A confluence of disruptive forces – economic, social, scientific and digital – is creating seismic shifts in the healthcare industry. New targeted therapeutics, smart diagnostics, advanced informatics and digital medical technologies will redefine healthcare as less reactive and dependent on traditional facilities and acute interventions, and more as a proactive, preventive and collaborative effort. As a result, critical healthcare needs will be met more efficiently and effectively.
As the healthcare industry has grown in cost, size and complexity, the choices of care setting, therapeutic approaches and post-intervention care coordination have become entangled in a myriad of objectives and controls. To endure, companies have focused on healthcare product sales, on healthcare delivery organisations to provide services at the right price point and on payers for actuarial modelling. But best patient outcomes and overall value for the healthcare system have often suffered.
Accenture research in a new book, Healthcare Disrupted: Next Generation Business Models and Strategies, shows that in developed countries such as the United States, the United Kingdom and Germany, where the ageing workforce is a key driver of rising healthcare costs, spending on healthcare ranges from 11% to 18% of gross domestic product. In rapidly emerging markets, such as China and Brazil, it is between 5-10%. Overall healthcare spending will double from $8.4tn in 2015 to $18.3tn in 2030 with an estimated lost productivity from chronic diseases alone of $47tn during the same period.
Correcting the fundamentals
The fundamental problem compelling reform efforts is that the value created for patients, providers and payers hasn’t been aligning with spending levels. For years, the industry has increased expenditures without improving returns to health.
In the United States and Europe, for instance, this approach is known as fee-for-service, and utilises codes, procedures and treatment groupings to determine how much is paid for treatment. Healthcare providers are given incentives to do ‘more’ in the most acute setting and with the most skilled clinical personnel, in order to ‘code’ as highly as they can to optimise revenues.
Therapeutic, device and diagnostic makers are motivated to encourage key decision-makers at provider and payer organisations to have their products and services used or prescribed as often as possible. With these incentives, and without an efficient market for value in terms of outcomes, healthcare costs have increased faster than general inflation.
The fee-for-service model can be viewed as deeply flawed. No simple modification will yield a different outcome. So, there is an emerging rationale for moving from an input-based approach – the number of patients seen or drugs and devices sold – to an output-based approach – patients’ best health outcomes. When payment or reimbursement is based on inputs, there is an adverse incentive to do as little as possible and receive the same compensation. When payment is based on outputs, the incentive is to optimise productivity and maximise system benefits.
Technology as a solution
Technology is opening up solutions. For payment based on outputs, a system must measure clinical outcomes realised for the patient and broader value created for the health system. This capability, until recently, was not part of most hospital, health or enterprise-resource-planning systems. Now it is possible to collect data on clinical activity, the health status of a patient before treatment and the change in health status after treatment.
This data, captured through electronic medical records, is enabling standards for how care is administered and outcomes captured to be better monitored. In addition, by using publicly available data, it’s possible to calculate the health status of a patient population and assess the health risks of the individuals within it. And so for the first time, it is possible to set the foundations for a healthcare market focused on outcomes and value.
Those in the industry find themselves playing catch-up with a new sense of responsibility: to ensure that those without care can access it; to build strength into national health systems; and to see that healthcare re-emerges as patient-responsive, responsible and centric. The healthcare industry is directly confronting the business models it’s built, defining what worked, what did not and what will work in the future.
Wearable technologies … are changing the nature of how the healthcare system understands and interacts with patients
Health consciousness yields opportunities
Along with ageing patient populations and the prevalence of chronic disease, many healthcare markets are experiencing a significant rise in patient health consciousness, which is framing new opportunities for companies to develop and market consumer goods and services that facilitate health and wellness.
These product offerings are increasingly leveraging the aforementioned disruptive forces that are the key enablers of change. These changes will have a major impact on life science companies, which must come to grips with a new, patient-centric order, one in which financial incentives are linked to the outcomes realised by patients and the value delivered to healthcare provider systems and risk bearers.
To harness the potential created by these changes, executives and industry leaders must better comprehend redefined markets, new services-centric approaches and new outcomes- and value-centric performance models. They must realise the fundamental impact new business models will have on their organisations.
Unprecedented insights
Some disruptive forces are built into wearable technologies, such as watches and mobile phones, which enable consumers to track and store health data. The manufacturers of these devices are increasingly bringing the healthcare system right to patients, essentially changing the nature of how the healthcare system understands and interacts with patients.
The ability to harness other digital data, including EMRs and personalised genomic information will further yield pockets of opportunity for life science companies. That data, and the ability to analyse it, represent additional revolutionary forces driving unprecedented insights and facilitating scientific breakthroughs.
A new overlap
Traditionally, there were three types of healthcare players: providers, manufacturers and payers. But the distinctions are blurring. Now device companies are transforming into service entities, focusing on the remote management of patients. Pharmaceutical companies are focusing on service. Providers are extending services into home care and post-discharge monitoring. Additionally, medical device and digital companies are pairing with pharmaceutical firms, and payers with providers.
In one instance, Accenture is partnering with Boston Scientific to facilitate data-driven digital health solutions that improve patient outcomes and reduce the cost of treating chronic cardiovascular conditions. The companies have developed a cloud-based, data-driven digital health solution for hospitals designed to improve patient outcomes and reduce costs for treating patients with chronic cardiovascular diseases.
Advantics Care Pathway Transformation helps providers make more proactive and informed decisions based on insights into the patient population, ultimately improving the care patients experience from their hospital stay through post-discharge care and in-home support.
Emerging business models
Meanwhile, new business models which incorporate fundamentally different economics are solidifying. They are setting precedents and standards for others to follow. Four business models – centred on patient outcomes and value – are coming into focus:
- Lean innovators: companies that combine generics-efficient manufacturing and supply chain best practices with M&A, and new digital technologies to facilitate rapid growth and challenge existing cost structures, productivity and operating models. With the shift to value and the consolidation of healthcare providers and health insurers across markets, they are in a unique and differentiated role to become broad partners.
- Value innovators: companies that improve patient outcomes and health system efficiency through the integration of therapeutics, remote sensors, wearables, devices and digital services with clinical processes. They are paid on the basis of the outcomes realised.
- Around-the-patient innovators: companies that put patient value and outcomes at the centre of their strategy, focus on the most devastating diseases, leveraging real-world analytics and digital medicines to create novel integrated healthcare solutions that assure outcomes and value.
- New health digitals: the vanguard of a new segment of health services and life sciences are companies assuring the integration of data, analytics and digital services across all settings with a cost and scale previously unseen – they are as focused on sustaining health as they are on enabling new healthcare approaches through cross-industry collaboration, always rooted in digital innovation.
These models represent potential strategies and direction that life science companies can take. How they implement them will depend on their journey – where they’ve come from and the place they want to hold in the healthcare system of the future.
Given the US trends in healthcare, which are similar to what Europe has recently gone through, Accenture expects a continued push for value innovation in pharmaceuticals and medical devices through partnerships with payers and provider networks both domestically and globally.
