Consumerism, Technology and New Business Models are Changing the Healthcare Industry
The evolution of the healthcare industry is akin to the stark differences between the popular animated television shows, The Flinstones and The Jetsons. The Flinstones live in a Stone Age town called Bedrock with prehistoric everyday tools, while the Jetsons live in a futuristic world called Orbit City with labor-saving robotic contraptions and inventions. Since the 1960s, and particularly in recent years, the healthcare industry has made similar innovative strides on three major fronts: consumer buying patterns, technological developments and new business models.
Years ago, when healthcare costs per capita were relatively low, consumers were somewhat ambivalent about the rising cost of services. The health maintenance organization (HMO) explosion over the last few decades further blinded consumers to the real, ever-increasing cost of care. Now, Consumer-Directed Health Plans (CDHP), Value-Based Insurance Designs (VBID), alternative networks such as tiered networks and reference-based pricing (RBP), and other programs engage the consumer at a much more transparent level. Additionally, more convenient, cost-effective healthcare settings are on the rise, including virtual care, telemedicine, convenience care, and urgent care. As these innovative initiatives continue to evolve and if stakeholders such as government, healthcare providers and healthcare payers can remove existing barriers; conventional wisdom suggests that market forces will drive down costs, improve quality, and increase satisfaction.
Many of the recent changes in the healthcare industry are driven by technological advancements across a host of areas. New drugs and drug delivery systems including precision medicine, can improve and extend quality of life. New medical equipment can detect illnesses at an earlier stage, providing more proactive treatment options. Human capital solutions such as payroll and benefits administration platforms have streamlined health plan administration for employers. Consumer-focused tools such as online websites, cost and transparency resources, and mobile apps can transform the way individuals buy healthcare services. Despite all of these technological advancements, most healthcare stakeholders continue to be frustrated by overall cost and quality results.
As the forces of consumerism and technology collide without the desired result of broad access to providers, high-quality outcomes and lower costs; the frustration levels from all stakeholders have reached a tipping point. The result is the emergence of fresh business models that are both vertical and horizontal.
Not only are traditional players making their mark but new entrants are pushing the boundaries as well.
Providers and carriers continue to consolidate for scale. Recently, CVS Caremark with its pending acquisition of Aetna and Cigna with its pending acquisition of Express Scripts have joined UnitedHealth Group in developing vertical and horizontal healthcare delivery systems that leverage data, scale and setting.
New entrants who are frustrated with the current system are joining the fray. Amazon, Berkshire Hathaway, and JPMorgan Chase are teaming up to create a new company with a goal of providing high-quality healthcare for their U.S. employees at lower costs. Warren Buffet, Chairman and CEO at Berkshire Hathaway, sums it up well saying, “Healthcare costs are a hungry tapeworm on the American economy.” Additionally, Apple is opening medical clinics to provide healthcare for its employees and family members. These are only a few of the new participants in the market. Suffice it to say that when ‘blue ocean’ companies or market disrupters like Amazon and Apple attack a market, it is highly likely that significant change will follow.
The healthcare industry has come a long way since the early days of Bedrock. Consumer-focused products and services are a move in the right direction and mirror all other market characteristics in a capitalist economy. Technology advancements are making things more like Orbit City – efficient, transparent and quicker. These three forces have the potential to evolve the healthcare industry into a dynamic marketplace where high-quality and low cost are not a dream, but a reality.