June 18, 2018
We see big non-healthcare players like Amazon, Berkshire Hathaway, and JPMorgan forming independent companies in an effort to cut out the middlemen and contract directly with healthcare providers to reduce costs and improve the quality of care for their employees. They are not the first collaborators to take on the entire ecosystem. But they are perhaps the first trio with the clout to effectively disrupt the entire supply chain. Consider that Amazon recently invited hospital executives to Seattle to discuss expanding its business-to-business marketplace so that U.S. hospitals and outpatient clinics can stock their emergency rooms, operating suites, and outpatient locations with its medical products.
Not only are we seeing large-scale disintermediation shaking up the system. We are also watching micro-hospitals lure patients away from traditional acute care hospitals with the lower cost and convenience of community-based services. We hear that 21% of healthcare executives are considering acquisitions to increase profitability. Hospitals are getting into the insurance business. Health insurers are experimenting with new delivery models and modes of payment. We have IBM® Watson’s artificial intelligence supporting clinician’s diagnoses and treatment plans. We have Fitbit® devices feeding activity, weight, heart rate, and nutrition data directly to consumers.
There are a lot of opinions being expressed about all the change that’s happening. We are convinced that a critical element in sensing your way through the disruption rocking the industry is a clear focus on the consumer.
In the past, B2C businesses relied on following a few traditional marketing principles to convert potential prospects into loyal customers. Now, in the age of always-on smart phones with their unending distractions, it’s all about providing meaning to establish engagement and then personalizing our communications in order to cut through the noise and turn customers into advocates.
How do we, in healthcare, begin to apply these same principles to our businesses? How do we convert our consumers (that is, our patients) into lifelong advocates?
INNOVATING TO ZERO
In theory, it would be great if we could innovate the whole system—considering nothing sacrosanct—so that patients can have a different experience of healthcare in the U.S. In practice, that simply won’t work. Our complex system is constantly in motion and can’t be stopped for a zero-based redesign. And, however much we might long to live in a world where there are zero fatalities, zero accidents, and zero disease, that is not yet our reality. We’re currently spending 17.9% of our GDP each year, to the tune of $9,500 per person, to take care of the health of America’s citizens. We’ve got patients to serve—every minute of every day all across our nation. There are no time outs allowed.
The next best thing to innovating to zero? Take a systemic approach to innovating the system with the patient at the center. Think about the patient and identify what is missing that would create a better experience, improved outcomes, and more efficient pricing. Execute changes and monitor results. A focus on an individual patient should inform the experiences of the next and the next and the next—improving in each iteration. In this continual learning mode, we can cross the boundaries that exist in our organizations and our whole healthcare ecosystem as we provide the care people need—when they want it, where they want it, and in the way they want.
In a world where Lyft & Amazon exist, consumers expect things to be delivered faster, better, and cheaper. We can have everything from the latest fashions to healthy food items delivered to our door with just a few clicks. We can determine what errands and chores we need to get done and search online to find volunteers and qualified professionals to help us do that work. In all this, we expect our experiences to be easy. Frictionless.
If we are truthful, we would admit that’s not what we get when it comes to our healthcare.
One major source of friction for patients is cost. According to the Bureau of Labor Statistics, employee contributions to premiums are rising faster than earnings and inflation. As of 2016, 44% of American adults are worried about their ability to pay medical bills if they should get sick or have an accident. They have reason to be worried. In the last 46 years, annual out-of-pocket expenses for patients have increased 85% (from $560 in 1970 to $1,093 in 2016). Twenty-eight percent of those who are in worse health have difficulty paying for routine care and 31% have trouble paying off their medical bills over time.
Another source of friction is the complexity of decision making. Patients don’t always know what’s in their best interests because the options are not always clear. A hairball of strategic financial and health decisions must be navigated. Where do you go for care? A specific facility so you can be reimbursed by your health insurance plan or your employer-sponsored coverage? Can you get there in time? An acute care hospital or a micro-hospital in your community? How long will you have to wait to be treated at either one? What happens to your coverage if you have to cross a state border? Will Medicare or Medicaid kick in? What will your HMO or PPO pay for? Can you afford surgery? Can you afford to follow the full treatment plan (as in, pay for the services, the drugs, or the rehab)? The list of things to consider is astounding…and that’s before you’ve even been treated.
At the same time, even as we try to help patients understand their options and figure out what’s in their best interests in the midst of all this complexity, we must rely on them to be a critical collaborator in their own healthcare. We need to actively educate and engage them in developing their unique treatment plan. We must let them have a strong voice in curating the right parties—from the surgeon and the physiotherapist who see them in the hospital to their general practitioner and insurance agent—and the necessary solutions to holistically address their healthcare needs and improve their outcomes.
Let’s move forward together in a way that has us all—including patients—being responsible for healthcare outcomes.
With the passing of the recent tax bill and the future of the Affordable Care Act still up in the air, it’s anyone’s guess what will happen with funding for Medicare and Medicaid. The pressure to keep the costs of reimbursements down and to reduce the bill for uncompensated care will continue. And that, along with all the other changes impacting the healthcare industry, means that if you’re a provider, you now face competition on all sides to secure an adequate supply of funding. As Tom Robinson, partner at Oliver Wyman, noted: “…providers are thinking, ‘Hang on a second, I could get carved out here.'”
The name of the game now is customer loyalty.
A surefire way to increase customer loyalty is by taking friction out of the healthcare experience for our patients. We have to first start with defining what “quality care” means to the individual patient, and then come up with metrics that are meaningful to both doctor and patient. With this information in hand, we can measure the quality of the care we provide in the eyes of the consumer, as well as the statistical outcomes and financial costs.
We want consumers to feel like they’re being treated as a unique individual, rather than as a number or a dollar sign, from the very first interaction they have with us. We can put forward a holistic approach to our services to amplify positive outcomes. We can engage with them, at their level of comprehension, to discuss what’s possible in terms of their care. We can curate the information we share with them in such a way that they know we see them as a whole person, not just as the problem they presented to us that needs addressing. We want them to come away from their experience not only feeling taken care of, but also empowered and committed to participating in their own ongoing care.
We can also take friction out of the healthcare ecosystem itself to improve patient service. This isn’t something we can necessarily do on our own. Because going frictionless requires we align around a common goal of improving the health and well-being of patients.
Thinking holistically about how we can collaborate for the good of patients and the good of the system is not something new for business. Yes, we’ve already made great inroads with telemedicine and with providing care in non-traditional settings. Now it’s time to apply this philosophy of meeting the patient where they are to give them access to effective, affordable solutions even more broadly.
Construction equipment manufacturer Caterpillar was probably among the first enterprises to tackle this. Their approach involved working across boundaries and creating new partnerships, all to meet the needs of patients while reducing costs to ecosystem participants (including the costs to consumers). In 2007, the company renegotiated how they would work with their Pharmacy Benefit Manager (PBM). They hired their own doctors and pharmacists, so employees would have easier access to diagnostic and prescription-filling services. They drew up their own list of drugs to be covered under their healthcare plan, promoting generics and discouraging the use of several expensive heartburn medications and cholesterol-lowering statins. They switched to using the PBM only to process claims. Within two years, the company’s drug costs were down 6.8% and the costs for plan members were down 13.8%.
The future is where consumerism and systems thinking collide.
We’re not suggesting the future lies in forming alliances with competitors. The future we see will come about by co-creating an ecosystem of care—a network of collaborations, partnerships, and joint ventures—that works for consumers and that shares the risks of making change happen.
This is possible. We’ve seen it happen with computers when Steve Jobs created the ecosystem that is “Apple”, a network of consumers and providers whose members are all very proud and vocal advocates. Being an Apple customer today says as much about you as a consumer as it does about the products and services the company provides. Similarly, we want patients remarking on how we worked in partnership with them, listening to their concerns and bringing together the right medicine, the right specialists, the right treatment at the right time and at the right price to make them truly feel they were participating in a system of integrated, comprehensive “care”.
The good news is we’re seeing this systemic shift towards collaboration happening more and more in healthcare services. In 2011, Intel began working with Presbyterian Health Services (a not-for-profit system of eight hospitals, a health plan, and a 600-provider medical group) to deliver an employee-centric benefits plan to everyone working at its largest semiconductor manufacturing facility. The agreement they co-created moves away from the traditional fee-for-service model and puts the onus on the value of providing high-quality care. Walmart continues to contract directly with specific clinics to provide organ transplants and some of the best spinal and heart care in the country to their employees. And then there’s the Healthcare Transformation Alliance, a group of 40+ corporations, coming together to “take better care of people”.
What does this shift mean for healthcare leaders? It means that, more likely than not, how we all deliver services to Americans in the future will be very different than how we deliver them now. We will have to come together in different combinations and in a different way to come up with different solutions and achieve better outcomes for our patients, our companies, and our partners in healthcare. We will have to enter into conversations with players in our ecosystem whom we may never have talked with before.
We at Ankura stand for the positive possibilities available to our healthcare system. But we know it will take all of us, working together to keep the consumer as our center of gravity, to make that possibility real in the U.S. As the Persian poet Rumi wrote, “Out beyond the world of ideas of wrong doing and right doing, there is a field. I will meet you there.”
See you on the field!
1 Melanie Evans and Laura Stevens. “Amazon’s Latest Ambition: To Be a Major Hospital Supplier”, Wall Street Journal, February 13, 2018. Accessed February 13, 2018 at http://on.wsj.com/2BpBfYi.
2 Joel Stinnett. “Health care leaders expect a busy year for M&As”, LMBC guest blog, January 24, 2018. Accessed February 21, 2018 at http://bit.ly/2EUwmIV.
3 Bradley Sawyer and Cynthia Cox. “How does health spending in the U.S. compare to other countries?”, Kaiser Family Foundation. Peterson-Kaiser’s Health System Tracker. Accessed February 5, 2018 at http://bit.ly/2nKyjgx.
4 Nick Wingfield, Katie Thomas, Reed Abelson. “Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care”, New York Times, January 30, 2018. Accessed February 5, 2018 at http://nyti.ms/2BDUeLj.
5 Peterson-Kaiser’s Health System Tracker dashboard. Problems Paying Medical Bills. Accessed February 19, 2018 at http://bit.ly/2EFL7Ag. Also: Affordability: Out-of-pocket expenses (figures quoted in constant 2016 dollars). Accessed February 19, 2018 at http://bit.ly/2C7brkW.
6 Shelby Livingston. “Left out of the game: Health systems offer direct-to-employer contracting to eliminate insurers”, Modern Healthcare, January 27, 2018. Accessed February 5, 2018 at http://bit.ly/2rXVNUF.
7 Douglas Hoey, “It’s time to reform accessibility to prescription drugs”, The Hill, September 11, 2017. Accessed February 19, 2018 at http://bit.ly/2wSzy43.
8 Brian L. Devore, Ben Wilson, and JJ Parsons. “Employer-Led Innovation for Healthcare Delivery and Payment Reform: Intel Corporation and Presbyterian Healthcare Services”. Accessed February 14, 2018 at http://bit.ly/2oc8asb.