Health Care Disruptors To Watch

• October 3, 2018
• Jennifer Boese

There is a realignment afoot in health care. Competition within the industry along with new competitors from outside of the industry are all disrupting the status quo. Let’s take a quick look at a few of those disruptors and how those could drive change.

• New Entrants – There are many new entrants – small and large – working to disrupt the system. For example, think about the Amazon/Berkshire Hathaway/JP Morgan Chase health care entity. While the initial focus is on their own employees, the combined companies have scale, financing and technology. Could they eventually push further into the health care system? Potentially, but incumbents have an advantage here; they know and understand the health care system, and there are high barriers to entry. However, incumbents are also frequently shackled by their historic business processes, can be less nimble and may find it difficult to adapt to changing market needs. This gives new entrants an advantage. Perhaps success will first be seen in the supply chain or new technology approaches (like mHealth, virtual health) or a distinct patient population or need. This then creates footholds which may open up adjacent markets or additional opportunities.
• Technology – Technology allows for the creation of new products, care delivery modalities, and for change. Think APIs, AI, new platforms, consumer wearables, telehealth, big data, and so much more! New technology, applications, uses, and the amount of data that is available, if it can be successfully harnessed, will revolutionize treatment and care delivery. However, the pace of advancement along with the number of options available are already difficult to assess. Many incumbents will likely dabble in these options until a clearer path forward emerges. While they don’t necessarily need to be first-movers, they should determine their long-term strategy or risk being left behind in a difficult, increasingly competitive market. Waiting too long allows new entrants and competitors to gain important market share.
• Mergers/Acquisitions – So much vertical (let alone horizontal) integration is happening. Think Cigna-Express Scripts, Humana-Kindred, CVS-Aetna, or any number of moves. And don’t forget private equity’s (PE) growing interest in health care. Case in point, Lifepoint’s purchase by PE firm, Apollo. Some of these moves are more interesting than others due to their novel natures. While intriguing, integration is difficult. This is because each part of the health care system is complex and merging two parts of that system poses challenges. Add to that the inherent difficulty of the integration process itself, and a variety of integrations will fail. However, watch for ones that can leverage each firm’s uniqueness to create a synergy that drives new value.
• New Medical, Drug Innovations – Think CRISPR, think blockbuster drugs, think genomics, think biotech. Again, the potential for advancing care or developing cures will be breathtaking when those materialize. We should be excited by this! However, we have yet to grapple with other issues inherent in these breakthroughs. For example, breakthrough drugs will be very, very expensive. In a health care system looking to contain costs, who pays for those and what happens if government, employers or consumers can’t or won’t pay? Those costs are already sparking some small changes in the pharmaceutical market, like new generics entrant Civica Rx, a joint venture by multiple not-for-profit health care systems including Mayo, SSM and Intermountain, and a heightened regulatory/legislative focus. Innovations will continue, and each new one will drive the cost issue further forward.
• New Payment Models – Think alternative payment models, two-sided risk, capitation, concierge medicine, and beyond. There has been a lot of activity in this space already, but not at scale…yet. Being held accountable for outcomes/cost will further take root. It is more of a question of how deeply and quickly that will be embedded across the entire health care ecosystem. Government health care programs, like Medicare, are a good place to watch for emerging models. Many new models are coming out of the Center for Medicare & Medicaid Innovation (CMMI), but don’t forget Medicare Advantage as a type of “value-driven” model that is already working. It is capitated, risk-adjusted, and now covers one-third of all Medicare beneficiaries—an increase from roughly 5.3 percent in 2004 to 33 percent, or 20 million, in 2017.
• And let’s not forget the consumer as a disrupter! Imagine a world where patients demand more convenience, a better consumer experience, equal or improved outcomes and quality, and information on cost (not prices, not charges). It is starting. More focus on price transparency, technology that allows consumers to control their medical information and records, changing consumer expectations, and costs will play a key role in the consumer mindset of the future.

There has been a shift going on in health care, but no one approach has gained enough traction to force substantive disruption. It will.

For incumbents, determine your course of action now. Don’t wait.

For disruptors and new entrants, there are opportunities. Be bold.

For consumers, your voice and your pocketbook matter. Demand more.

Tags: technology, Health Care Policy, Payment Models/Reimbursement | Comments Off on Health Care Disruptors To Watch