These days, markets and company shares significantly react to a headline that includes the word “Amazon” in it, since investors and customers know that some sort of disruption is around the corner.
So, today when Amazon, Berkshire Hathaway and JPMorgan Chase announced a partnership to reduce healthcare costs and improve services for their estimated combined 1M US employees, the stock market and consumers responded as expected, resulting in share prices weighing down several US stock indices.
Earlier this month, another organization, Intermountain, proposed another disruption to the healthcare industry, declaring Frustrated Over Medication Costs, Hospital Group To Form Its Own Drug Company. The report discussed how their “frustration” with the high prices and inconsistent access to critical medications drove Intermountain to explore setting up its own pharmaceutical company.
To add one more to the mix, CVS is planning to buy Aetna, which will likely make prescription delivery and prices decrease for Aetna customers.
Detecting a trend here?
Increasing prices, stakeholder frustrations, initial competition, and other factors are all symptomatic factors of an industry awaiting major disruption. Case in point, Amazon was not the first business to go into the grocery store industry either. Blue Apron, HelloFresh, and other delivery services were already there showing signs of future disruption. Whole Foods had consumer frustration too, earning the nickname “whole paycheck.” These are factors that any organization should be considering as it looks to stay ahead of becoming irrelevant.
So how can healthcare companies compete?
With money coming back into the US and higher profits given new tax laws, healthcare companies need to reinvest in how they do business to find new efficiencies and test out patient- and doctor-friendly approaches to delivering products/services. Innovations are already present in the market for consideration too.
- Personalized healthcare experiences. Electronic healthcare records have struggled to meet privacy standards and often make consumers feel uneasy as they are being tracked. Kaiser created a unified medical record for its customers back in 2010; however, outside the network or under other insurance companies, a person has to visit each doctor’s website (if there is one) to see their medical records.
- Transparent pricing models. The cost for procedures, drugs, and stays vary widely by person even within a hospital, mostly due to insurance coverage, hospital costs, and specific patient needs. Outcome-based pricing models where payment is based on success rate of the treatment also are potential disruptions to the market; however, this model just further complicates the cost of treatment. Patients want the ability to see a menu of costs (commonly called bundled payment options), so non-emergency procedures can be shopped around.
- Integration of technology. While technology is not for all people, Fitbits have become prevalent in society today, and generations will likely continue to further accept more tracking and monitoring as it comes with health benefits. Especially given the competition with Amazon, healthcare companies need to invest in partnerships with proven diagnostic tools, such as those that track general health indices or analyze blood health. These variety of improvements in diagnostic and treatment processes could further support patient engagement in their health, increase preventative care, and reduce costs associated with lab tests.
- Share the research costs. Americans often pay three times more than other markets for the price of drugs. Given the current US market system, the premium allowed on drug prices subsidized the research costs worldwide for new drugs. Pharmaceutical companies, specifically, need to accept how the US market is changing, and make plans to better spread the costs of research worldwide, if not other wealthy markets. The alternative is facing more competition from Intermountain and other hospital groups making generics cost-effectively with no research required.
- Employee engagement and empowerment. With the future joint venture, Amazon, Berkshire Hathaway, and JPMorgan Chase will likely become more invested in the health of their employees, seeking to minimize stress, increase exercise, and improve food services, to decrease their own costs. Johnson & Johnson already has a similar model with its Health & Wellness Solutions offerings, and has employed tactics like Patient/Corporate Athlete programs to improve internal employee health. Insurance companies need to consider how they empower their end customers to be healthier as a preventative measure for overall costs, as well as an added benefit to its customers.
Put together, these trends could converge to create a new healthcare reality for organizations, employers, employees and patients. These developments and others need to be weighed in the organization’s strategic planning process to avoid giving the upper hand to possible competitors who incorporate these innovations early on.
With this new-found accessibility to healthcare organizations and drugs, it is only a matter of time before more companies and hospitals develop ever more disruptive ways to address our healthcare needs.
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