Healthcare’s Retail Transformation – Enabling Healthcare Consumerism

Healthcare’s Retail Transformation – Enabling Healthcare Consumerism


Business as usual – that is traditional hospital cross-subsidies, whereby commercial insurers would subsidize public payers with above-cost pricing – has come and gone. Gone are the days of a price-insulated patient, who sought care with little concern for out-of-pocket payment. Medicare payment innovation, market-based Medicaid reform, and increased commercial market competition have collapsed the cross-subsidy model, with reductions in fee for service payments. As patients are no longer price-insulated, and bear more and more costs, healthcare is transforming to a retail, consumerism market before our eyes.

There are a growing number of buyers, with activist employers, and price-sensitive individuals. There is also a proliferation of product options, as broad, open networks transform into narrow, custom networks. Increased transparency has been provided with plan comparison on exchange platforms, and reduced costs for plan replacement have lessened disruption for employers to change benefit options.

However, the most important driver of healthcare consumerism, is greater consumer cost exposure via variable individual premium contributions and high deductibles. As such, health systems are needing to engage the healthcare consumer, the patient, at the point of network selection. This has been witnessed over the past several years in the burgeoning retail clinic and urgent care markets, with patient access as the battleground.

A recent NTT Data study provides further evidence, with findings that nearly two-thirds of consumers expect their healthcare digital experience to be more like retail. U.S. healthcare consumers want simple and reliable digital interactions for routine transactions, such as filling prescriptions, accessing test results and making doctor appointments. The study reveals that consumer expectations for healthcare providers and insurers are being shaped by other industries, and they want their digital experiences to more closely mirror interactions with major online retailers, such as Amazon, Apple and Southwest Airlines.

Healthcare Retail Transformation - US Retail Clinic GrowthAs the retail and urgent care clinics have been transformed, further disruption is in the works. New entrants are challenging the traditional health system status quo. CVS Health Corp., hit by slower store sales and the defection of some big insurance providers, is moving ever more onto doctors’ turf in a bid to win back business. The company is expanding its program to transform its stores into health center, in which it marshals pharmacists, hundreds of on-site medical clinics and its vast data network to help people manage chronic diseases including asthma and high blood pressure. Furthermore, the $69B acquisition of Aetna could mark the start of a new era of integrated healthcare big data analytics, as both Aetna and CVS Health have championed the importance of risk stratification, data-driven targeting for population health interventions, and the need for real-time big data shared across the care continuum.

Retail Pharmacy Healthcare Consumerism TransformationCompeting with the likes of CVS/Aetna, Amazon, Berkshire Hathaway, and JP Morgan Chase announced a partnership which theoretically would allow innovation through a large self-insured entity. Self-insured employers are not bound by Medical Loss Ratio standards, and thus have a significant impetus to minimize cost, relative to the private insurance environment. Additionally, Amazon has taken some initial steps into pharmacy, with its vast experience creating digital platforms that cater to consumer preferences, as well as facilitate buyer and seller engagement in a market. Part of the reason why Amazon is so successful is the ability to collect huge volumes of disparate consumer data to generate highly-targeted suggestions for individuals based on previous purchase patterns and the profiles of similar individuals. Amazon is expected to leverage core areas of supply chain management and distribution to transform a pharmaceutical delivery market ripe for disruption.

With this retail transformation, patient relationship management is paramount. To maintain competitiveness, healthcare delivery organizations must develop a more nuanced understanding of consumers’ needs, preferences, and values. While patient relationship management is more than CRM for healthcare, there are many parallels between the two concepts – deliver personalized content and streamlined digital experience. As health systems face new entrants and competitors into the market, it becomes even more imperative for them to cultivate a relationship with the patient. Health system’s goals are to create loyalty by providing resources and tools that will help make patients more efficient.

Additionally, healthcare delivery organization consolidation continues as M&A is driven by a desire to increase scale and spreading out risk. As patients bear more of the costs of their health – they will demand more efficiency and convenience. As we consolidate to what is likely to be 12 major health systems by 2025 (as forecasted by Chilmark Research), that will become ever more important.

Excerpt from Chilmark Research: Why Patient Relationship Management Is More Than “CRM for Healthcare”

We are still more than two years away from widespread adoption of comprehensive patient engagement solutions that can support coordinated, value-based care.

To do this, PRM solutions need to do two things:

Meet patients where they are. The industry is getting there – and, admittedly, faster than we had anticipated 18 months ago. Bidirectional messaging and appointment scheduling, two of the biggest “asks” that patients have, are widely available in PRM solutions.

Help patients manage their health and wellness on their own terms, outside the HCO setting. This has proven more difficult. PRM is making strides in these areas, by offering access to care plans and integrating medical and fitness devices, but support is neither widespread (not all vendors offer it) nor universal (not all vendors that offer it do it the same way). Plus, mere access to a care plan is not the same shared responsibility for a care plan – which is also not the same as self-sufficiency.

Chilmark’s upcoming report provides many more thoughts on what it will take to make that happen.

Contact us to learn more about our strategic advisory services, and gain additional resources to maintain competitiveness and adapt to healthcare’s retail transformation.

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