The Future of Health Is More,
Better, Cheaper
New entrants and
established players are racing to create the next generation of medical
products and services.
Healthcare, like so
many other industries these days, is being democratized. A survey published in
April 2014 by PwC’s Health Research Institute (HRI) found that many consumers
are willing to abandon traditional care venues for more affordable and convenient
alternatives. Nearly one in two survey respondents said they would choose
at-home or retail options for more than a dozen medical conditions or
procedures such as self-diagnosing strep throat or administering chemotherapy.
Kits already exist that enable people to test themselves for HIV. Respondents
between the ages of 35 and 54 were very likely to opt for these types of
affordable alternatives, as were those who indicated that their healthcare
expenses had put a strain on family finances. As individuals are required to
foot more of the bill for medical care through high-deductible or cost-sharing
health plans, insurance exchanges, the popularity of these options
will only rise.
Within a decade, the
health business will look and feel much more like other consumer-oriented, technology-enabled industries. It will have its own
Amazon-style, iconic brands—companies that give consumers an easy way to access information, doctors, and
treatments; provide them with a variety of services and products at a variety
of prices; and centralize their care through user-friendly interfaces. And
thanks to this growing trend, plenty of entrants into the market would like
nothing better than to upend the old model of care, empowering consumers while
taking some of the industry’s annual US$2.9 trillion market for themselves.
These new players will
further propel the democratization and decentralization of the healthcare
industry. Incumbents such as established pharmaceutical companies and health
insurance firms, in turn, will face critical decisions. How should they compete
with emerging players? Should they forgo competition and instead partner with
them? This much is clear: Incumbents cannot continue to do business as usual.
Healthcare for the People
In 2013, 24 of the top
50 Fortune 500 companies were new entrants into healthcare. Of this group,
seven were retailers and eight were technology and telecommunications
companies. Both types arrived on the health scene boasting deep relationships
with millions of customers and rich databases of information. There were even
two automakers on the list: General Motors and Ford. The latter company is
developing services to help drivers with chronic conditions manage their health
while they’re behind the wheel. And at a time when venture capital investment
in the life sciences is down, money is pouring into startups targeting digital
health,
price transparency, workflow, electronic medical record systems, and population
health management.
Many
of the products and services these entrants are developing are available now,
or will be soon. Consumers
can already access online services to evaluate digital photos of rashes,
moles, and skin conditions, or to connect with a physician quickly and for a
flat fee. CellScope’s Oto, a smartphone accessory that captures digital images
of the ear canal, went on the market at the end of 2014 at $79 for home users
and $299 for medical professionals. Scanadu—developers of the Scan-adu Scout,
a Star Trek–inspired vital sign “tricorder”—hope the device will
soon have a place next to the thermometer in the family medicine cabinet. The
company is currently testing it.
Some companies are
taking established products that previously had nothing to do with healthcare
and developing new and unexpected uses for them. Samsung’s Galaxy S5
smartphone, released last year, includes a built-in heart rate monitor. In
November 2013, Time Warner Cable Business Class announced a “virtual visit”
experiment in partnership with the Cleveland Clinic in which caregivers
interacted with patients through their televisions, using secure video
technology. Other entrants have figured out that collaboration is an even
faster route to innovation that will attract consumers’ attention: AT&T
opened its mHealth platform to developers in 2012, with the aim of becoming the
go-to creator of future game-changing apps.
In some cases, these
companies are looking for a hefty slice of the $2.9 trillion sick-care or $267
billion wellness pies. In others, they hope to woo customers to other parts of
their business with high-quality, affordable healthcare, perhaps enticing them
to visit their stores or websites more frequently or for more time. Yet another
group views the changing healthcare landscape as an opportunity to develop
low-cost, DIY, or retail solutions for certain types of care, or as a hook to
gather valuable data that can be monetized into insights or ad sales. For
example, more than 1 million customers transmit data from fitness trackers to
Walgreens in exchange for points that can be used like cash to purchase many
products in the company’s stores and on its website.
New Life for Old Players
With all these
changes, it may seem that established healthcare companies risk becoming
obsolete. But if they take the time now to make necessary adjustments, they can
position themselves to compete—or collaborate—with these new players. After
all, incumbents already have an advantage: They know the industry better than
companies from other sectors, and they know the stakeholders, the regulatory
challenges, and the payment systems. They now have to use this knowledge in
fresh ways.
Understanding the
needs and wants of the consumer is a good place to start. As healthcare
exchanges and new competitors offer customers more choices, healthcare
companies need to differentiate themselves by providing customer experiences
that earn loyalty and trust. Patients will abandon companies that can’t deliver
care on their terms. Incumbents should create new options for access,
information, and products and services. They should consider making operating
hours more convenient for customers, making clinicians available via digital
devices, and making pricing and quality as transparent as possible.
Traditional healthcare
companies, many of which view insurance companies as their primary customers,
must also move from a B2B model to one that includes the consumer. In this type
of business-to-consumer-to-business (B2C2B) model, companies retrieve health
app data from consumers and use it to personalize experiences and care, and
create better products and services. To develop these models, they’ll need to
evaluate their service offerings and operating models. They’ll also have to
experiment and innovate proactively, and not as a reaction to a revenue dip.
Competing online is
critical to all these moves. This means developing efficient, affordable ways
to deliver care to consumers’ digital devices while answering regulatory,
privacy, and security concerns. To mitigate some of the complexity, companies
could enter the market through the wellness and fitness categories. Consumers
tend to pay out of pocket for goods and services such as personal health
tracking devices, which has the added advantage of being relatively free of
regulation.
Integration and
accessibility of data are keys to success online. Skeptics point out that an à
la carte medical system, in which patients access care at a variety of
locations, will undermine efforts to integrate care if data is not readily
available to all caregivers. Retail clinics have been criticized by some
physician groups, which cite lack of access to information about patients and
impeded continuity of care. And customers have not yet embraced the concept of
universally accessible personal health records. Successful companies will find
a way to combine all this information into a resource consumers want to use.
Teaming Up
Success in the new
healthcare environment will require inside knowledge of the complexities of the
fragmented healthcare system, technological prowess, and strong ties to
consumers. Because few organizations possess all these characteristics, both
incumbents and entrants may find that partnering with one another, and taking
advantage of one another’s capabilities, is the best way to navigate the
market.
New players have
several advantages in customer engagement. They may have access to large,
diverse, and valuable customer segments where incumbents have yet to make an
impact. And these entrants also have the platforms that enable them to interact
with people more often and more meaningfully than traditional healthcare
companies—and usually with a higher degree of customer loyalty. They’re also
better at using data analytics to determine what customers really want, even
down to the individual level, making the experience better for consumers each
time they use the service.
Upstarts can also
benefit from smart alliances. As partners, traditional healthcare companies can
serve as guides to the regulatory and payment maze. Pharmaceutical and life
sciences companies, for example, can develop novel ways to add value by
partnering with entrants that are targeting patients with specific diseases or
conditions.
Healthcare incumbents
are also experienced in the unique challenges of the industry. One big barrier
to change is the third-party payment system, which doesn’t exist in any other
sector. Newcomers need to understand the interactions and roles among insurers,
pharmaceutical and life sciences companies, providers, manufacturers, and
patients.
Perhaps the biggest
challenge in this transformation of the healthcare industry is that 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 old and new will
need to be creative in designing business models that draw people to pay for
value. And ultimately, the consumer wins in this scenario—with the emergence of
a marketplace filled with more, better, and cheaper options
by Vaughn Kauffman and Trine Tsouderos
http://www.strategy-business.com/article/00302?gko=ffe4d
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