How tech-enabled consumers are reordering the healthcare landscape
Consumers’ accountability for healthcare spending is increasing, and more than a thousand companies are developing new digital/mobile technologies that should allow consumers to take greater control over their healthcare choices. This combination may disrupt the industry’s migration toward larger, more integrated systems and put almost $300 billion—primarily, incumbent revenues—into play.
Four convergent forces are reordering the healthcare landscape in the United States. Largely in response to two of them—reform and the reallocation of financial risk between providers and health insurers—the industry has been consolidating at record pace (80+ deals in each of the past four years). However, two other forces—rising consumerism and the spread of digital/mobile technologies—could lead the industry in a different direction.
Consumers are paying a growing portion of their healthcare costs out of pocket, and they are well aware of the convenience and simplicity provided by online banking, shopping, and travel reservations. As a consequence, they are starting to alter their attitudes about healthcare costs, choices, and accessibility, as well as who should control their clinical information and how much administrative complexity they should endure. These changes will likely accelerate as consumers’ financial accountability for healthcare costs continues to increase.
Technology companies—many of whom are new entrants to the healthcare sector—are hastening the changes by offering consumers a growing array of health-related applications, programs, monitors, and devices. Although these technologies currently pose little risk to incumbents, they could create considerable disruption in the not-distant future.
Our research suggests a growing divergence between how providers and insurers are integrating and reconstituting their organizations and how tech-enabled, financially accountable consumers want to interact with them. Consumers may increasingly resist incumbent-imposed restrictions precluding them from deciding where, when, how, and from whom to seek care. Consider a world in which:
- Pricing transparency applications and online scheduling tools permit consumers to identify and use discrete, best-in-breed health services from a range of providers (some of whom are consulted remotely via mobile e-visits), rather than accept the limitations in benefits or access restrictions imposed by narrow networks, health maintenance organizations, or integrated provider systems.
- By enabling people to own, and control access to, their health data, digital/mobile health technologies eliminate the information asymmetry that has long benefited healthcare system incumbents and inhibited the creation of an informed healthcare consumer.
- Consumers can create their own personal health management “ecosystems,” quite literally in the palms of their hands, based on individual preferences for how they wish monitor and manage their health and healthcare, as well as how they choose to manage their health benefits and payments. (Admittedly, this last scenario requires development of an IT platform that would allow data from different technologies to connect, but such a platform is likely to be built within five to ten years.)
We cannot yet predict the rate at which these developments will occur. Evidence verifying the effectiveness of some of the technologies has not yet emerged. Furthermore, the healthcare sector has confounded many prior predictions of technological evolution (in part because of the typically inverse relationship between age and need—younger people tend to adopt new technologies more rapidly, but older people usually have greater healthcare needs). Nevertheless, the pace of change has often been extremely rapid when digital/mobile technologies are involved (think BlackBerry versus iPhone, or CD versus MP3). If the changes become widespread, up to about $270 billion of incumbents’ current revenue and another $13 billion to $24 billion in new revenues could be contested due to price compression and shifting demand and supply dynamics. Furthermore, the conventional wisdom—that vertical and horizontal integration, and the risk management and information advantages resulting from them, are preconditions for competitive success in healthcare—may become invalid or will apply only to those market segments forced or willing to trade personal choice and access for very low cost.
In short, the rise of financially accountable, technology-enabled consumers could splinter today’s healthcare value chain. Incumbents must decide how they want to respond.