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Perspectives

Health Plans and the Threats – and Opportunities – of the Emerging On-Demand Healthcare Economy

2017-09-27


Healthcare-on-demand platforms may render current industry models obsolete, but they also will create possibilities for new value propositions, partnerships and business models that will further reshape the cost and delivery of care.

We live in an on-demand world. Novel innovation techniques and next-generation technology platforms have radically reshaped supply chains in many industries — delivering the convenience, simplicity, speed and immediate satisfaction that consumers now expect. The on-demand platform economy is already disrupting publishing, retail, transportation, music, banking and financial services and logistics. 

Healthcare is next. 

The healthcare on-demand economy will empower consumers to choose healthcare providers and services based on convenience and personal criteria vs. the rules of a third-party gatekeeper or health insurer – accelerating price and quality transparency in healthcare. Freed from the confines of proprietary PPO and HMO provider networks, consumers will shop for an array of competitively priced wellness and medical services offered by the ever-increasing supply of primary care providers, specialists and ancillary service providers choosing to practice healthcare via consumer-to-business (C2B) on-demand platforms.

Figure 1

As primary and specialty care services become accessible through Internet-enabled care, virtual care or self-care, healthcare costs will drop. On-demand, virtual visits simply cost less — a lot less: reportedly, 40% of the cost of the average primary care physician (PCP) visit and 26% of the average urgent care visit.

Venture capital investment in on-demand healthcare is rising rapidly, making it one of the fastest growing on-demand segments. At the same time, healthcare is one of the most active segments of artificial intelligence (AI) investment. Add in the estimated $20 billion worth of annual investments over the next five years in technologies that enable mobile health and virtual care, and a very different healthcare ecosystem comes into view in the not-too-distant horizon: Reports indicate Amazon already is gearing up to create some form of healthcare-on-demand platform. 

Emerging Business Model Archetypes for the C2B On-Demand Economy

We conduct future-mapping and forecasting exercises with some of our most strategic clients to envision how these trends could reshape — and potentially disintermediate — the traditional health plan value proposition.  As traditional value propositions are disrupted and new players enter the industry, health plans will need to reassess and refine their business models.

We have identified four alternative business model archetypes in our future-casting strategy sessions. Organizations should not target one model over the other; in practice, organizations are likely to blend these models and adopt hybrid approaches based on their market positions, the populations they serve and the competitors they face.

Archetype: Become the On-Demand C2B Healthcare Platform Provider

As the industry enters the on-demand economy, one business model option for health plans is to leverage their existing investments in digital technology assets and platforms to create a game-changing on-demand platform. The platform would help power the new digital healthcare marketplace connecting producers and consumers. 

Archetype: Insurance Powerhouse – Back to the Future 

If trends diminish the value of managed care networks and preferred pricing arrangements, then health plans should consider returning to their pre-managed care origins and pursuing a classic insurance model of benefit design, risk management and underwriting. These entities will serve consumers and businesses with bundled and unbundled offerings for life, property, health, auto, long-term care and other insurance needs. With the economies of scale necessary to better manage profit and loss across multiple lines of business, these companies should have the flexibility to take creative approaches to health-related insurance, going beyond catastrophic care policies with health savings accounts and creating personalized policies targeted to very specific market segments. 

Archetype: Integrated Delivery Model at Scale 

The impact of consumers choosing healthcare on demand promises to be immense, forcing the industry to reconcile the tension between large, closed-network, fully integrated healthcare systems that prioritize efficiency and scale, and newer, more distributed digital upstarts that emphasize speed and consumer experience. 

Yet on-demand healthcare and integrated delivery are not mutually exclusive. In fact, some of the largest integrated delivery systems (IDS), like Kaiser, are now providing on-demand healthcare at the enterprise level. The combination of IDS and the on-demand healthcare platform economy will fuel integrated delivery at scale and accelerate the viability of national accountable care organizations (ACOs).  

Archetype: Health, Wealth and Lifestyle Management 

Demand for disease prevention, stress reduction, optimized health and quality-of-life enhancements will grow as “healthcare” transitions to “lifecare” through less expensive and more convenient care delivery and AI innovations provide new tools for lifestyle management and personal health monitoring.

Health plans diversifying into health, wealth and lifestyle management will face competition from retirement and traditional wealth advisers and P&C/life insurance and financial services, some of whom already offer new ways to manage healthcare financing alongside traditional wealth management.

Making ’No-Regrets’ Investments

Significant barriers must be overcome before these shifts in healthcare market dynamics can fully be realized — but the direction is clear. Less obvious is when the tipping point will occur and how painful the disintermediation will be. 

Given these uncertainties, we recommend health plan payers consider a variety of no-regrets investments. The key to no-regrets investing will be to identify the capabilities and characteristics required for success in the emerging C2B on-demand economy that will also serve the business well today. Organizations that follow the guiding principles below will create value today while positioning themselves for future success.

  • Mobile first: Health payers must design for mobile on-demand options first to meet consumer expectations for using smartphones to manage their healthcare. 

  • Minimize, simplify and modernize IT assets: Contemporize IT capabilities cost effectively using the increasingly sophisticated infrastructure, data center and application development and anything-as-a-service offerings of public, private and hybrid cloud services. 

  • Invest in AI and automation: AI, intelligent machines and robotic process automation deliver cost and efficiency benefits today and power systems of learning that will enable health payers to engage on very individualized levels with health consumers.

  • Collaborate across the payer, provider and pharma value chains: Greater collaboration among health plans, healthcare systems and biopharma companies, such as clinical data sharing, would likely enable analytics tools to distill more meaningful insights to collect evidence, refine therapies, improve adherence, etc., for better outcomes. 

  • Enable real-time transactions: Payers must emulate Uber-style up-to-the-minute pricing and passenger reviews. 

Figure 2

Incumbent stakeholders will need to evolve quickly. Digital health start-ups are challenging with new business models and new ways of engaging customers. Existing companies will need to embrace the on-demand economy and transform their service and delivery systems to meet consumer demand, or find themselves upended by those that embrace this shift. 

Future mapping exercises cannot offer certainties, but they do help clarify possibilities rooted in facts and trends. With possible destinations in sight — and armed with the knowledge of their relative strengths — health plans can plot their course toward the future and take better charge of their destinies.

For more detail about the four potential health business archetypes and what to do right now to respond to on-demand healthcare, please see our white paper, “Rethinking Health Plan Business Models for the Emerging On-Demand Digital Economy,” and visit the healthcare portion of our website.

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Health Plans and the Threats – and Opportunities – of the Emerging On-Demand Healthcare Economy