Menu
by Dan Neuwirth, Realize Health. Oct. 14, 2019
I wrote an article about 18 months ago where I said that healthcare providers must act quickly to transform the experience of care around what consumers want and expect. As I said then, consumers will choose to get healthcare where service, convenience, and access delivers that experience. This reality is happening fast and challenging traditional healthcare providers that aren’t adapting to this new world. If incumbent healthcare providers don’t innovate to compete now, they won’t likely survive, at least not in their current form.
In recent weeks, non-traditional healthcare providers, “Disrupters”, have announced new or enhanced health care points of access that give us a glimpse to their future strategies and the potential future of healthcare delivery.
Recently, Walmart opened its first 10,000 square foot Health Center – a “supercenter” for healthcare that puts primary care, dental, optometry, lab tests, X-rays, behavioral health and other services all under one roof. Aside from offering a convenient and consumer-friendly facility, what may be most disruptive about the Health Center is its transparent pricing for services that is well below current market prices – a significant competitive threat for traditional healthcare providers.
CVS is also challenging the status quo by expanding its Health Hub store format at a rapid pace. These Health Hubs are CVS’s strategy to transform the consumer experience through expanded healthcare services, more products, and advanced pharmacy care in its stores. With convenient locations, hours, and transparent pricing as well, CVS is poised to upend the competitive landscape for healthcare providers across the U.S. While only in 4 states today, CVS plans to have 1,500 Health Hub locations nationwide by 2021!
Amazon, maybe the potentially greatest disruptive threat to traditional healthcare providers, just announced the launch of its Amazon Care program – a virtual health clinic with in-home follow ups for its employees in Seattle. This program puts Amazon in the direct care delivery business with nurse chat, video visits with doctors and nurse practitioners; in-home nurse visits, and prescription delivery services. Clearly if successful in Seattle, Amazon will likely expand the program to other markets and beyond its employee base.
It’s not just large retailers that are threatening the status quo. Several companies that have been built from the ground up to appeal to today’s healthcare consumers are gaining traction both in number and scale. One Medical, a chain of primary care clinics backed by Google parent Alphabet that offers high touch service to members that pay an annual fee, just announced preparation for an IPO. Other innovative companies are raising large sums of venture capital to build out networks of consumer-oriented clinics.
Unfortunately for them, not enough and most are moving much too slowly given these and other competitive threats. Health systems in particular have been slow to develop experiences that come close to meeting the expectations of today’s healthcare consumers. While many are investing to improve the patient experience, legacy bureaucracies, organizational silos, and lack of institutional innovation are major barriers to making the transformative changes necessary to compete with the growing number and capabilities of Disrupters.
Health system leaders are not typically rewarded for innovation, risk taking, and change management, but can experience severe ramifications (like losing their jobs) when change becomes messy or real innovation doesn’t go as planned. The dilemma for these leaders is that despite having tremendous assets to deliver healthcare in ways consumers want, there’s no way to do it without breaking down ingrained cultural barriers and aligning stakeholders – a messy task for sure. The existential threats from Disrupters may be the catalyst to drive the change and innovation needed in these organizations.
While Disrupters meet diverse consumer needs through convenient locations, online scheduling (with actual appointment availability), walk-in services, on-demand virtual care, telehealth, and other flexible access to care, traditional providers still struggle with basic customer service and access. Simple things like answering phones in a reasonable timeframe, managing clinician schedules and capacity efficiently, self-service scheduling and access to care, and extended hours of operation are not managed well.
While many traditional providers have invested in various solutions to address these needs, few have developed an integrated service offering that is centered on a quality consumer experience. For example, investments are made in new real estate locations without solid strategic planning or design that maps to consumer needs. For many providers, access to care is still largely a “bricks and mortar” investment decision, not an opportunity to improve customer service.
On the technology front, traditional providers have invested in patient portals to offer centralized information and communication for patients, but generally the documentation is limited, requires a medical degree to understand, and is not designed in a user friendly way. Online scheduling solutions are made available but with extremely limited appointment availability so become virtually worthless for consumers. Telehealth services are disconnected from other care interventions. And the list goes on…
I believe that traditional providers, particularly health systems that provide services across the continuum of care, have the breadth and depth of assets to provide consumer experiences that most other players in the healthcare ecosystem can’t offer. That’s the good news…
The challenge for these providers is to organize their processes and services around these assets to deliver a superior consumer experience, which is difficult given the organizational barriers that make change hard. Making this even more challenging is that reimbursement models often don’t support the work required to deliver what consumers need and want. Healthcare insurers are vertically integrating by providing more and more direct care further encroaching on traditional providers’ turf. That’s the bad news…
So what to do? There isn’t some formula for success or a competitive playbook to follow. The industry landscape is evolving rapidly and what will work and what won’t still remains to be seen – both in terms of new models introduced by Disrupters and the competitive responses of incumbents. Market dynamics vary across geographies, which dictate different approaches in different markets.
The simplest plan of attack is to just get better at organizing care delivery around a connected consumer experience- and do it faster. Make the necessary organizational changes and investments needed to compete. Health systems in particular have the resources to compete with Disrupters, they just need to do it – all easier said, than done however.
Some would argue that much like any competitive environment, stakeholders should focus on the things that they are uniquely or at least better positioned to do. For example, health systems uniquely deliver specialized, complex, and acute care services. Perhaps they should focus on those services and leave primary care and care coordination to other providers that can deliver more competitive consumer experiences and engagement. Instead, they could develop different kinds of relationships with Disrupters or even create their own Disrupters through partnerships.
However, as more healthcare spending shifts to prevention, proactive care management, and other services that Disrupters are targeting, this may not be a winning strategy, not to mention forcing a reassessment of the massive investments that have made in primary care and care coordination. Additionally, much of the “front door” consumer relationship would be lost. Yet, in the absence of offering a competitive service, this business will be lost to providers that do a better job anyway. It’s far better to be proactive about shifting away from an uncompetitive position rather than just reactively waiting to get beat in the market if that’s inevitable.
Independent primary care practices are in the direct cross-hairs of disruption. Either they can take an “if you can’t beat them, join them” approach or could adopt their own flavors of consumer experience that works well in their local markets in order to remain viable and independent. Independents may need to act much like the boutiques, specialty stores, or corner grocers of the retail world. Many of these retailers have survived and even flourished in a transformed retail world by offering unique products, services, locations and other differentiators.
Healthcare specialists are somewhat insulated from some of these market pressures by the nature of their unique services, but this insulation probably just gives them more time to adapt before disruption enters their market space.
What is clear is that maintaining the status quo is not an option for traditional providers. Action needs to be taken with urgency to address accelerating competitive threats. It is easy to get lulled into thinking there is more time to change – particularly when you’re a legacy, dominant healthcare provider. As is common with most disruption, incumbents often wait until it’s too late to adapt and simply can’t compete.
Some will point to value-based care reimbursement as taking much longer to take hold than many in the industry predicted as rationalization for having time to address the threat of Disrupters. What is fundamentally different is that a shift to value-based care reimbursement where providers are paid based on quality of care, not quantity, and ultimately take on the risk of the cost of care, is a shift requiring change across large, bureaucratic organizations – the government, insurers, providers, and suppliers. Despite the complexity of value-based care, this shift continues to happen in a big way even though it’s taken longer than some might have predicted.
Unlike value-based care, the disruption created by companies creating new consumer-focused care delivery models primarily requires changes in consumer behavior. Consumers have proven time and time again that they will flock to services that address unmet wants and needs at rapid speed – think online retail, ride sharing, and social media. Why wouldn’t consumers widely and quickly adopt the convenience, access, and pricing offered by Disrupters when the status quo means long waits for service, higher and less transparent pricing, and fewer and less convenient points of access?
Let’s face it – the end-to-end consumer experience of traditional care delivery is relatively poor. For a given interaction, like a visit with a doctor or nurse, the experience can be very good. Yet it’s the transactions all around that visit and lack of connected experiences that typically fall short.
While I’m sure many healthcare leaders will drive their organizations to adapt to the changing expectations of consumers and the rapid market penetration of Disrupters, only those that can move with speed will succeed. Incumbent healthcare providers that fail to innovate now, will see their market position erode. For some, they won’t likely survive the impact of this competitive threat, but as always is the case, others will be well positioned to fill the void.