Rather than consumers scrambling for help during times of need, health networks will seek to form lifetime relationships with consumers to deliver personalized care and wellness. Achieving this will involve dynamic decision making across the strategic agenda. Anticipating demand, configuring the network, deploying the talent and technology, and managing the risk will all be essential.
Care delivery in the US has experienced two major evolutions over the last few decades. In the late 1990s, utilization rose sharply with the uptick in managed care and increased further in the post-HMO era with an economic focus on utilization and episode-based care. This was 1.0 – over 750 fragmented institutions with predominantly hospital assets, limited risk-based payment arrangements, incremental cost-reduction efforts, and a nascent focus on consumer experience. We estimate half of all providers still exist in this stage.
Post the merger mania of the late 2000s and the Affordable Care Act, a 2.0 paradigm of the delivery system emerged and prevails today. We estimate the other half of providers are in this stage. Characterized by approximately 500 regional and multi-regional health systems, 2.0 features scale, increasing focus on the consumer (and care team) experience, a gradual rise in risk arrangements, and an extension in care beyond acute episodes. However, entrenched cultures, limited resources, and regulation have restricted change. The results are familiar and unexceptional: Clinical costs continue to rise with little improvement in quality and outcomes, while consumers suffer.
At the heart of IHN 3.0 will be the consumer’s “home”: highly curated care and wellness delivered where the consumer lives, works and plays. As care and wellness continue to shift away from inpatient centers, some consumers likely will never visit a hospital for most of their lifespan, and the “virtual consumer” will arise.
The next evolution will see health networks focus on improving holistic health outcomes by building a trusted relationship with the consumer through a series of curated experiences across the consumer’s lifetime. Mega-networks will evolve to engage both clinical and social drivers of health, with the number of systems likely contracting further to approximately 250 to 300. As they scale, networks will take on more risk arrangements, guaranteeing health outcomes. This is IHN 3.0, a curator and guarantor of consumer health and well-being. While some health organizations have made sporadic progress and innovative models are constantly appearing, no one is here yet.
At the heart of IHN 3.0 will be the consumer’s “home”: highly curated care and wellness delivered where the consumer lives, works and plays. As care and wellness continue to shift away from inpatient centers, some consumers likely will never visit a hospital for most of their lifespan, and the “virtual consumer” will arise. Health networks will be both intensely local – clinical access at home, leveraging of community partners, retail channels – and without geographic boundaries as virtual health makes it possible to engage health consumers everywhere.
This will mean a marked shift from largely acute-care hospital assets, to virtual and retail “doors to health.” Business and technology systems will combine these assets, consumer solutions and human care teams with cutting edge clinical and behavioral science, artificial intelligence, product design and information systems.
Similar systems already drive consumer interactions in other industries. Financial institutions seek to build lifelong relationships with consumers and their families through personalized banking services, investment advice and credit products delivered virtually. Healthcare will follow: As many as 50% of physician office visits could be virtual by 2024.
The economic prize will shift to the lifetime value of the consumer, as health networks seek to build trusted lifelong relationships enabled through technology, scale and behavioral insights. Significant value will be unlocked through enhancing the “Return on Experience” that will inspire loyalty as well as drive new revenue streams and savings. Reimbursement will continue to be both fee-for-service and value-based. However, health organizations in IHN 3.0 will take on significantly more risk as they scale, acting as guarantors of consumer health and well-being. Cost reduction will play a vital role in enabling personalized care, with networks seeking to remove more than 25% of their cost base.
Achieving IHN 3.0 will require significant investment, capability shifts and cultural changes for healthcare providers along all elements of the strategic agenda:
As markets evolve, so will strategies of each health organization, in line with its legacy, strengths and market realities. For example, today’s Experience Leaders are heavily focused on making services more accessible and user-friendly. Tomorrow, they will look to create new experiences, settings and offerings that inspire consumer loyalty over their entire lifetimes. Doing so will require greater strengths in areas like consumer engagement and customer relationship management (CRM) – but could also create new revenue streams such as subscription fees.
Not every health organization will become an IHN 3.0, but they all will probably join one. This will require a multitude of dynamic decisions based on continuous and rigorous analysis of competition, partners, reimbursement and regulations.
Uncertainty around these decisions is high, however leaders have increasingly sophisticated tools to help them understand future scenarios and make more informed strategic decisions in the progression to IHN 3.0.
Evolution to IHN 3.0 will occur across regulatory scenarios. For example, in a single-payer scenario, margins will continue to decline, making scale and cost reduction more important. Along with a hyper focus on cost of care, Millennial, Gen X and Z demand for digital access, content and treatment will likely accelerate the evolution of 3.0. In this scenario, there will be even larger networks with super regional or national footprints, as state boundaries lose relevance and employer relationships change.
In future articles we will highlight in-depth perspectives on the business and economic model for IHN 3.0, the consumer experience and predicting behaviors with sophisticated modeling approaches, virtual health and technology considerations, as well as cost transformation in IHN 3.0.
Experience Strategy Lead, PwC US
Principal, PwC US
Principal, Health Industries, PwC US