.

  • Compete in cyberspace. Eighty percent of Americans aged 18 to 34 own a smartphone; half of American adults do. Developing efficient, affordable ways to deliver care to consumers’ devices is critical, as is finding solutions to regulatory, privacy and security concerns. Consumers will reward those who make healthcare as easy and affordable as online shopping for travel, consumer goods and entertainment.

Mobile will be crucial in the New Health Economy. All players must understand how to create new value propositions based on social, mobile, analytic and cloud technology, generating positive customer experiences.

  • Integrate. Skeptics point out that an a la carte medical system will undermine efforts to integrate care if data are not readily available to all caregivers. Retail clinics have been criticized by some physician groups, citing lack of access to information about patients. Customers have not embraced universally-accessible personal health records. Integration and accessibility of data will be key to building a seamless, coordinated health system.

For traditional healthcare organizations

  • Triage sources of revenue. As cheaper options emerge, especially for commodity services, traditional healthcare companies should evaluate which services are worth defending. The loss of less-lucrative services could free space and time for higher-value offerings. Consider partnering with new entrants. Experiment before revenue starts to disappear.

  • Rethink marketing. As consumers shift to DIY medicine and new providers, drug makers must adjust marketing to reach consumers where they live – online and at home. Patients are becoming influential opinion leaders. Companies will need to determine how to address the growing diversity of influencers in their marketing campaigns.

  • Rethink the value proposition. The growth of new price and quality transparency services will place pressure on drug manufacturers as stakeholders gain the power to compare different products’ values. Pharmaceutical and life sciences companies must re-evaluate pricing models and develop new ways to add value, perhaps by partnering with new entrants targeting patients with relevant diseases or conditions.

For new entrants

  • Get paid. New entrants must know how to adapt to current and prospective payment systems. The business model is as important as the technology or service. As Zeiger of Smart Patients put it, “We don’t need more technology. We mostly need faster evolutions of the business.”

The digital world has trained consumers to believe they don’t need to pay much for many online services, such as content and social media. Companies must be creative in designing business models that hook others into paying for value.

Business model innovation is a complex process with no single recipe for success. Companies should create a defined business innovation process first, using business model simulation as a tool. Simulations can help fine-tune projects before they are tested in the real world, allowing for rapid, low-cost, low-risk iteration.

  • Know the stakeholders: New entrants need to understand the interactions and roles among insurers, pharmaceutical and life sciences companies, providers, manufacturers and patients and how to tap new channels to enter the market, especially as it becomes increasingly consumer-oriented.

Where are you on the journey

Infographic

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Quotes

“The question is, when do you disrupt yourself?”

Dr. Bob Kocher
Partner, Venrock

"We are seeing the emergence of new health services being provided by non-traditional players; a trend that is here to stay"

Vaughn Kauffman
PwC Principal, US Health Industries

"As a consumer, I would say my memories of going to the doctor 20 years ago are almost exactly like my experience is today. I'm still filling out those clipboards."

Mario Schlosser
Co-founder, Oscar Health Insurance

"It is inevitable. The world will be this way. The timing may be off, but it will go in this direction."

Malay Gandhi
Chief Strategy Officer
Rock Health

"Traditional business models will be challenged as companies from more customer savvy industries continue to enter the health space."

Kelly Barnes
PwC US Health Industries Leader

"There will be so much health care monitoring and care delivery that will happen right on your mobile device."

Lawrence Leisure
Operating Partner
Kleiner, Perkins, Caufield & Byers