The new Healthcare model: Beyond the pill, the premium and the patient
The Healthcare sector’s anxiety over revenue pressures came to the fore last week when a 5000% price increase on a life-saving drug by tiny, unknown Turing Pharma provoked a severe backlash, and at least one Presidential candidate rattled the sabre of price controls in response. Turing Pharma and its "pharma bro" CEO are just symptoms for the real disease facing healthcare: revenue growth anemia.
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Don't count on your 'plain vanilla' resume to get you noticed - your resume needs a personal flavor to Other important announcements have been made in the last few weeks that point to how the rest of the healthcare sector is exploring alternate revenue sources beyond just naked price increases.
-- J & J announced that it was launching a patient engagement app in partnership with IBM and proposes to use the Watson engine to provide “virtual coaching” experiences to patients while helping hospitals and health insurance companies control readmissions
-- Lab test leader Quest Diagnostics announced a partnership with Inovalon, a healthcare analytics provider, to deliver actionable insights at the point of care
-- Aetna, which recently announced merger plans with Humana, intends to build out an Optum-like unit – another healthcare analytics firm – in the merged entity to provide clinical consulting and data analytics among other things
The one thing common to these announcements is that these companies are acting to get in front of what the industry already knows – traditional revenue streams from selling pills, collecting insurance premiums, and charging for patient visits is running its course. Add to this the threat of silicon-valley startups that are disrupting the current business models, and the urgency of the matter at hand becomes even more apparent.
The other thing that’s interesting about these announcements is that all these companies are looking to expand revenue streams using the same strategy, which is to monetize data assets through analytics.
It’s not hard to see why these industry leaders would pursue this new healthcare model.
Quest sits on over 20 billion lab test results that can be analyzed for patterns to detect the onset of a wide variety of disease conditions. Combined with Inovalon’ s analytics capabilities, and over 120 million patient records, this could provide a unique capability to generate insights that clinicians may be willing to pay for as they try to manage the health of their own patient populations.
J & J’s approach is more technology-focused, with an aim to increase patient engagement, a known shortcoming in healthcare, by partnering with Apple to bring in sophisticated UI capabilities. IBM Watson’s advanced analytics and artificial intelligence platform will provide the insights to prevent hospital readmissions and similar events, for which hospitals and health plans would be willing to pay. In a hedging statement, J & J admits that success will be determined by how much the app can move the needle (pun intended) on things like readmissions, suggesting that healthcare analytics is not going to be an easy sell.
The Aetna-Humana strategy may be some distance away from execution, considering that the merger is yet to close officially and is under the justice department's review for potential antitrust implications.
At some level, all of these strategies are aspirational, and real success is neither visible nor foretold. Healthcare remains an embattled industry. Quest faces potential rate reductions as part of a CMS overhaul of lab test rates, while upstarts like VC-funded Theranos are nipping at their heels with disruptive pricing models. Faced with evidence that health insurance deductibles are outpacing wage increases, health plans are also facing the prospect of some kind of government action in future. It makes sense that all of these firms would step out of their traditional comfort zones and form these unusual alliances to explore new revenue opportunities.
Somewhere over the rainbow.
There is a pot of gold somewhere out there. It would seem that the path is paved with healthcare data and the vehicle to reach the destination is healthcare analytics. Large technology firms such as IBM have made no secret of their insatiable appetite for healthcare data. But much of the data is locked up, either in proprietary electronic health record (EHR) systems, or are with healthcare enterprises, now eager to get in on the business of data and data analytics themselves. The lines between customer, supplier, and competitor are being redrawn as these new alliances are forged, and as all players recognize that they cannot do this alone. The ones that succeed in getting this right will find the pot of gold at the end of the rainbow.