Healthcare executives responded to a recent survey by providing their perspectives on key trends affecting the healthcare industry that are contributing to disruptive innovation—and that require proactive strategic response on the part of healthcare organizations.
Healthcare organizations are under pressure to maintain a delicate balance between delivering better consumer outcomes and keeping the lights on. To make matters more difficult, they must achieve this balance in a disruptive environment characterized by increasing market uncertainty, a growing financial burden for healthcare providers, and fluctuating regulatory changes. With so much at stake, the healthcare industry is ripe for innovation.
The word innovation tends to be associated with the emergence of new technology, but it can extend to many other areas, particularly in health care. From the formation of strategic partnerships that reduce admissions to the use of data to create customizable treatment plans, innovative approaches to complex problems are transforming the healthcare industry.
Moreover, the sheer pace of this transformation requires healthcare leaders to be proactive in their response to change and disruption. Healthcare organizations cannot afford to sit on the sidelines to watch what happens next. By taking advantage of major industry trends, they can create opportunities for innovation—and success—within their organizations.
An in-depth survey conducted in 2017 sought the perspectives and insights of 45 senior healthcare executives on the major industry trends and their expectations for the future of health care. These executives—who represent a wide array of leadership roles in health care, including healthcare delivery, financing, insurance, and technology—identified four major trends that are providing healthcare organizations with ample opportunities for innovation. Just like the overall healthcare industry, these trends are complex and involve inherent contradictions. By understanding how to embrace these intricate and multifaceted trends, healthcare leaders can position their organizations to own the future, rather than be disrupted by it.
Trend 1: Consolidation
With the rising costs of care, organizations are looking to each other for ways to reduce spending and improve organizational efficiency through consolidation. The healthcare executives agree that consolidation is one of the most prevalent and versatile trends in the industry. Consolidation is bigger than one hospital or health system pooling resources with another. In today’s market, every type of healthcare organization is consolidating, from specialist medical practices and acute care centers to smaller clinics and accountable care organizations.
The contradiction. Although costly in the short term, consolidation greatly reduces costs in the long term.
Consolidations can happen for any number of reasons, but most fall into either of two main categories: those driven by financial distress and those driven by strategic gain.
In the financial distress category, consolidations are intended to relieve both organizations of heavy financial burdens. Although these types of consolidations are common and often beneficial, the executive respondents stress the importance of strategic gain as a motivating factor. For them, consolidation is not only one of the most prevalent industry trends but also one of the most significant—and fastest growing—sources of innovation in the industry.
For some healthcare leaders, the costs of consolidation are too great for it to be considered a viable strategy for growth and innovation. Moreover, consolidation also requires a great deal of human capital—— to identify how partnering with appropriate local or regional entities will provide measurable and repeatable solutions to organizational problems. Consider that the teams on both sides of the transaction require people from all parts of the respective organizations not only to devise the strategy and plan but also to assemble the shared resources and implement and sustain changes within those resources.
Nonetheless, the healthcare executives agree that, when implemented correctly, consolidation greatly reduces long-term costs, improves organizational performance, and provides both parties with something they did not have before—all of which benefits the consumer. Whether it means enhancing a care delivery model, reducing inpatient admissions, or implementing a more efficient payment model, consolidations can solve many complex problems. In short, strategic partnerships that blend capabilities to create something new are a key form of innovation that benefits both organizations and their consumers.
The opportunity. Consolidation provides a way for healthcare leaders to challenge existing business models by creating their own. Healthcare leaders should assess what needs are not being met within their own organizations and consider consolidation as an adaptable solution for meeting those needs.
Trend 2: The Transition to Value-Based Care
For decades, healthcare organizations followed the traditional fee-for-service model, which favored quantity of services over the quality of care and outcome for the patient. This approach to payment models—and to care delivery—has shifted. In the past 10 years, government regulations have pushed healthcare leaders to adopt a value-based approach to payment and care delivery, which favors quality of services and outcomes over quantity.
The surveyed leaders indicated the rationale for the shift to value-based care makes more financial sense. Despite the incentive to charge more for doing more, the healthcare executives noted that the fee-for-service model increased the cost of care and contributed to higher levels of care variation for patients.
The contradiction. Government regulations initiated the drive toward value-based care, but consumers are now in the driver seat.
From a consumer perspective, the shift to value-based care provides more clarity. Executive respondents reiterate that the fee-for-service model made it especially difficult for consumers to understand what services were being performed, how they were being charged for these services, and how these services contributed to the overall treatment plan of the patient.
Although government regulations were the catalyst for value-based care, consumers are now the ones driving this trend in the marketplace. This shift has occurred because of the impact the value-based care trend has had on patient experience and satisfaction. From the retail industry to higher education, consumer choice is a key factor for long-term success and growth. The executive respondents confirm that the healthcare industry is no different: The consumer still reigns supreme.
Consumers demand accessibility, expediency, and transparency in the transactions of their lives. Value-based care shifts the focus of the healthcare experience to patients as consumers, enabling them to have more control over the services they receive and the costs of maintaining their treatment. The healthcare executives suggest this change in focus gives industry leaders a chance to connect with and engage consumers in innovative ways that are not possible under the fee-for-service model.
The opportunity. A “consumer first” approach is a winning one. Healthcare leaders who institute a consumer-centric business model with a dedicated focus on delivering better outcomes at lower prices and at the convenience of consumers will enjoy long-term success.
Trend 3: The Advent of Big Data
As with the shift to value-based care, consumer choice is driving change in medicine and medical treatment. In a highly customizable world where everything is available at the touch of a button, consumers are looking for healthcare options that fit their lifestyles, preferences, and unique needs. The use of big data and analytics to improve healthcare outcomes makes personalization, customization, and innovation in health care possible in unprecedented ways.
The contradiction. Big data is expected to be a key driver of future clinical breakthroughs and customized solutions, but it is still in its infancy in health care, and the industry has barely scratched the surface of what is possible.
The surveyed healthcare executives generally share the belief that big data holds the promise of revolutionizing health care.
First, they are confident big data will change how patients are diagnosed and treated. Many healthcare organizations already are exploring personalized medicine by testing wearable medical devices, for example. The data pulled from these medical devices can assist healthcare organizations in providing more accurate diagnoses, resulting in more effective treatment and long-term prevention. With so many medical device options in the marketplace, the combinations of innovative data-mining strategies and solutions are virtually endless.
Second, the respondents expect big data to improve the overall health of populations. They predict that healthcare organizations will be able to look at health patterns within various specific populations with simultaneous breadth and granularity to significantly improve the treatment and prevention of chronic diseases such as obesity, diabetes, and hypertension. They also believe big data will have significant implications for tracking strains of influenza and preventing widespread contagions.
The sophistication of big data in combination with health records such as genetics, personal and family medical histories, and even data on physical activity from wearable devices will help healthcare organizations tailor innovative treatment to patients and across population sets. As healthcare organizations gather and analyze more data, and as analytics systems become more precise, healthcare executives expect the impact on care delivery to be immeasurable.
The opportunity. Innovation is best when it improves more than one problem. By combining disparate sources of data to paint larger, clearer pictures, healthcare leaders can ensure their organizations will provide consumers with the personalized solutions they demand.
Trend 4: The Generational Divide
The nation is in the midst of a generational shift as baby boomers enter their retirement years and millennials become the leading generation. Nonetheless, both generations are having a profound effect on the nation’s healthcare system.
The contradiction. Baby boomers and millennials are changing the landscape of health care, but in different ways and for very different reasons.
In every industry, millennials are changing the status quo. They differ from every preceding generation in what goods and services they buy—and how they buy them.
Nonetheless, many of the surveyed healthcare executives are quick to point out that the younger generations are not the only ones who are changing the landscape of the healthcare industry. Baby boomers who are working and living longer are still significantly influencing the industry. Executive respondents believe the generational differences between these two groups are having a profound impact on how the healthcare industry will operate in the future.
Consumers from the baby boomer generation differ from their millennial counterparts in several ways regarding how they approach their healthcare experience.
First, survey respondents note that older generations are more likely to have a preestablished relationship with a primary physician. When it comes to planning their next visit, older generations do not feel the need to shop around to find other options to meet their healthcare needs; they usually know exactly who they will see.
Second, the boomer generation is less likely to self-diagnose and more likely to take the recommended medicine associated with their providers’ diagnoses. They trust what their providers have given them and do not feel the need to research other medication options unless they are unhappy with the results.
Conversely, millennials take more of a “do-it-yourself” approach to meeting their healthcare needs, the healthcare executives say.
First, younger generations are more likely to prefer a healthy lifestyle as a means of disease and injury prevention. They value the longer-term benefits of small, healthy choices made daily, versus short-term and expensive annual physician check-ups and exams. Being well-informed about the overuse of antibiotics and the potential dangers of prescription drugs—both common problems they have witnessed in older generations—millennials are less likely to embrace doctor-recommended prescriptions.
Second, before choosing a provider, millennials are more likely to assess whether they need one. With the availability of sites like WebMD and other online symptom checkers, younger generations weigh the options of seeing a provider over making their own self-diagnosis. When millennials choose to see a physician, they typically make that decision based on pricing transparency, convenience, and individual research done in advance. Once they have determined that they will seek treatment, younger generations prefer the instant gratification of going to a minute clinic over the wait time of a hospital or other practice.
Despite these differences, the surveyed executives generally believe both populations are equally responsive to innovation in care delivery. Cost and convenience have no generational preference. Smart, strategic changes that make meeting healthcare needs easier, cheaper, and more efficient for the consumer will put any healthcare organization ahead of others.
The opportunity. There is no “one size fits all” solution. The future of health care belongs to those who prioritize the balance of two diametrically minded but equally influential consumer populations by understanding and reacting to the needs of both.
Survey Takeaways
Consumers, technology, and traditional care delivery models all have changed. And with the fast pace of disruption and transformation in the industry, they will continue to change—often at a moment’s notice. Healthcare leaders who think, plan, and act to embrace these changes are likely to succeed, while inactivity is almost certainly a recipe for failure. Through strategic partnerships, the guided use of big data, and a deep understanding of the consumers they serve, healthcare organizations will be better equipped to deliver higher-quality consumer outcomes. With a strong foundation rooted in consumer choice, healthcare leaders can develop innovative solutions to combat market uncertainty, increased costs, and ever-changing regulations, and create the framework for long-term, sustainable success.
Jeff Jones is managing director, Huron, Portland, Ore.
