A Vision for U.S. Healthcare's Radical Makeover


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The healthcare industry is on the verge of a disruptive change that will significantly reshape our experiences and reorient our expectations across the provider and payer value chain.

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A Vision for U.S. Healthcare's Radical Makeover

  1. 1. A Vision for U.S. Healthcare’sRadical MakeoverJust as the publishing and music industries were disruptedand rebuilt by powerful transformative levers, the healthcareindustry is on the verge of a similar disruptive change thatwill significantly reshape our experiences and reorient ourexpectations across the provider and payer value chain.
  2. 2. The U.S. healthcare model is unsustainable. This is not news. What is new, however, is the very tangible evidence of an industry being reinvented, from how care is managed, to how it is paid for, to how it is delivered. Healthcare’s unsustainable cost equation can be highlighted in numerous ways: healthcare as a percentage of gross domestic product (17.9% in 2011);1 healthcare expenditures as a percentage of the federal budget (23% in 2011);2 and the transfer of rising healthcare costs to employers and consumers (since 2008, the annual cost of insurance coverage for a family of four has risen nearly 25%, from $15,609 to more than $20,728).3 These factors have led to additional concerns: a lack of clarity and transparency about prices, dissatisfaction among patients and physicians with how care is delivered and growing questions about how to pay for care. The industry, as well as state and federal agencies, have been responding to these issues, generating these strong market currents: • Redistributed accountability and risk, as lines between payers and providers blur. Large healthcare plans are acquiring hospital systems and home care com- panies; hospital systems create and sell health plans. We see payer and provider clients working more closely together to improve quality while finding ways to reduce the costs of therapies and procedures. • Rise of integrated health management. The industry is experimenting with Accountable Care Organizations (ACOs) and Patient-Centered Medical Homes (PCMHs). These entities coordinate a comprehensive range of care for patients and consumers under a single, often virtual, roof. ACOs and PCMHs hope to streamline the healthcare value chain for consumers and patients, eliminating the need for them to find their own specialists and coordinate their own care. • Increasing vertical/horizontal integration and diversification. Merger and ac- quisition activity is brisk across the industry. Among our client base, we see sig- nificant interest in broadening from local to regional and even national customer bases through mergers and acquisitions. Healthcare players are also expanding their expertise, with health plans purchasing caregivers (e.g., WellPoint intro- duced a patient-centered primary care program) and providers launching their own health plans to consumers, such as that administered by the University of Pittsburgh Medical Center. • The “retailization” of healthcare. Healthcare clinics are now available in phar- macies, big box retail outlets and grocery stores, and such outlets will grow. More marketing of services and health plans will be direct to consumers, with the industry offering more individualized products and a greater emphasis on customer service. Despite the momentum behind these market forces, they cannot transform health- care’s business model. These initiatives – the M&A activity, ACOs, redistributed financial risk, etc. — generate only incremental improvements in cost reduction, quality and efficiency. Conversely, creating a truly sustainable foundation for healthcare will require the industry to eliminate substantial costs, embrace new ways of delivering care and improve the quality of that care. Achieving those goals means the industry must combine incremental improve- ments with the power of truly disruptive transformative forces, from new technology, to radically different diagnostic tools, to virtualized means of caring for patients. In other industries, similar disruptive forces have dramatically changed cost and service delivery equations. Think along the lines of how Apple transformed the music business with the iPod, how Amazon is reshaping publishing with its electronic delivery model and how Netflix reimagined the home video market.2 FUTURE OF WORK September 2012
  3. 3. Disruption and reinvention of the same order is required in healthcare. And it isalready occurring. Signs of radical transformation are emerging, driven by powerfullevers that are enabling the reinvention of the industry’s business model.Transforming Healthcare’s Business ModelRethinking healthcare to create a new, sustainable business model requiresexisting players, as well as newcomers to the industry, to disrupt current modelsby harnessing the following transformative forces — some ofwhich already are reshaping the industry. Creating a truly sustainable• Technology: Portions of the healthcare value chain will be radically transformed as segments of the industry are dis- foundation for healthcare intermediated through new business models, new software and new diagnostic capabilities. Some examples: The U.S. will require the industry to Food and Drug Administration is evaluating whether certain prescription drugs could be dispensed through self-serve eliminate substantial costs, kiosks that ask patients about their symptoms and make drug selection suggestions.4 Tiny robots tethered to physi- embrace new ways of cians assist in a variety of surgeries, and researchers say these are precursors to self-guided nanobots that will revo- delivering care and improve lutionize surgery.5 Researchers at the University of Geor- gia have developed a quick, inexpensive way to test for flu the quality of that care. viruses using nanoparticles that can be used in any clinic.6 Innovations like these shake up healthcare’s traditional structures, making it possible to eliminate costs while maintaining and even improving access to and the quality of care.The Emerging Healthcare Ecosystem Call Center Coaching Family Health Pharma • Disease Management Manager Drug Info Coaching • Disease Management Education • Wellness Education • Disease Management Rx Registries Services Disease Management Rx Behavioral Data • Wellness Incentives Coaching Rx Generic Profiles Dependent Monitoring Alerts Rx Education Interventions Periodic Reports Wellne ss Outcom es/Beh avior U Rx (Refills) pdates EHR/PHR Allergies Concomitant Rx’s Child Health Adverse Events Drugs Monitoring Co-Pays Alerts Consumers School Nurse Rx Vitals Updates Treatments Rx’s Case Manager Rx Medical Conditions Benefits Eligibility Wellness Programs Rx Treatments ePrescriptions Formularies Wellness Incentives Rx Medical Outcomes Replenishment Claims Payments Rx Compliance Wellness Incentives Treatments Benefits Eligibility Rxs FormulariesRx Registries PaymentsRx Medical Outcomes Premium Benefits Eligibility Discounts Formularies Employers Payments Healthcare Providers Employee Outcomes Payers Enrollment DataFigure 1 COGNIZANTI THOUGHT LEADERSHIP 3
  4. 4. • Virtualization: Technology innovation will create new business models capable of providing care anywhere and allowing new entrants to leapfrog bricks and mortar and go directly to virtualized, integrated healthcare models. All health- care will not be local. This is already becoming true: Web sites such as Consult A Doctor (consultadr. com) and Virtuwell (virtuwell.com) let anyone register and receive an e-consult from a physician or other caregiver. Partners Healthcare offers e-mail-based second opinions to patients and their physicians. Patients in remote villages Quick Take Mobilizing via M-Health Helping consumers and patients fill an active manage their health plans from a variety of role in healthcare is an essential component computing platforms, including smartphones of the new healthcare business model. The and tablets. The app enables them to search explosion of mobile devices and apps dovetails for providers, receive immediate explanation of with this requirement. Mobile health, or benefits notices, get messages about coverage “m-health,” fulfills two key needs: enabling changes, obtain a secure ID card for use at consumers to manage their health service rela- physician offices and emergency departments, tionships more easily and giving individuals and use a variety of ease-of-use features, such powerful portable tools for managing chronic as click-to-call. conditions and staying well. Another app offers personalized wellness One application we have developed at our management via smartphone or tablet (see clients’ request will allow consumers to easily below). This app enables patients and members to easily enter or automatically download health information, such as blood pressure, blood sugar, cholesterol levels, weight, body measurements, etc. Then, in easy-to-read charts, the app shows them how their current results relate to their goals and offers a variety of tips and information to help them achieve those goals. Authorized physicians may access data from the app to monitor patient progress more frequently, without the time or expense of office visits. Plans and physicians may also customize the app to be alerted to changes in a patient’s condition that require intervention. Employers may even use the app in wellness campaigns, with games and graphics encour- aging participation. The objective of these features is to prevent minor conditions from escalating to more serious problems that cost more to treat and manage. Apps like these will put health management tools literally at the fingertips of consumers and patients, giving them the more active role in their health choices they are demanding — and that will help reshape healthcare.4 FUTURE OF WORK September 2012
  5. 5. throughout the world are accessing high-quality healthcare through mobile and telepresence applications.7• Globalization: Due to technology advances and process virtualization, the in- dustry will have access to the highest-quality/lowest-cost services anywhere, creating a unique opportunity to transform care delivery in the U.S. and around the world. Sustainability will require leveraging global supply chains and oper- ating systems for quality and talent (e.g., offshore reading of radiology images and coding medical charts), thus eliminating major portions of cost. Similarly, U.S. health providers can offer their expertise to expanding global markets, as Children’s Mercy Hospitals & Clinics in Kansas City has done in creating a telemedicine partnership with a large hospital in Guangzhou, China.8 A logical next step is making• Disruptive innovation: Sophisticated medical diagnostic procedures will continue to move to less expensive set- gene-sequencing part of a tings, from hospitals, to physician offices, to retail clinics, typical checkup so that a to homes. Researchers and entrepreneurs can draw on the 200 terabytes of human gene sequence data generated by person’s care can be truly the 1000 Genomes Project, which is available free and on- line.9 Small labs can already use more affordable genome personalized for the ultimate sequencing tools from companies such as Roche and Illu- mina, Inc. A logical next step is making gene-sequencing in preventive care and part of a typical checkup so that a person’s care can be truly personalized for the ultimate in preventive care and disease management. disease management.• Next-generation analytics: Clinical decision support systems that leverage artificial intelligence and big data will revolutionize diagnostic practices, per- sonalized care planning and actual patient care. Blue Health Intelligence, the analytics arm owned by Blue Cross Blue Shield Association, has launched a pilot program using predictive analytics to improve the care of Arkansas diabetes patients while reducing costs.10 Similarly, our clients increasingly are using the “big data” stores generated by the explosion of cloud-powered mobile and social computing with advanced analytics to enable fact-based decision-making. Doing so moves companies from historical reporting on transactional data to more proactive planning, enabled by the rich insights contained within the terabytes of data generated by clinical systems.• Demographic shifts: Consumers want their healthcare accurate, fast and reli- able, and are prepared to be more involved in it. We are seeing an explosion in self-care fueled by mobility, technology and diagnostic innovation. More than 44 million healthcare apps will be downloaded this year, and the number of U.S. pa- tients remotely monitored will rise to 3 million.11 Evidence is growing that mobile health, or “m-health” helps individuals take better care of themselves. Mobile remote coaching and financial incentives improved diet and wellness activities among patients managing chronic conditions, according to a study backed by the National Institutes of Health.12 Our clients are working with us to develop apps to make care more convenient and personal for consumers, patients and physicians (see sidebar, next page).A healthcare model incorporating these forces would necessarily be a dynamic one.Just as consumers first experience the convenience and lower cost of e-books fromAmazon or buying music one tune at a time from Apple and then come to expectsimilar benefits from all their suppliers of books and music, the new healthcarebusiness model similarly will shift expectations with new healthcare experiences.Further, transformative processes are already under way. Trends such as techno-logical innovation and virtualization will continue to reshape healthcare, regardless COGNIZANTI THOUGHT LEADERSHIP 5
  6. 6. of regulatory shifts. The question is how much of the transformation will be driven by entrepreneurial new entrants to the industry and how much by established players reinventing themselves. It may be easier for the new entrants to envision, and establish, new models. How to Embrace Reinvention It is vitally important to understand that radically transforming healthcare will not be accomplished through an incremental, piecemeal approach, such as deploying a mobile technology here or a new self-care option there. Reinventing today’s healthcare model requires visionary thinking and strong champions to overcome embedded practices and the common belief that a series of small improvements will add up to radical change. Instead, the model must reimagine how healthcare can be delivered, how its quality can be measured, how it will be priced and who will pay for it. Prospering — perhaps even surviving — in this rapidly changing world will depend on how well your organization understands where it will fit in the new health ecosystem and how it will achieve that position. Consequently, organizations need to devote time and resources to visioning and planning to provide the necessary foundation for solid execution. Our experience tells us that without this preparation, organiza- tions can quickly lose their customer base to new entrants or competitors that have been more adept at reinventing themselves. We, therefore, recommend taking the following steps to get started on participating in the new era of healthcare: • Develop a broader strategic vision of how the industry could change. Un- derstand the trends and other forces reshaping the industry and consider vari- ous “end state” scenarios. End states might range from all primary care being delivered virtually and/or at retail clinics, to a steady increase in individuals and employers paying for a wider range of care directly instead of through health insurance plans, to a dozen healthcare super entities offering comprehensive cradle-to-grave services under a single banner. • Determine your company or organization’s role in the new healthcare value chain, as well as where other entities will fit. Who are your current competi- tors? Where might new competitors arise? What parts of your business are grow- ing? • What are the implications for your company or organization depending on its role in a particular scenario? A health plan might see that trends such as direct contracting with employers and hospital system-driven ACOs are on the rise in its market area and determine its best fit is to offer information processing and risk management to those ACOs. • How will customer behavior or buying patterns change? Will social networks be a strong influence on your customer base? This is likely to be the case among the millennial population. Similarly, digitally connected consumers tend to want mobile transactions and be accustomed to smaller-dollar transactions. • What customers will you want to attract/win in the future? And a corollary: What will be a best-in-class experience for those customers? Defining your tar- get population is critical to understanding the types of reinvented processes and rewiring you’ll require. Serving a younger, healthier population will require a strong, customer-centric mobility strategy. If long-term care patients are your target, it’s caregivers that will require mobile devices to deliver clinical intelli- gence at the point of care.6 COGNIZANTI THOUGHT LEADERSHIP September 2012
  7. 7. Toward the New Sustainable Model: A RoadmapWith your vision and strategic plan in place, your organization is better equipped tounderstand or create a role for itself in the reinvented healthcare value chain andhow its business model must change to support that role.To create the roadmap to your future, you must understand how to use transforma-tive levers – new technologies, virtualization, globalization and diagnostic innovation— to achieve the position you want in the transformed industry. If you have manymultinational employers in your region with highly mobile employees, and your goalis to provide “anytime, anywhere” care to them, you will need to investigate global,virtual resources, as well as mobile and telepresence technologies.Containing the costs of reinvention is critical, so consider identifying potentialpartners and allies that have the skill sets you require. Look outside the healthcareindustry; telecommunications and other high-tech companies may have more of thecapabilities you need.As you define the necessary transformation activities, create and implement agovernance model to guide and monitor these activities.Reinventing healthcare delivery undoubtedly will be challenging, requiring shifts inthinking, training and attitude — from consumers, as well as caregivers and industryplayers. Paradigm shifts often seem unlikely, even impossible, before they occur.But when they do, we can hardly imagine how we lived without our e-books, smart-phones and streamed video.In the near future, as we text our nurse-coordinators with questions, use our appsto monitor resting heart rates, transmit home test data and write smaller checks forhealthcare procedures, we’ll marvel at how long we managed with our outmodedcurrent system. ENABLER 8: FLEXIBLE SERVICE DELIVERY (NINTH OF A MULTI-PART SERIES) 7
  8. 8. Footnotes 1 National Health Expenditure Projections 2011-2021, Centers for Medicare & Medicaid Services, http://www.cms.gov/Research-Statistics-Data-and-Systems/ Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ Proj2011PDF.pdf. 2 Historical Tables, Office of Management and Budget, http://www.whitehouse.gov/omb/budget/Historicals. 3 “2012 Milliman Medical Index,” Milliman Research Report, May 2012, http://insight.milliman.com/article.php?cntid=8078. 4 “FDA Considers Expanding Definition of Nonprescription Drugs,” U.S. Food and Drug Administration, March 23, 2012, http://www.fda.gov/Drugs/ResourcesForYou/SpecialFeatures/ucm297128.htm. 5 “Snakebots Aid Docs in Surgery,” Associated Press, May 29, 2012, http://www.modernhealthcare.com/article/20120529/INFO/305299965/ snakebots-aid-docs-in-surgery. 6 “New Flu Test from UGA,” Athens Patch, Oct. 27, 2011, http://athens.patch.com/articles/new-flu-test-from-uga. 7 Stephanie Novak, “Exploring the Role of Mobile Technology as a Health Care Helper,” The New York Times, May 13, 2012, http://www.nytimes.com/2012/05/14/ world/africa/exploring-the-role-of-mobile-technology-as-a-health-care-helper. html?_r=1. 8 David Twiddy, “Children’s Mercy Starts Telemedicine Partnership with Chinese Hospital,” Kansas City Business Journal, May 25, 2012, http://www.bizjournals.com/ kansascity/print-edition/2012/05/25/childrens-mercy-starts-telemedicine.html. 9 “1000 Genomes Project Data Available on Amazon Cloud,” NIH News, March 29, 2012, http://www.nih.gov/news/health/mar2012/nhgri-29.htm. 10 Blue Health news release, March 30, 2012. 11 “Mobile Healthcare Opportunities: Smartphone Apps, Monitoring & mHealth Strategies, 2011-2016,” Juniper Research, Dec.1, 2011, http://www.juniperresearch.com/reports/mobile_healthcare_opportunities. 12 “NIH-Funded Study Examines Use of Mobile Technology to Improve Diet and Activity Behavior,” NIH News, May 30, 2012, http://www.nih.gov/news/health/ may2012/nhlbi-30.htm. About the Authors Patricia (Trish) Birch is a Cognizant Vice President and leads the company’s Healthcare Consulting Practice within Cognizant Business Consulting. She has 25 years of experience in healthcare operations and management consulting and serves on the board of directors of Sylvania Franciscan Health, which provides healthcare services in the midwest and south-central U.S. Trish is also a published author and speaker on issues facing the healthcare industry. She earned a BSBA in Finance from Boston University and an MBA from Jacksonville University. Trish can be reached at Patricia.Birch@cognizant.com. Bill Shea is an Assistant Vice President within Cognizant Business Consulting’s Healthcare Practice. He can be reached at William.Shea@cognizant.com. The authors acknowledge the contributions of Jagan Ramachandran and Dr. Keerthi Kumar, consultants with Cognizant Business Consulting’s Healthcare Practice.8 COGNIZANTI THOUGHT LEADERSHIP September 2012
  10. 10. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ 07666 USA Phone: +1 201 801 0233 Fax: +1 201 801 0243 Toll Free: +1 888 937 3277 inquiry@cognizant.com European Headquarters 1 Kingdom Street Paddington Central London W2 6BD Phone: +44 (0) 207 297 7600 Fax: +44 (0) 207 121 0102 infouk@cognizant.com Continental Europe Headquarters Zuidplein 54 1077 XV Amsterdam The Netherlands Phone: +31 20 524 7700 Fax: +31 20 524 7799 Infonl@cognizant.com India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, 600 096 India Phone: +91 (0) 44 4209 6000 Fax: +91 (0) 44 4209 6060 inquiryindia@cognizant.com© Copyright 2012, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means,electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject tochange without notice. All other trademarks mentioned herein are the property of their respective owners.