Digital innovation and the rise of the empowered healthcare consumer
We’ve seen this play out before – industries such as music, entertainment, travel and financial services have all been dramatically disrupted by digital forces and technology, ultimately transforming complex value chains into creator-to-consumer models.
Healthcare will be next. Transformative market forces, coupled with rapid advances in digital technologies, are placing consumers at the center of an increasingly virtualized, personalized and delocalized healthcare system. Anticipating disruption, an unprecedented number of new entrants and venture capital-backed solution providers focusing on healthcare have emerged. In fact, digital health funding reached a new high in 2015, with close to $6 billion in investments (1).
While responding to this transformation will be an existential challenge for traditional healthcare organizations, it will be prudent to quickly master successful engagement with the healthcare consumer of today and tomorrow if organizations hope to survive and thrive in this new healthcare economy.
New forces reshaping healthcare
To cater to the technological transformation and meet the needs of the new generation of consumers, healthcare organizations need to be aware of the key factors that are set to reshape the industry. Currently, healthcare is grappling with two major transformative impacts on traditional health insurance and care delivery models:
- Consumerism and the expansion of direct-to-consumer retail insurance markets: By 2020, industry experts predict that the majority of health insurance purchases will shift from employer-sponsored group insurance to direct-to-consumer online marketplaces.
- Value-based care and the shifting of risk and accountability away from payers and towards providers and members: The Accountable Care Act (ACA) and Centers for Medicare and Medicaid Services (CMS) are aggressively promoting new value-based care reimbursement models. Value-based care rewards providers when they deliver improved quality of care and achieve enhanced population health outcomes, compared with traditional fee-for-service claims-based models of the past that reward volume of services delivered with little regard to quality.
At the same time, a parallel set of digital and societal forces are causing a shift in the market. Rapidly evolving technology, such as social networks, mobility solutions, big data analytics, cloud computing, artificial intelligence and the Internet of Things (IoT) are already impacting the delivery of healthcare. For example, advances in telemedicine and telehealth, as well as the proliferation of mobile health apps and remote patient monitoring technologies, are resulting in new business models capable of delivering an increasing range of virtual healthcare services. There are also thousands of health apps available today that allow consumers to track all aspects of their lives – including health statistics, emotional states, behavior and social environment – empowering individuals to take more control over their own health and data.
At the same time, shifts related to patient demographics are dictating the delivery of healthcare. For example, millenials have grown up with the Internet and have expectations that healthcare information will be delivered with the same level of digital consumer experience and self-service that they routinely receive in the retail and entertainment sectors.
While some of these transformative forces are just starting to gain consideration in the industry, the digitized healthcare universe is finally reaching a tipping point with the adoption of electronic medical records (EMR), electronic health records (EHR), health information exchanges (HIE) and advancements in data standards and interoperability. As organizations continue to invest in these technologies to eliminate siloed and proprietary data, high-quality health information is starting to be more accessible to both patients and providers.
With these changes, incumbent healthcare stakeholders are already rethinking their business models. To date, this has resulted in consolidation in the health plan sector, selling insurance administration, diversification strategies focused on higher margin, non-insurance lines of business, and reorganization of care delivery to be sustainable risk-bearing organizations (RBOs) as accountability shifts and new value-based reimbursement models mature.
All of these transformative forces are spurring an investment in digital capabilities to support population health management and patient engagement, as well as in administrative and information management infrastructure. As health plans start to take steps towards digital, it is important to develop a strategy that differentiates from competitors and clearly outlines key capabilities that enable this differentiation.
At the beginning of this journey, it is important to consider an organization’s place in the overall market, as well as the strategies and investments that market segments are making while also taking a close look at competitor strategies and to understand their capabilities and investments. In addition, recognizing today’s “industry standard,” alongside the future “new normal,” is crucial. While entities should eventually close gaps between those two moments in time, they also need to be aware of shifting consumer expectations and technology advances, and know that these things may also change over time.
Digital steps to consumer centricity
We recently worked with a U.S. non-profit health plan with close to four million members that faced strong digital competition from well-established players and venture capital-backed startups. Top tier digital capabilities in the market were a clear competitive necessity. At the same time, economic constraints were also a reality for this health plan, making it equally vital to develop a business-outcome driven digital strategy.
To establish a high-quality member-centric experience, the health plan implemented the following return on investment (ROI)-driven enterprise roadmap that pinpoints immediate high value initiatives and incorporates the foundation of a longer-term digital journey. These actions, which other health plans can take into account as they evolve their strategies, include:
- Establish future-first: Identify the digital capabilities, such as mobile access, that are defined as critical by various line of business stakeholders – including members.
- Conduct a competitive assessment: Then, compare your digital “wish list,” such as mobility options and digital communication alternatives, with current capabilities offered by competitors and industry trends to validate perceptions. Following this assessment, clarify priorities.
- Create a prioritization model: Rank digital targets – such as table stakes capabilities – that are required and expected by consumers – to be on par with the local competition, as well as high ROI initiatives and true market-leading efforts. In addition, consider the investments for each, and look at the sum of your capability goals. Be realistic and remove lower priority items to give your organization a better chance at achieving the most important initiatives.
- Develop a digital capability maturity model: Assess the ability of in-house systems and commercial platforms to deliver on your company’s priorities.
- Reimagine the customer experience: Envision new processes supported by the targeted digital capabilities, such as popular self-service based, always available digital channels.
It is important to note that given the pace of technological change, healthcare organizations will need more than just single-point digital solutions – especially when considering the investment it requires to support multiple systems. Incorporating innovation across all areas will help health plans succeed in both delivering desired digital tools to consumers and in growing their businesses. The health plan mentioned in the above example opted for a platform that combined vetted, third party digital point solutions and in-house developed apps into a common digital consumer engagement layer. Their new platform also supports foundational digital capabilities, such as predictive analytics, aligned with long-term business goals.
The future: An industry aligned with the accountable consumer
The industry remains burdened with legacy technologies that impede interoperability, as well as overly complex insurance products and providers contracts that defy automation and inhibit innovation. As digital technologies become mainstream, health plans must continuously innovate to maintain market differentiation based on business and clinical performance, or they will be left behind.
Empowered, accountable consumers will not be willing to subsidize the industry’s traditional inefficiencies. Instead, they will increasingly channel their healthcare spending to the health plans and providers that have invested in industry-leading, digitally optimized systems of consumer and patient engagement.
- “Digital Health Funding Hits New Highs in 2015, Reaching Nearly $6B,” CBInsights, January 9, 2016. https://www.cbinsights.com/blog/digital-health-funding-2015/