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The Case for Disruption in Healthcare

By 02.27.18
Reading time: 4 minutes

Industry disruption has been a big topic over the past few years, and people are very quick to point out the success stories… Uber is one of the most commonly used, and there are many others – we’ve all become familiar with the tales.

What people frequently forget is that for an industry to be ‘vulnerable’ to disruption, and indeed what makes up the very nature of disruption itself, is a sustained and tolerated gap between the services being offered, and what the customers actually want. Put another way, disruption is when a long-time accepted business model is interrupted by someone who changes some key element of the model (be it price, delivery medium, quality, etc), in order to increase ultimate value to the customers. It’s possible that the value has been sitting unfulfilled for years, and it’s equally possible that the value is a brand new gap that has evolved as the market has changed. But either way the value gap has to exist – purely changing a business model without increasing the value to the end customer is not likely to succeed, at least in the larger scale.

Take the Uber example. There’s a clear disruption to the existing taxi industry. But it’s superficial to say the disruption is the technology that’s introduced. Taxis have long presented ‘tolerated’ issues as a marketplace – uncertain timing, inconsistent service, lack of trust by consumers, among others. Uber used technology to provide solutions to those challenges, and simultaneously lowered pricing (although one might argue they didn’t even have to do that). And even in that example, their success isn’t absolute. Personally I’m very likely to use Uber in a lot of places I travel because of those very things I mentioned above. But as much as I have (and do) travel to New York, I don’t use Uber when I’m there. NYC taxis are abundant, relatively cheap compared to other cities, and reasonably consistent in service. Uber simply doesn’t provide me the incremental value that it does in other places. (I also doubt an Uber will arrive before the next free taxi passes me, in most cases.)

You can’t just set out to disrupt an industry. You have to identify a gap in value, and deliver solutions that address that value. And while I read about incumbent players having an advantage in fending off disruption, that’s frankly only true if they recognize the gaps and work to address them. (It makes one consider… if they knew gaps existed and allowed them to be sustained for so long because customers tolerated them, why are they going to be able to fix them now?)

So why is Healthcare primed for disruption? Simply – because it’s changing. A lot. And the changes expose those very gaps in value. The gaps exist across the industry value chain… from provider services, to supply companies, to medical device and pharmaceutical companies, and even to the insurers. And the largest change, and the one that requires the most focus is this:

The patient is becoming the customer, and they are more in control than ever before.

Sounds crazy, I know, but consider:

  • If we define the ‘customer’ as the person paying for services, then that role has been traditionally played by payers, and is moving more to patients. Deductibles are increasing, more consumers are electing to purchase high-deductible and catastrophic-only plans, and recent studies even show that patients have become the third-largest payer, behind only Medicare and Medicaid. Because of the rise in out-of-pocket amounts, price is becoming a valid factor in decision making.
  • The amount of information available to consumers about alternatives, from health management strategies, to available drugs and surgical procedures, has grown tremendously, even to the point of being overwhelming for most consumers.
  • There is no topic more personal, more emotional, and potentially more confusing, than healthcare.

The health industry has traditionally been centered around providers – patients have long abdicated treatment plans, drug choices, and even scheduling, to the providers. In fact, we have historically given so much power to providers that we’ll show up for a scheduled appointment and tolerate waiting untold amounts of time before we get to see them, usually without a word of objection.

But patients are taking back some of that power. They are challenging providers on strategies, they are becoming (slightly, and perhaps dangerously) more educated about care and treatment options, and they are accepting alternate methods of delivery – Telehealth and remote/mobile services are on the rise.

However, patients are a very reluctant new power player – imagine how equipped you would feel to make the best decision for what to choose between treatment options in the best of cases. Most of us don’t have the background, education or skills to feel confident with health decisions. And now add the stress and emotion of a personal health crisis to the mix. Patients want someone they trust to guide them, more than ever. In the past that trust was gained through pure geography at times… now it needs to be reaffirmed and nurtured in a more proactive way.

For every player in the Healthcare market, this represents both a challenge and an opportunity – those that can adapt, to truly make the patient the center of their strategy, and to create a trusted, value-based engagement with those patients (and their families), will be the players who can take advantage of the shifting market needs. Other models for delivery will continue to evolve, but by centering our thoughts around the patients, it might reduce the demand (and thus acceptance) of disruption.

Putting the customers’ needs first in this case might be most of the disruption we need.

This article was originally posted on LinkedIn, head over to the article to add your perspective in the comments. 

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