Healthcare Transformation





A vision for healthcare’s radical makeover




Just as the publishing and music industries were disrupted and rebuilt by powerful transformative levers, the healthcare industry is on the verge of a similar disruptive change that will significantly reshape our experiences and reorient our expectations across the healthcare value chain, writes Patricia Birch, Vice President – Consulting, Healthcare Practice, Cognizant.

Providing quality healthcare for all is a major challenge in the US and around the world. This is not news. What is news, however, is the very tangible evidence of an industry being reinvented, from how care is managed, to how it is paid for, to how it is delivered.

In the US, healthcare’s unsustainable cost equation can be highlighted in numerous ways: healthcare as a percentage of gross domestic product (17.9% in 2011);1 healthcare expenditures as a percentage of the federal budget (23% in 2011);2 and the transfer of rising healthcare costs to employers and consumers (since 2008, the annual cost of insurance coverage for a family of four has risen nearly 25%, from US$15,609 to more than US$20,728).

These factors have led to additional concerns: the lack of clarity and transparency about prices, dissatisfaction among patients and physicians with how care is delivered and growing questions about how to pay for care. This is also a challenge for most, if not all, industrialised countries. Developing countries have different challenges, such as general availability of and access to care, and the opportunity to selectively implement the best from other systems of care.

The industry, as well as state and federal agencies, has been responding to these issues, generating the following strong market currents:

- Redistributed accountability and risk, as lines between payers and providers blur. Large healthcare plans are acquiring hospital systems and home care companies; hospital systems create and sell health plans. We see payer and provider clients working more closely together to improve quality while finding ways to reduce the costs of therapies and procedures.

- Rise of integrated health management. The industry is experimenting with Accountable Care Organisations (ACOs) and Patient-Centred Medical Homes (PCMHs). These entities coordinate a comprehensive range of care for patients and consumers under a single, often virtual, roof. ACOs and PCMHs hope to streamline the healthcare value chain for consumers and patients, eliminating the need for them to find their own specialists and coordinate their own care. Notably, these models have similarities to the CCA model being implemented in the UK.

- Increasing vertical/horizontal integration and diversification. Merger and acquisition activity is brisk across the industry. Among our client base, we see significant interest in broadening from local to regional and even national customer bases through mergers and acquisitions. Healthcare players are also expanding their expertise, with health plans purchasing caregivers (for example, WellPoint introduced a patient-centred primary care programme) and providers launching their own health plans to consumers, such as that administered by the University of Pittsburgh Medical Center.

- The “retailisation” of healthcare. Healthcare clinics are now available in pharmacies, big box retail outlets and grocery stores, and such outlets will grow. More marketing of services and health plans will be direct to consumers, with the industry offering more individualised products and a greater emphasis on customer service.

Despite the momentum behind these market forces, they cannot transform healthcare’s business model. These initiatives – the M&A activity, ACOs, redistributed financial risk, etc. – generate only incremental improvements in cost reduction, quality and efficiency. Conversely, creating a truly sustainable foundation for healthcare will require the industry to eliminate substantial costs, embrace new ways of delivering care, and improve the quality of that care.

Achieving those goals means the industry must combine incremental improvements with the power of truly disruptive transformative forces, from new technology, to radically different diagnostic tools, to virtualised means of caring for patients. In other industries, similar disruptive forces have dramatically changed cost and service delivery equations. Think along the lines of how Apple transformed the music business with the iPod, how Amazon is reshaping publishing with its electronic delivery model, and how Netflix re-imagined the home video market.

Disruption and reinvention of the same order are required in healthcare. And that is already occurring. Signs of radical transformation are emerging, driven by powerful levers that are enabling the reinvention of the industry’s business model.

Transforming healthcare’s business model

Rethinking healthcare to create a new, sustainable business model requires existing players, as well as newcomers to the industry, to disrupt current models by harnessing the following transformative forces – some of which already are reshaping the industry.

Technology: Portions of the healthcare value chain will be radically transformed as segments of the industry are disintermediated through new business models, new software and new diagnostic capabilities. Some examples: The US Food and Drug Administration is evaluating whether certain prescription drugs could be dispensed through self-serve kiosks that ask patients about their symptoms and make drug selection suggestions.4 Tiny robots tethered to physicians assist in a variety of surgeries, and researchers say these are precursors to self-guided nanobots that will revolutionise surgery.5 Researchers at the University of Georgia have developed a quick, inexpensive way to test for flu viruses using nanoparticles that can be used in any clinic.6 Innovations like these shake up healthcare’s traditional structures, making it possible to eliminate costs while maintaining and even improving access to and the quality of care.

Virtualisation: Technology innovation will create new business models capable of providing care anywhere and allowing new entrants to leapfrog bricks and mortar and go directly to virtualised, integrated healthcare models. All healthcare will not be local. This is already becoming true: Websites such as Consult A Doctor (consultadr.com) and Virtuwell (virtuwell.com) let anyone register and receive an e-consult from a physician or other caregiver. Partners Healthcare offers email-based second opinions to patients and their physicians. Patients in remote villages throughout the world are accessing high-quality healthcare through mobile and tele-presence applications.7

Globalisation: Due to technology advances and process virtualisation, the industry will have access to the highest-quality/ lowest-cost services anywhere, creating a unique opportunity to transform care delivery in the US and around the world. Sustainability will require leveraging global supply chains and operating systems for quality and talent (for example, offshore reading of radiology images and coding medical charts), thus eliminating major portions of cost. Similarly, US health providers, for example, can offer their expertise to expanding global markets, as Children’s Mercy Hospitals & Clinics in Kansas City has done in creating a telemedicine partnership with a large hospital in Guangzhou, China.8

Disruptive innovation: Sophisticated medical diagnostic procedures will continue to move to less expensive settings, from hospitals, to physician offices, to retail clinics, to homes. Researchers and entrepreneurs can draw on the 200 terabytes of human gene sequence data generated by the 1000 Genomes Project, which is available free and online.9 Small labs can already use more affordable genome sequencing tools from companies such as Illumina, Inc. A logical next step is making genesequencing part of a typical check-up so that a person’s care can be truly personalised for the ultimate in preventive care and disease management.

Next-generation Analytics: Clinical decision support systems that leverage artificial intelligence and big data will revolutionise diagnostic practices, personalised care planning and actual patient care. Blue Health Intelligence, the analytics arm owned by Blue Cross Blue Shield Association, has launched a pilot programme using predictive analytics to improve the care of Arkansas diabetes patients while reducing costs.10 Similarly, our clients are increasingly using the ‘big data’ stores generated by the explosion of cloud-powered mobile and social computing with advanced analytics to enable fact-based decision-making. Doing so moves companies from historical reporting on transactional data to more proactive planning, enabled by the rich insights contained within the terabytes of data generated by clinical systems.

Demographic Shifts: Consumers want reasonable quality, reasonable price, and are prepared to be more involved in it. We are seeing an explosion in self-care fuelled by mobility, technology and diagnostic innovation. More than 44 million healthcare apps will be downloaded this year, and the number of US patients remotely monitored will rise to 3 million.11 Evidence is growing that mobile health – or “m-health” – helps individuals take better care of themselves. Mobile remote coaching and financial incentives improved diet and wellness activities among patients managing chronic conditions, according to a study backed by the National Institutes of Health.12 Our clients are working with us to develop apps to make care more convenient and personal for consumers, patients and physicians.

A healthcare model incorporating these forces would necessarily be a dynamic one. Just as consumers first experience the convenience and lower cost of e-books from Amazon or buying music one tune at a time from Apple and then come to expect similar benefits from all their suppliers of books and music, the new healthcare business model similarly will shift expectations with new healthcare experiences.

Further, transformative processes are already under way. Trends such as technological innovation and virtualisation will continue to reshape healthcare, regardless of regulatory shifts. The question is how much of the transformation will be driven by entrepreneurial new entrants to the industry and how much by established players reinventing themselves. It may be easier for the new entrants to envision, and establish, new models.

How to embrace reinvention

It is vitally important to understand that radically transforming healthcare will not be accomplished through an incremental, piecemeal approach, such as deploying a mobile technology here or a new self-care option there. Reinventing today’s healthcare model requires visionary thinking and strong champions to overcome embedded practices and the common belief that a series of small improvements will add up to radical change. Instead, the model must re-imagine how healthcare can be delivered, how its quality can be measured, how it will be priced and who will pay for it.

Prospering – perhaps even surviving – in this rapidly changing world will depend on how well your organisation understands where it will fit into the new health ecosystem and how it will achieve that position. Consequently, organisations need to devote time and resources to envisioning and planning to provide the necessary foundation for solid execution. Our experience tells us that without this preparation, organisations can quickly lose their customer base to new entrants or competitors that have been more adept at reinventing themselves. We, therefore, recommend taking the following steps to get started on participating in the new era of healthcare:

- Develop a broader strategic vision of how the industry could change. Understand the trends and other forces reshaping the industry and consider various ‘end state’ scenarios. End states might range from all primary care being delivered virtually and/or at retail clinics, to a steady increase in individuals and employers paying for a wider range of care directly, instead of through health insurance plans, to a dozen healthcare super entities offering comprehensive cradle-tograve services under a single banner.

- Determine your company or organisation’s role in the new healthcare value chain, as well as where other entities will fit. Who are your current competitors? Where might new competitors arise? What parts of your business are growing?

- What are the implications for your company or organisation depending on its role in a particular scenario? A health plan might see that trends such as direct contracting with employers and hospital system-driven ACOs are on the rise in its market area and determine its best fit is to offer information processing and risk management to those ACOs.

- How will customer behaviour or buying patterns change? Will social networks be a strong influence on your customer base? This is likely to be the case among the millennial population. Similarly, digitally connected consumers tend to want mobile transactions and be accustomed to smaller-dollar transactions.

- What customers will you want to attract/win in the future? And a corollary: What will be a best-in-class experience for those customers? Defining your target population is critical to understanding the types of reinvented processes and rewiring you’ll require. Serving a younger, healthier population will require a strong, customer-centric mobility strategy. If long-term care patients are your target, it’s caregivers that will require mobile devices to deliver clinical intelligence at the point of care.

Toward the new sustainable model: a roadmap

With your vision and strategic plan in place, your organisation is better equipped to understand or create a role for itself in the reinvented healthcare value chain and how its business model must change to support that role.

To create the roadmap to your future, you must understand how to use transformative levers – new technologies, virtualisation, globalisation and diagnostic innovation – to achieve the position you want in the transformed industry. If you have many multinational employers in your region with highly mobile employees, and your goal is to provide ‘anytime, anywhere’ care to them, you will need to investigate global, virtual resources, as well as mobile and tele-presence technologies.

Containing the costs of reinvention is critical, so consider identifying potential partners and allies that have the skill sets you require. Look outside the healthcare industry; telecommunications and other high-tech companies may have more of the capabilities you need.

As you define the necessary transformation activities, create and implement a governance model to guide and monitor these activities.

Reinventing healthcare delivery undoubtedly will be challenging, requiring shifts in thinking, training and attitude – from consumers, as well as caregivers and industry players.

Paradigm shifts often seem unlikely, even impossible, before they occur. But when they do, we can hardly imagine how we lived without our e-books, smartphones, and streamed video.

In the near future, as we text our nursecoordinators with questions, use our apps to monitor resting heart rates, transmit home test data and write smaller cheques for healthcare procedures, we’ll marvel at how long we managed with our outmoded current system.

References

1 National Health Expenditure Projections 2011-2021, Centers for Medicare & Medicaid Services, http://www.cms.gov/Research-Statistics-Dataand- Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/Downloa ds/Proj2011PDF.pdf.

2 Historical Tables, Office of Management and Budget, http://www.whitehouse.gov/omb/budget/Historicals.

3 “2012 Milliman Medical Index,” Milliman Research Report, May 2012, http://insight.milliman.com/article.php? cntid=8078.

4 “FDA Considers Expanding Definition of Nonprescription Drugs,” U.S. Food and Drug Administration, March 23, 2012, http://www.fda.gov/Drugs/Resources ForYou/SpecialFeatures/ucm297128.htm.

5 “Snakebots Aid Docs in Surgery,” Associated Press, May 29, 2012, http://www.modernhealthcare.com/ article/20120529/INFO/305299965/ snakebots-aid-docs-in-surgery.

6 “New Flu Test from UGA,” Athens Patch, Oct. 27, 2011, http://athens.patch.com/articles/ new-flu-test-from-uga.

 7 Stephanie Novak, “Exploring the Role of Mobile Technology as a Health Care Helper,” The New York Times, May 13, 2012, http://www.nytimes.com/2012/05/14/world/ africa/exploring-the-role-of-mobile-technologyas- a-health-care-helper.html?_r=1.

8 David Twiddy, “Children’s Mercy Starts Telemedicine Partnership with Chinese Hospital,” Kansas City Business Journal, May 25, 2012, http://www.bizjournals.com/kansascity/ print-edition/2012/05/25/childrensmercy- starts-telemedicine.html.

9 “1000 Genomes Project Data Available on Amazon Cloud,” NIH News, March 29, 2012, http://www.nih.gov/news/health/mar2012/ nhgri-29.htm.

10 Blue Health news release, March 30, 2012. r>
11 “Mobile Healthcare Opportunities: Smartphone Apps, Monitoring & mHealth Strategies, 2011-2016,” Juniper Research, Dec.1, 2011, http://www.juniperresearch.com/reports/ mobile_healthcare_opportunities.

12 “NIH-Funded Study Examines Use of Mobile Technology to Improve Diet and Activity Behavior,” NIH News, May 30, 2012, http://www.nih.gov/news/health/may2012/ nhlbi-30.htm.

 Date of upload: 20th Nov 2012

 

                                  
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