emdeon | healthcare disruption presentation for pharma conference
TRANSCRIPT
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DISRUPTION Healthcare’s New Business Model
Emdeon | 03.04.15 Dr. Michael Burcham [email protected] CEO, The Nashville Entrepreneur Center Co-Chair, U.S. National Advisory Council on Innovation & Entrepreneurship Faculty, The Owen Graduate School of Management, Vanderbilt University
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When an industry faces disruption, companies often fail to appreciate quickly enough the nature, extent, and velocity of the changes taking place.
They bring new business models. They leverage new technologies. They are highly disruptive.
WHY? Disruptions start at an industry’s edge, among small companies that provide specialized value to emerging customer segments
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Part 1 | The Perfect Storm for Disruption
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ACA | IMPLEMENTATION TIMELINE
2014 2015 2020 2013
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HIGH DEDUCTIBLE PLANS GO MAINSTREAM!
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ENROLLEMENT IN HIGH DEDUCTIBLE PLANS HAS TRIPLED SINCE 2009
Source: PwC 2014 Health Research Institute
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HOSPITAL PRICES REMAIN A MYSTERY FOR CONSUMERS
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…While Expanding the Fitness & Wellness Space
New Players Will Disrupt the $3 Trillion US Health Economy Drawing Billions from Traditional Players
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OF FORTUNE 50 FIRMS 24 ARE NEW ENTRANTS IN HEALTHCARE
Source: Fortune. 2014
In their eyes, today’s system represents $2.8 trillion in the US alone - but the New Health Economy of tomorrow will include trillions more globally as consumers shop for products and services online.
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Part 2 | 7 Core Attributes of Disruption
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1 | COMPETITORS CHURN Lots of new players enter the market, many fail. Although few incumbents are able to gain stronger positions, many shrink, are acquired, or disappear.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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2 | ADVANTAGES MATTER When market forces become more important than regulatory rules real Competitive Advantage determines the winners.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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3 | PERFORMANCE GAPS WIDEN As competition shifts to true sources of advantage, the difference in the financial performance of top and bottom players increases - and the gap often persists for years.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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4 | PRODUCTIVITY INCREASES Strong financial performance depends not only on competitive advantage but also on operational efficiency.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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5 | NEW CUSTOMER SEGMENTS FORM New customer segments will emerge as innovative products are introduced and consumers become more aware of the diversity of their choices.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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6 | PROFIT POOLS SHIFT During disruption the most attractive industry segments become the least attractive as new entrants flock to the more attractive segments and compete away profits.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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7 | MORE DEALS Deal activity tends to increase during industry disruption – coming in waves as competitors attempt to keep up with one another.
CORE ATTRIBUTES OF INDUSTRY DISRUPTION 7
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The “topple rate” is the likelihood that an industry leader will lose its dominant position during the next five years.
Source: S&P 500. McKinsey Analysis. 2014
INDUSTRY LEADERSHIP VOLATILITY HAS RISEN SHARPLY
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Consumers may well benefit from the innovations that healthcare disruption is apt to unleash—consumers typically do when disruptive changes arise.
Incumbents most often falter during disruption.
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Part 3 | Elements of New Models
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• Search • Big Data • Indoor Mapping • Online Scheduling • Near Field Communication • Mobile Diagnostics • Connected Devices
• Wearable & Embedded Technologies
• Wellness Apps • Virtual Visits | Telemedicine • Mood Detection • Gesture Recognition • 3d Printing & Bio-Printing
WHAT IS IMPACTING HEALTHCARE CONSUMER BEHAVIOR?
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Source: HRI Consumer Survey, December 2013
OPPORTUNITY | CONSUMERS WANT AN AMAZON.COM STYLE EXPERIENCE
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of online consumers are comparison shopping on 2+ hospital websites 64% |
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$112,824 Opportunity cost of losing one hospital website visitors
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• Diagnostics • Primary Care • Online Support
Source: HRI Consumer Survey, December 2013
CONSUMERS | THEY ARE READY TO GET CARE IN NEW WAYS & IN NEW PLACES
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NEW DISRUPTIVE ENTRANTS “How likely would you be to choose these options if they
cost less than the traditional choice?”
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35 - 54 YEAR OLDS ARE MOST LIKELY TO CHOOSE NEW OPTIONS FOR CARE
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Part 4 | Strategic Thoughts for Incumbents
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1. PORTFOLIO FOCUS | Shift emphasis to customers and products that will benefit from the disruption – or at least be insulated from it.
De-emphasize areas of vulnerability.
STRATEGIES THAT CAN HELP INCUMBENTS THRIVE 3
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2. TRANSFORM THE BUSINESS MODEL | Make fundamental model adjustments that enhance your competitive advantages. New entrants often offer a “better mouse-trap” – superior benefits and lower costs.
The Incumbent should exploit competitive advantages others cannot replicate.
STRATEGIES THAT CAN HELP INCUMBENTS THRIVE 3
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3. BUILD A NEW BUSINESS | Acquire or build a new business that can leverage the company’s core capabilities and scale to replace lost earnings. Often this may be a model that supports the original business and other incumbents in the space.
This may be the most challenging of the three options.
STRATEGIES THAT CAN HELP INCUMBENTS THRIVE 3
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1. Take on 2 Jobs | Run today’s business while building a strategy of the
business of tomorrow.
2. Resource Allocation | Focus resources to the new strategy – strategy is only theory until resources are allocated.
3. Capacity for Change | Know the organization’s strengths; Know which assets can be leveraged or re-purposed.
4. Go Lean | Administrative efficiency is a must-have during disruption. Cost reduction is not a recipe for success – but a prerequisite.
THE LEADERS ROLE IN MANAGING DISRUPTION
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CONSUMER PREFERENCES IN HEALTHCARE SHOPPING
Prefer an online shopping site with different options at different prices
Prefer to use their health insurer’s website
Prefer to use healthcare provider website
Prefer calling around to get prices
Prefer a website provided by their employer
Source: PwC 2014 Health Research Institute
Prefer “other” methods to shop for healthcare
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CONSUMERS ARE DISCOVERING THAT CONVENIENT CARE IS EFFICIENT CARE
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ENROLLEMENT IN HIGH DEDUCTIBLE PLANS HAS TRIPLED SINCE 2009 THEY’RE LEARNING | DRUGS COST MORE IN CERTAIN SETTINGS
Oncology drug Z costs $1000 in a physician office setting
Oncology drug Z costs $2000 in a hospital-outpatient setting
Physician Hospital Percent office outpatient difference
Alimta
Herceptin
Avastin
Example oncology drugs Total payment ($) per claim
Source: PwC 2014 Health Research Institute
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Have you (or someone in your household) ever sought healthcare
treatment in a retail clinic?
Would you (or they) go to a retail clinic again in the future?
AS HEALTHCARE GOES RETAIL | THERE’S ROOM FOR GROWTH
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80 Million
Wearable wireless sensors for fitness and wellbeing by 2016.
Adoption is driven by device availability & new social patterns that encourage people to record and share fitness data
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WEL
LNES
S &
FITN
ESS
MAR
KET
THE $267B
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CONSUMERS TURN TO TECHNOLOGY TO COMMUNICATE WITH PROVIDERS
How would you like to communicate with your doctor, nurse or caregiver?
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Super-Sized Health Systems have outdated communications leading to confusion, loss of information and decreased engagement.
THE PROVIDER COMMUNICATION PROBLEM
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Why It Matters
Engaged staff are 50% more likely to show an attitude of
genuinely caring about patients than non-engaged staff.
Hospitals with above median
HCAHPS scores report 37% high operating income.
Towers Watson, 2013
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The ideal experience is increasingly being defined by non-clinical elements, such as convenience, amenities, and communications.
AN IDEAL EXPERIENCE PROMPTS 34% OF CONSUMERS TO SWITCH PROVIDERS
Source: PwC 2013 | Customer Experience Radar Research
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Part 5 | Business Model Principles
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1 | FOCUS ON THE BUSINESS MODEL Base your business models on generating value in the New Health Economy.
FIVE BUSINESS MODEL PRINCIPLES
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There are 7 core business model types from which every business model
is created.
BUSINESS MODELS | 7 CORE TYPES
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2 | TURN THE TABLES Consider a Consumer-to-Business (C2B) Strategy. Use consumer data to refine business models, enhance consumer experience and earn greater loyalty.
FIVE BUSINESS MODEL PRINCIPLES
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MULTI-CHANNEL LIFE MOST CONSUMERS HAVE A
Customers
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3 | COLLABORATE Blend the best of Emerging ventures and incumbents. Fill skill and asset gaps.
FIVE BUSINESS MODEL PRINCIPLES
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EMPLOYERS
SEARCH
PROVIDERS
SERVICE VENDORS
HEALTH PLANS
APP MAKERS
Customers
AROUND THE CONSUMER HEALTHCARE STAKEHOLDERS ARE ALIGNING
You are competing with every other type of
healthcare entity for “shelf space” with the consumer.
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4 | BIGGER THAN A WEBSITE Healthcare’s next generation consumer is mobile and lives online. It will take more than a website to thrive in the New Health Economy.
FIVE BUSINESS MODEL PRINCIPLES
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MOBILE | THE FUTURE OF HEALTHCARE
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5 | THINK VALUE Challenge traditional thinking in healthcare – focus on the customer, whose wants and needs change.
FIVE BUSINESS MODEL PRINCIPLES
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Source: The New Multi-Screen World Study | Google, August 2013
CONSUMER CHOICE IS OFTEN MADE IN CONTEXT OF TIME & ACCESSIBILITY
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“The difficulty lies not in the new ideas…
…but in escaping from the old ones.”
John Maynard Keynes
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DISTRUPTION Healthcare’s New Business Models
Dr. Michael Burcham [email protected] http://www.slideshare.net/michaelburcham