Presentation on Disruption | Emerging Buisness Models in Healthcare - Presented at the HIMSS Summit of the Southeast in Nashville, TN on 09.17.14. The presentation underscores the significant opportunities that exist in healthcare for entrepreneurs, investors, and strategic partners.

1. DISRUPTION
Healthcare’s New Business Models
TN HIMSS 2014 Summit of the Southeast
Dr. Michael Burcham

2. When an industry faces disruption, companies often fail to
appreciate quickly enough the nature, extent, and velocity
of the changes taking place.
WHY? Disruptions start at an industry’s edge, among small
companies that provide specialized value to emerging
customer segments
They bring new business models.
They leverage new technologies.
They are highly disruptive.

3. Part 1 | The Perfect Storm for Disruption
HIMSS 2014 Summit of the Southeast
09.17.14 | Burcham

4. ACA | IMPLEMENTATION TIMELINE
2014
2015
20132020

5. HIGH DEDUCTIBLE PLANS
GO MAINSTREAM!

6. ENROLLEMENT IN HIGH DEDUCTIBLE PLANS
HAS TRIPLED SINCE 2009
Source: PwC 2014 Health Research Institute

7. AVERAGE DEDUCTIBLES FOR VISITS
ARE INCREASING
Out-Of-Network
In-Network at Out-of-Network Deductibles
In-Network
Source: PwC 2013 Health & Well-Being Touchstone Survey

8. INDUSTRY CONSOLIDATION HAS
LED TO HIGHER PRICES | FOR NOW
Hospital Deals on the Rise
Source: Irving Levin Associates, 2013

9. HOSPITAL PRICES REMAIN A
MYSTERY FOR CONSUMERS

10. New Players Will Disrupt the $3 Trillion US Health
Economy Drawing Billions from Traditional Players
…While Expanding the Fitness & Wellness Space

11. OF FORTUNE 50 FIRMS
24 ARE NEW ENTRANTS IN HEALTHCARE
In their eyes, today’s
system represents
$2.8 trillion in the US
alone - but the New
Health Economy of
tomorrow will include
trillions more globally
as consumers shop
for products and
services online.
Source: Fortune 50. 2013

12. Part 2 | 7 Core Attributes of Disruption
HIMSS 2014 Summit of the Southeast
09.17.14 | Burcham

13. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
1 | COMPETITORS CHURN
Lots of new players enter the market, many fail.
Although few incumbents are able to gain stronger
positions, many shrink, are acquired, or
disappear.

14. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
2 | ADVANTAGES MATTER
When market forces become more important than
regulatory rules real Competitive Advantage
determines the winners.

15. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
3 | PERFORMANCE GAPS WIDEN
As competition shifts to true sources of advantage,
the difference in the financial performance of top
and bottom players increases - and the gap often
persists for years.

16. CORE ATTRIBUTES OF
7 INDUSTRY DISRUPTION
4 | PRODUCTIVITY INCREASES
Strong financial performance depends not only on
competitive advantage but also on operational
efficiency.

17. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
5 | NEW CUSTOMER SEGMENTS FORM
New customer segments will emerge as innovative
products are introduced and consumers become
more aware of the diversity of their choices.

18. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
6 | PROFIT POOLS SHIFT
During disruption the most attractive industry
segments become the least attractive as new
entrants flock to the more attractive segments and
compete away profits.

19. CORE ATTRIBUTES OF
7 I NDUSTRY DISRUPTION
7 | MORE DEALS
Deal activity tends to increase during industry
disruption – coming in waves as competitors
attempt to keep up with one another.

20. INDUSTRY LEADERSHIP
VOLATILITY HAS RISEN SHARPLY
The “topple rate” is the likelihood that an industry leader will lose its dominant
position during the next five years.
Source: S&P 500. McKinsey Analysis. 2014

21. Consumers may well benefit from the
innovations that healthcare disruption is apt to
unleash—consumers typically do when disruptive
changes arise.
Incumbents most often falter during disruption.

22. Part 3 | Elements of New Models
HIMSS 2014 Summit of the Southeast
09.17.14 | Burcham

23. WHAT IS IMPACTING HEALTHCARE
CONSUMER BEHAVIOR?
• Search
• Big Data
• Indoor Mapping
• Online Scheduling
• Near Field Communication
• Mobile Diagnostics
• Connected Devices
• Wearable & Embedded
Technologies
• Wellness Apps
• Virtual Visits | Telemedicine
• Mood Detection
• Gesture Recognition
• 3d Printing & Bio-Printing

24. OPPORTUNITY | CONSUMERS WANT AN
AMAZON.COM STYLE EXPERIENCE
Source: HRI Consumer Survey, December 2013

25. 64% |on 2+ hospital websites
of online consumers are comparison shopping

26. Opportunity cost of losing one $112,824
hospital website visitors

27. CONSUMERS | THEY ARE READY TO GET
CARE IN NEW WAYS & IN NEW PLACES
• Diagnostics
• Primary Care
• Online Support
Source: HRI Consumer Survey, December 2013

28. NEW DISRUPTIVE ENTRANTS
“How likely would you be to choose these options if they
cost less than the traditional choice?”

29. 35 - 54 YEAR OLDS ARE MOST LIKELY TO
CHOOSE NEW OPTIONS FOR CARE

30. Part 4 | Strategic Thoughts for Incumbents
HIMSS 2014 Summit of the Southeast
09.17.14 | Burcham

31. STRATEGIES THAT CAN HELP
3 INCUMBENTS THRIVE
1. PORTFOLIO FOCUS | Shift emphasis on customers and
products that will benefit from the disruption – or at least
be insulated from it.
De-emphasize areas of vulnerability.

32. STRATEGIES THAT CAN HELP
3 INCUMBENTS THRIVE
2. TRANSFORM THE BUSINESS MODEL | Make
fundamental in core activities the meet the disruptive
challenge head-on. New entrants often offer a “better
mouse-trap” – superior benefits and lower costs.
The Incumbent should exploit competitive
advantages others cannot replicate.

33. STRATEGIES THAT CAN HELP
3 INCUMBENTS THRIVE
3. BUILD A NEW BUSINESS | Acquire or build a new
business that can leverage the company’s core
capabilities and scale to replace lost earnings. Often this
may be a model that supports the original business
and other incumbents in the space.
This may be the most challenging of the three
options.

34. THE LEADERS ROLE IN MANAGING DISRUPTION
1. Take on 2 Jobs | Run today’s business while building a strategy of the
business of tomorrow.
2. Resource Allocation | Focus resources to the new strategy – strategy is
only theory until resources are allocated.
3. Capacity for Change | Know the organization’s strengths; Know which
assets can be leveraged or re-purposed.
4. Go Lean | Administrative efficiency is a must-have during disruption. Cost
reduction is not a recipe for success – but a prerequisite.

35. CONSUMER PREFERENCES IN
HEALTHCARE SHOPPING
Prefer an online shopping site with
different options at different prices
Prefer to use their health
insurer’s website
Prefer to use healthcare
provider website
Prefer calling around to
get prices
Prefer a website provided by
their employer
Prefer “other” methods to
shop for healthcare
Source: PwC 2014 Health Research Institute

36. CONSUMERS ARE DISCOVERING THAT
CONVENIENT CARE IS EFFICIENT CARE

37. ENROLLEMENT THEY’RE LEARNING IN | DRUGS HIGH COST DEDUCTIBLE MORE IN
PLANS
CERTAIN HAS TRIPLED SETTINGS
SINCE 2009
Oncology drug Z costs $1000
in a physician office setting
Oncology drug Z costs $2000 in a
hospital-outpatient setting
Physician Hospital Percent
office outpatient difference
Alimta
Herceptin
Avastin
Example oncology drugs
Total payment ($) per claim
Source: PwC 2014 Health Research Institute

38. AS HEALTHCARE GOES RETAIL | THERE’S
ROOM FOR GROWTH
Have you (or someone in your
household) ever sought healthcare
treatment in a retail
clinic?
Would you (or they) go
to a retail clinic
again in the future?

39. 80 Million
Wearable wireless sensors for
fitness and wellbeing by 2016.
Adoption is driven by device availability & new social patterns
that encourage people to record and share fitness data

40. WELLNESS & FITNESS MARKET
THE $267B

41. CONSUMERS TURN TO TECHNOLOGY TO
COMMUNICATE WITH PROVIDERS
How would you like to communicate with your
doctor, nurse or caregiver?

42. THE PROVIDER COMMUNICATION PROBLEM
Super-Sized Health Systems have outdated communications leading to
confusion, loss of information and decreased engagement.

43. Why It Matters
Engaged staff are 50% more
likely to show an attitude of
genuinely caring about patients
than non-engaged staff.
Hospitals with above median
HCAHPS scores report 37% high
operating income.
Towers Watson, 2013

44. AN IDEAL EXPERIENCE PROMPTS 34%
OF CONSUMERS TO SWITCH PROVIDERS
The ideal experience is increasingly being defined by non-clinical
elements, such as convenience, amenities, and communications.
Source: PwC 2013 | Customer Experience Radar Research

45. Part 5 | Business Model Principles
HIMSS 2014 Summit of the Southeast
09.17.14 | Burcham

46. FIVE BUSINESS MODEL PRINCIPLES
1 | FOCUS ON THE BUSINESS MODEL
Base your business models on generating value in
the New Health Economy.

47. BUSINESS MODELS | 7 CORE TYPES
There are 7 core business model types
from which every business model
is created.

48. FIVE BUSINESS MODEL PRINCIPLES
2 | TURN THE TABLES
Consider a Consumer-to-Business (C2B) Strategy.
Use consumer data to refine business models,
enhance consumer experience and earn greater
loyalty.

49. MOST CONSUMERS HAVE A
MULTI-CHANNEL LIFE
Customers

50. FIVE BUSINESS MODEL PRINCIPLES
3 | COLLABORATE
Blend the best of Emerging ventures and
incumbents. Fill skill and asset gaps.

51. HEALTHCARE STAKEHOLDERS ARE ALIGNING
AROUND THE CONSUMER
EMPLOYERS
SEARCH
PROVIDERS
SERVICE VENDORS
HEALTH PLANS
APP MAKERS
Customers
You are competing with
every other type of
healthcare entity for “shelf
space” with the consumer.

52. FIVE BUSINESS MODEL PRINCIPLES
4 | BIGGER THAN A WEBSITE
Healthcare’s next generation consumer is mobile
and lives online. It will take more than a website
to thrive in the New Health Economy.

53. MOBILE | THE FUTURE OF HEALTHCARE

54. FIVE BUSINESS MODEL PRINCIPLES
5 | THINK VALUE
Challenge traditional thinking in healthcare – focus
on the customer, whose wants and needs change.

55. CONSUMER CHOICE IS OFTEN MADE
IN CONTEXT OF TIME & ACCESSIBILITY
Source: The New Multi-Screen World Study | Google, August 2013

56. “The difficulty lies not in the new ideas…
…but in escaping from the old ones.”
John Maynard Keynes

57. DISTRUPTION
Healthcare’s New Business Models
TN HIMSS 2014 Summit of the Southeast
Dr. Michael Burcham
michael@michaelburcham.com
http://www.slideshare.net/michaelburcham