Systems must ‘let go’ of owning everything and focus on high value, patient experience
In the old days (think 2015), healthcare organizations prioritized owning facilities, maximizing volume, optimizing revenue and controlling production in-house.
There was little regard for total costs, outcomes or patient experience.
Meanwhile, an asset-light revolution was underway in other industries. Customer-focused organizations like Amazon, Uber and Airbnb are asset-light and brand-heavy. They operate “platforms” that employ data, organize suppliers and delight customers by offering great products at low prices with exceptional customer service.
Healthcare consumers increasingly expect better value and experience. Their demand-driven requirements for better services will transform healthcare delivery.
The startling news earlier this month that Amazon, Berkshire Hathaway and JP Morgan Chase are creating a new healthcare company rocked the industry. The 10 largest health insurers and pharmacy businesses lost $30 billion of market value within two hours.
How can traditional healthcare organizations compete? From their customers’ perspective, providers have two essential jobs: “Fix me when I’m broken” and “Keep me as healthy as possible.” In post-reform healthcare, successful companies have to do both.
Under fee-for-service medicine, “Fix me when I’m broken” generates high-margins for health systems that own all delivery components. Low-margin “Keep me healthy” services are less attractive.
Current delivery models focus on high-cost acute care at the expense of high-value preventive care. This frustrates consumers and creates market inefficiencies that platform companies can exploit.
The movement to value-based care
reverses this orientation. Irrespective of ownership and control, healthcare organizations must deliver quality outcomes and better customer experience. It’s time to get moving.
The two most successful value-based payment models—bundled payments for episodic care and capitated payments for ongoing care—demonstrate the power of platforming:
In episodic care, successful outcomes require delivering the right care at the right price. Healthcare organizations must bring owned and non-owned services and suppliers into alignment to meet patients’ needs and offer competitive prices.
Ongoing care management depends on reducing acute, episodic interventions. Healthcare organizations that establish trusting relationships with customers produce the best results. Under capitated payment models, hos- pital admissions generate costs, not revenue. Keeping customers as healthy as possible becomes the priority.
Providence St. Joseph Health is taking steps to platform healthcare services. To better understand the customer, the system is mapping interactions and giving clinicians tools to enhance patient experience while expanding access to wellness programs and community-based services outside the hospital.
To embrace platforming, healthcare organizations must overcome powerful, entrenched business practices by asking provocative questions and demanding customer-centric answers:
Does owning acute-care facilities make sense, particularly in saturated markets?
Does partnering or outsourcing generate superior outcomes?
Do current operations compromise quality?
Health systems must “let go” of production control and focus on delivering high-value care. They must re-think business models that prioritize ownership to maximize revenue. They need to delight customers by delivering high-quality outcomes and great service. In transparent, competitive markets, companies differentiate based on price, brand and customer experience. These are not core competencies at most health systems today.
As consumerism advances, the platforming of healthcare services will accelerate. Healthcare organizations will need to reorganize to deliver better, more convenient services at lower costs. This will fuel continuous innovation and value creation and allow U.S. healthcare to heal itself.
In healthcare, as in every market, outcomes matter, customers count and value rules.