Creating the Southwest Airlines of healthcare

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Despite its high costs and mammoth size, the US health industry is lacking a “value line” of products or services, its own version of a Southwest Airlines that eases the cost of travel, a Costco Wholesale that sells its products and services at a known markup, or an Uber that transports people with a click of a button. These companies offer premier customer experiences at low, transparent costs, balancing in-person and virtual interactions with employees who are laser-focused on the consumer. In 2019, a health industry increasingly pressured to do more with less will take lessons from emerging companies that have figured out how to deliver value to the uninsured and underinsured—traditionally deemed unprofitable—and turn a profit.


A lower-cost value line is an important growth strategy in a healthcare ecosystem in which average deductibles have tripled over the last decade and are now almost $1,300 for an individual with employer-based insurance, making healthcare costs a difficult financial decision even for the insured. Fifty-two percent of consumers with a high-deductible health plan say it would be hard to afford the deductible.1 Also, more than 30 million Americans remain uninsured, and Medicaid covers more than 60 million people.2

In response to these pressures, some healthcare companies are starting to build new, lower cost delivery models to capture this market, bucking the trend by reducing fixed costs, rethinking which clinicians deliver care and addressing the social determinants of health.

Ardās Family Medicine in Denver provides walk-in-only service to refugees predominantly enrolled in Medicaid—and does so profitably.3 Since 2012, Ardās has seen more than 10,000 patients, with 97 percent of revenue coming from Medicaid.“They don’t teach you that you can open your own practice and structure it to make money off Medicaid,” Ardās founder Dr. P.J. Parmar said in an interview with HRI. How does Ardās do it? “There is no one magic bullet,” Parmar said. Ardās operates on a walk-in basis rather than handling appointments, in a space designed to move people in and out quickly. It works with only one payer and has built a model around the customer experience, with evening and weekend hours and over-the-counter medications available in the office.5


New York City-based Cityblock Health, which contracts with health plans to serve low-income and vulnerable communities, sees significant opportunity to deliver and manage care differently for Medicaid beneficiaries.6 “Medicare Advantage has been a gold rush for provider-plan partnerships,” said Robbie Pottharst, chief operating officer of Cityblock Health, in an interview with HRI. “Medicaid has the added complexity of plans and patient populations that vary by state, requiring a highly tailored approach, but also creating an opening for new care delivery models.” The company receives a set amount of money per patient each month and takes on the financial risk of managing those patients’ care.Cityblock creates “Neighborhood Hubs” with local healthcare teams that deliver a high-touch care experience to address complex medical, behavioral health and social needs. Consumers want to address the social determinants of health, with Medicaid patients in particular recognizing their importance.

CareMore, an integrated health plan and care delivery system that serves Medicare and Medicaid patients in 10 states, is measuring and treating loneliness in the senior population through its Togetherness Program.8 CareMore uses direct interventions such as weekly phone calls from CareMore employees and volunteers and home visits from social workers who connect patients to community-based organizations.9 Early results are promising: Emergency room use declined by 5 percent and acute hospital admissions by 11 percent per 1,000 patients.10 “Loneliness is an epidemic in plain sight,” said Dr. Sachin H. Jain, CareMore chief executive officer, in an interview with HRI. “We treat it as an unavoidable part of aging.”

Even some technology companies are finding ways to apply their business models to addressing the social determinants of health. In 2017, Uber began partnering with healthcare organizations to transport patients to medical appointments. The company formally launched Uber Health in 2018.

Even some technology companies are finding ways to apply their business models to addressing the social determinants of health. In 2017, Uber began partnering with healthcare organizations to transport patients to medical appointments. The company formally launched Uber Health in 2018.11

Some companies are anchoring themselves on transparency; 77 percent of consumers whom HRI surveyed said they want to see more of that in healthcare.  Dallas/Fort Worth-based CityDoc Urgent Care lists self-pay prices for office visits and add-on services such as labs and X-rays on its website.12 CVS Health takes a similar approach with its MinuteClinics.

Generic drugs have long been the value line for pharmaceutical companies.13  With 15 percent of consumers responding that they have skipped or delayed getting medicine in the past 12 months because of cost, generics alone aren’t enough.14

For years, pharmaceutical companies have offered programs that help people afford their medications. HRI expects that in 2019 those programs will expand to help people manage their health and other aspects of their lives. For example, Sanofi’s Patient Connection program includes its Resource Connection service, which connects patients to nutritional assistance, transportation help, housing support and more.15

Implications

Recognize your consumer segments who need value

Consumers with high-deductible health plans, Medicaid consumers and those without insurance all have varying needs for value lines. They also have varying health needs and preferences that should be considered when creating these value lines.16 Providers that understand the consumer segments they want to serve can design an operating model for the future—perhaps as “integrators” serving a payer mix and consumer base that are both diverse, or as “health managers” targeting the frail elderly, complex chronic, chronic and mental health consumer segments.17

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Consider partnerships to deliver lower-cost, high-quality care

Scottsdale, Arizona-based Redirect Health is working with employers nationwide to make it easy and affordable to provide healthcare to even low-wage employees.18 For example, the company offers employees unlimited primary care visits paid for by their employer. Redirect Health is in talks with hospitals about collaborating to reduce unnecessary and expensive utilization by uninsured and Medicaid patients.19 Such partnerships would let Redirect Health manage those patients’ ongoing care and avoid unnecessary, pricey emergency room visits that often go unpaid or under-reimbursed, so that hospitals can concentrate on where they are needed most.

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Go beyond the prescription coupon

Pharma has yet to fully embrace the idea of value lines other than generic drugs and patient financial assistance programs. It could build on existing patient support programs to tackle social and lifestyle barriers to patient adherence. Pharma also could do more with outcomes-based payments, with which the price paid for a drug is linked to its economic or clinical performance.20 These companies also could develop value lines in the direct-to-consumer market with digital therapeutics such as Natural Cycles, a contraception app approved by the FDA in August 2018.21 The app costs $80 a year and doesn’t require a doctor visit or prescription.22

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PwC Health Research Institute consumer survey, winter 2018

2 Congressional Budget Office, “Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2018 to 2028,” May 2018, https://www.cbo.gov/system/files?file=2018-06/53826-healthinsurancecoverage.pdf

3 PwC Health Research Institute interview with Dr. P.J. Parmar, founder of Ardās Family Medicine, on Oct. 1, 2018

4 Ardās Family Medicine, “Welcome to Ardās Family Medicine,” accessed Sept. 28, 2018, http://www.ardasclinic.com/

5 PwC Health Research Institute interview with Dr. P.J. Parmar, founder of Ardās Family Medicine, on Oct. 1, 2018

6 PwC Health Research Institute interview with Robbie Pottharst, COO, Cityblock Health, on Sept. 20, 2018

7 Ibid.

8 PwC Health Research Institute interview with Dr. Sachin Jain, chief executive officer of CareMore, on Oct. 5, 2018

9 Robin Caruso, The American Journal of Managed Care, “CareMore’s Togetherness Program Addresses a Symptom of Living With Chronic Illness: Loneliness,” Aug. 15, 2018,  https://www.ajmc.com/journals/evidence-based-oncology/2018/august-2018/caremores-togetherness-program-addresses-a-symptom-of-living-with-chronic-illness-loneliness

10 Ibid.

11 Introducing Uber Health | Cost-efficient, Reliable Transportation for Patients, "When Lack of Transportation Is a Barrier to Patient Care, Uber Health Can Help,” accessed November 12, 2018, https://www.uberhealth.com/about

12 CityDoc Urgent Care, “No Insurance, No Problem: CityDoc Offers Simple Self-Pay Pricing,” accessed Oct. 12, 2018, https://citydoc.net/no-insurance-no-problem/

13 CVS Pharmacy Minute Clinic, “Price List,” accessed Oct. 12, 2018, https://www.cvs.com/minuteclinic/services/price-lists

14 PwC Health Research Institute, “The FDA is approving more generic drugs than ever before, faster than ever before. Is it enough to lower drug costs?” June 2018, https://www.pwc.com/us/en/industries/health-industries/health-research-institute/generic-drug-pricing.html

15 PwC Health Research Institute consumer survey, winter 2018

16 Sanofi, “Patient Connection: Connecting Patients to Medication and Resources,” accessed Oct. 29, 2018, http://www.sanofipatientconnection.com/media/pdf/SPC_Brochure.pdf

17 PwC Health Research Institute, “Customer experience in the New Health Economy: The data cure,” February 2018, https://www.pwc.com/us/en/health-industries/health-research-institute/customer-experience.html

18 PwC Health Research Institute, “Provider systems of the future: What happens when the hospital is no longer the center of the health universe?” October 2018, https://www.pwc.com/us/en/health-industries/health-research-institute/provider-systems-future.html

19 PwC Health Research Institute interview with Dr. David Berg, co-founder of Redirect Health, on Oct. 2, 2018

20 Ibid.

21 PwC Health Research Institute, “Launching into value: Pharma’s quest to align drug prices with outcomes,” September 2017, https://www.pwc.com/us/en/industries/health-industries/library/value-based-drug-pricing.html

22 U.S. Food & Drug Administration, “FDA allows marketing of first direct-to-consumer app for contraceptive use to prevent pregnancy,” Aug. 10, 2018, https://www.fda.gov/newsevents/newsroom/pressannouncements/ucm616511.htm

23 Natural Cycles, “Natural Cycles — Digital Birth Control,” accessed Oct. 6, 2018, https://www.naturalcycles.com/en-us

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