Facing the Game Changers: A New Era of Healthcare Access

Edward Zalaman
Vizient Consultant, Sg2 Consumer Innovation

Legacy healthcare, a domain once perceived as an unassailable fortress, now finds itself besieged by unconventional adversaries. Retail powerhouses, tech titans, venture capitalists and insurance providers are collectively reshaping the healthcare terrain. The expansion of these 'game changers,' propelled by mergers and acquisitions (M&As), appears limitless, showing no regard for geographical confines. The last quarter of 2022 was particularly vibrant in M&A activity, with industry shapers like Optum, CVS and Amazon leading the charge. While these disrupters come from different industries, they each have a similar focus — to leverage core expertise to win in healthcare. Therefore, it's more important than ever for healthcare organizations to realize their patients as customers to compete in the marketplace.

The intruders: revealing the game changers

Big tech: Amazon's healthcare foray exemplifies its strategic planning, leveraging technology to challenge traditional healthcare norms. From buying online pharmacy PillPack to launching Amazon Care, its attempts have focused on accessible, consumer-centric healthcare. Despite the closure of Amazon Care due to internal constraints, Amazon further demonstrated its resolve with the $3.9 billion aquisition acquisition of primary-care provider One Medical and the introduction of AWS HealthScribe, a HIPAA-compliant service harnessing AI and speech recognition to streamline clinical documentation. Additionally, Amazon's virtual medical clinic, prosaically named, 'Amazon Clinic,' is now fully national. Bolstered by its partnerships with SteadyMD and, most importantly, Wheel, Amazon Clinic patients now can virtually confer with a bevy of board-certified physicians and Advanced Practice Providers across all 50 U.S. states.

Private equity: The involvement of private equity in healthcare, aimed at short-term profitability, has been transformative, with 2022 witnessing nearly record-breaking healthcare deal activity at close to $90 billion. Bain & Company's report anticipates continued investment in 2023, particularly in sectors like biopharma, life sciences and AI. However, the private equity impact on healthcare costs, quality and utilization remains contested, with the National Institute for Health Care Management attributing workforce changes, increased costs and potential care gaps to private equity's acquisition practices.

Retail: Retail giants like CVS and Walgreens have successfully translated their retail prominence into a more consumer-friendly healthcare model. By partnering with healthcare providers and diversifying services, these retailers capitalized on consumers' demand for convenience and affordability. In fact, retail clinics have seen a 200% utilization increase over the past five years, with technology integration like CVS's acquisition of Signify Health further solidifying their place in the new healthcare paradigm.

Payers: Insurers are heavily investing in Medicare Advantage and consolidating primary care practices to extend their service range and meet diverse consumer needs. Noteworthy examples include CVS Health's acquisition of Oak Street Health, a chain of primary care centers, and Kaiser Permanente's exclusive contracts with physician groups. This approach toward consolidation and diversification has been profitable for Optum and Kaiser Permanente, indicating the potential in a consumer-focused model. Further, with 10,000 Americans turning 65 every day, insurers such as Anthem and Humana recognize the significant financial implications of capturing this market share. So much so, that during their fourth quarter 2021 earnings report, Humana, announced that they would be committing $1 billion to fund growth and investment to shore up membership enrollment into their Medicare Advantage products.

If you can't beat them, join them

The emergence of these disruptors forces a crucial decision on traditional healthcare providers: collaborate with the disruptors or challenge them? Some providers have joined the revolution through M&As, while others have mirrored their business models. Irrespective of the choice, it's apparent that the classic healthcare model must evolve to survive.

Embracing the consumer-centric approach

To survive and succeed, healthcare providers must transition from merely offering services to cultivating a devoted and valuable customer base. This demands thorough knowledge of consumers, their purchasing behaviors and their experiences.

So how can healthcare organizations survive the influx of game changers? Stay attuned to the approaches in other industries with an eye toward what translates to crucial health system functions and remember that patients are customers. By adopting a consumer-first model, healthcare providers can compete effectively with disruptors, while enhancing the quality and efficiency of the care they deliver.

Learn more about how to unlock your near-term revenue generation and long-term consumer loyalty through Consumer Innovation solutions.

Author

As a Vizient consultant within Sg2’s Consumer Innovation team, Edward Zalaman is responsible for aiding and guiding clients in their journey to achieving patient loyalty. To realize this, he relies upon both his and his team’s expertise as well as the exclusive insights and analytics made possible by Sg2’s proprietary claims data sets. He develops tailored analytic frameworks and models to solve the unique and complex challenges expressed by clients in stakeholder interviews, working sessions and check-in calls. By synthesizing and translating his analyses and research into evidence-based knowledge, he provides the clear and compelling recommendations necessary to ensure the success of the project. Zalaman earned his Bachelor of Science in human biology at the State University of New York at Albany and his Master of Science in health informatics at the University of Denver.