Musings On Healthcare & Its Future

Originally published on Medium on October 23, 2015.

I recently had the opportunity of taking a deep dive into the world of healthcare as an intern on the Corporate Development team at the Blue Shield of California. I was amazed at how large this industry is (Healthcare deal volume > Tech deal volume). Furthermore, I’m excited by how different aspects of the healthcare industry can be disrupted and innovated upon to completely enhance patient outcomes, improve EHR systems, and increase the impact of PCPs.

Furthermore, within the healthcare industry’s evolutionary span, I’ve observed some inefficiencies that need to be fixed, and some efficiencies that should be highlighted. These are driven by 2 main factors: consolidation and innovation. Consolidation leads to the aforementioned inefficiencies, whereas Innovation drives efficiencies. Lets take a look at the two more in depth:

Consolidation Led Inefficiency (3–5 Years):

Healthcare is at the cusp of pure inefficiency as seen by rapid Payor/Plan M&A activity. Consolidation is a big fat Band-Aid on the archaic system still in place today. It’s the quickest way for companies such as Aetna, Anthem, and Centene to stay relevant in the market and continue to provide competitive value to the influx of members under the landmark Affordable Care Act (ACA).

Unlike countless investor presentations, consolidation will not lead to economies-of-scale and lower consumer prices. The exact opposite will occur.

• Let’s take a look at the Aetna-Prudential deal, which discussed “cost synergies” but in actuality led to consumer cost increases.
• McKinsey & Company (Payor Book 2015), through a sample of 100+ companies, proved that increasing Health Plan membership past 1,000,000 would lead to diseconomies of scale.

Health Plan Consolidation will lead with Provider Consolidation.

• Health plan consolidation = more members per health plan
• More members = increased leverage a health plan has over a single Healthcare provider
• Increased leverage = health plan pays lower prices to health care provider
• To not be at the whim of each health plan’s increasing number of members, Healthcare providers have started to consolidate to balance the playing field.

Now, we have two sides of an industry going against each other. At this point, you can begin to guess what’s going to happen to prices.

Industry Innovation & Requirements (5 Years)

Let’s introduce strategy backed by technology advancements. Taking advantage of the inefficient Healthcare system and “surprising” increase in prices; transformative Healthcare companies will emerge (5+ years out) dominant for four main reasons;

Redefining Of Value-Based Care:

• Current health plans, providers, and other health institutions are too focused on minimizing cost drivers, increasing volume, and profitability.
• Focusing on maximizing value, defined as successful patient outcomes at low costs, directly allows providers and plans to deliver sustainable care, achieve lower maintenance/care costs, generate high patient success, increase market share, and lay the foundation of a virtuous care cycle.

Patient Centric Delivery:

• Almost 80% of health-related activities (checkups, routine tests, prescriptions, and health questions) can be solved at or near home.
• Startups like Oscar are paving the way with wearable offerings, unlimited telemedicine usage, and amazingly fast PD achievability.

Leveraging Data To Increase Performance:

• Healthcare is ripe for actionable intelligence. Catalyzing pre-existing aggregate data will spur cost savings in three major areas: Improving patient care outcome, Patient maintenance cycle management, and Long-term sustainability.
• Technology surrounding daily activity (Moves), health tracking wearables (Fitbit), and wellness platforms (Vida Health) will support and build upon all these three areas. Imagine if all of the data these tools collected, was aggregated, analyzed, and acted upon.

Creating Efficient IT Platforms:

• IT will be the common denominator among the above three tenets. It is the aspect that “will make things work.”
• Healthcare IT has historically been focused upon specific function, service, data instance, and geographic characteristics.
• Future systems need to be secure, accessible, and accurate, focused around storing data about the patient. Standardization of patient records, data, and tests throughout the entire Healthcare process will enable easy information extraction by every participant.

The systematic combination of these four main drivers will create an interconnected industry that is patient focused, supported by efficient IT systems, and catalyzed by actionable information. The most important aspect is the shift to value-centric care which the likes of the Cleveland Clinic have continually pursued and achieved incredible patient outcomes and market share.