By William Shea and Patricia Birch
Amazon, JPMorgan Chase and Berkshire Hathaway joining forces to create a new healthcare entity may seem like an odd partnership. Yet that triumvirate, plus Cigna’s planned acquisition of ExpressScripts, signal the continued tightening of the healthcare industry’s value chain. These developments also point to the rapid shifts in the industry’s business models—shifts that will upend traditional industry value propositions.
Drawing on industry research and client visioning exercises, we have identified several emerging healthcare business models being driven by ubiquitous smart phones, the Internet of Things, data analytics, and platform technology. The new models also are being shaped by consumers who now expect anytime, anywhere service and the industry’s shift to value-based care. These forces are giving rise to an on-demand healthcare economy, the foundation of which will be one or more consumer-to-business (C2B) on-demand healthcare platforms. These platforms will help deliver an Uberized version of healthcare, with consumers selecting providers on-demand based on price and quality ratings.
Other emerging business models include: doubling down on traditional insurance capabilities (underwriting, actuarial, and risk management) as the industry accelerates its shift to high deductible products and away from proprietary networks and managed care models. We expect to see more creative and individualized coverage from health insurers, as well as from insurance powerhouses re-entering the healthcare market; new plays from financial services providers to incorporate healthcare into consumer’s overall financial management strategies; and a rise in wellness offerings.
Amazon, Chase and Berkshire blend several of these new business models into one package. Here’s how:
- C2B on-demand healthcare platform. Amazon could connect consumers directly to providers via a telehealth platform and let the market drive pricing. Consumers would assemble their own low-cost networks of quality providers, threatening the basic value proposition of HMOs, PPOs and traditional health plan business models.
- Insurance Powerhouse. Berkshire Hathaway portfolio insurance companies could offer products for catastrophic care, with riders for chronic and other special conditions, with access to best-outcome providers (e.g., Mayo for cardiac conditions, MD Anderson for certain types of cancer, etc.).
- Holistic healthcare finance. JP Morgan Chase could package health and wealth advisory services, including 401k, health coverage and health savings account (HSA) recommendations, based on each employee’s individual situation.
At each step, the new company would be tightening the industry value chain, squeezing out entities that increase costs without adding value.
What to Do Now
Even if the Amazon venture were somehow sidetracked, the trends behind it—value-based care, consumer and employer rebellion over high premium and care prices—will continue to drive new industry models. Traditional players must figure out where they will fit into a compressed industry value chain. Here are some strategies and tactics to consider:
- Use industry incumbent status to your advantage. Monetize your knowledge of healthcare’s uniquely difficult supply chain – its regulations, privacy and security, specialties, sub-specialties, etc. New industry entrants will need this critical knowledge to create new opportunities and support business models.
- Look for innovative ways to partner with the tech giants attempting to disrupt healthcare. In the light of Amazon’s play, it could be better to embrace an open technology stack through application programming interfaces (APIs) and partner with tech giants and disruptors instead of building or buying a proprietary solution.
- Put mobile first but don’t neglect other channels. Smartphones are the de facto delivery mechanism, yet consumers want seamless, smart experiences across any channel they choose.
- Minimize, simplify and modernize IT assets. Healthcare organizations must cultivate IT agility to quickly deliver better customer experiences and new services. The cloud is mature, sophisticated and enables organizations to launch next-generation infrastructure, software and processes while minimizing capital expense.
- Invest in AI, machine learning and automation. Start applying software bots to rote processes to drive down costs and improve quality.
- Work toward real-time, transparent pricing. Consumers will expect this, having been trained on platforms such as Uber, Airbnb, etc.
The healthcare industry’s size, complexity and regulatory requirements will not inoculate it from mass disintermediation from a force like Amazon. The no-regrets moves above will make your organization stronger today as well as prepare it to transition to a new role in the industry’s evolving value chain in which the “Amazon of healthcare” may in fact turn out to be – Amazon.
William Shea is Vice President of Cognizant. Patricia Birch is SVP and Global Healthcare & Life Sciences Consulting Practice Leader for Cognizant.
The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.
