At Nordic, we’ve described a health ecosystem that is increasingly moving to a model of Decentralized Care, a shift to meeting health consumers’ expectations of an increasingly digital and locationally convenient style of health delivery that will require new layers of connection between people, data, and technology. A central feature of Decentralized Care is the increasing number of entities interested in providing health goods and services directly to health consumers. Some of these companies are focused on developing care models and operational processes that use people and technology in new ways, with an eye toward disintermediating traditional providers of healthcare. While this means increasing challenges for health systems, it creates a burning platform for cross-enterprise initiatives that address many challenges at once.
Health systems face the risk of disintermediation from new entrants that come in two flavors: large and small. A number of these new entrants are making more aggressive moves to build health capabilities with an eye towards using a combination of people and tech to build new care models, reduced administrative burden, and improved patient and clinical care team experience. This includes involving the use of digital tools and platforms to streamline processes and improve communication between patients and care teams.
On the “large” side, a number of entrants from big tech and retail are looking to use their data infrastructure (i.e., platforms), expertise in consumer experience, and large customer base to move traditional health systems to the sidelines. Big platforms mean all the network benefits that come with it: minimal incremental costs to scale the tech, better data (and thus better algorithms) as more join, a bigger pool of data for research and discovery, and more value and convenience for the consumer. And, like all platforms, the goal is to grow market share before increasing profitability. Big tech and retail have a market capitalization that can support a lot of market share growth (offering services or products at a loss, for example) before it would even register on their bottom line.
On the “small” side, private equity firms have been increasingly investing in healthcare practices. These firms often have expertise in identifying and implementing efficiency improvements, which can help them lower operational expenditures. We also see this in new entrants who carve out “micro-efficiencies” – little bits of the care continuum that can be performed with hyper-efficiency (services focused on particular conditions such as hair loss, sexual health, dermatological conditions, etc.). This type of competition can slice away bits of revenue from traditional systems while also resulting in more fractionation of health data and clinical experience for patients.
Health systems may need to consider similar strategies to remain competitive and avoid being priced out of the market. This can include finding ways to streamline processes, eliminate unnecessary steps, and use technology and people in a more efficient manner. Automation and other tools can be helpful in achieving these goals, but it is important to carefully consider the potential impacts on the quality of care and the workforce. Health systems may also need to find ways to diversify their revenue streams and generate income from sources other than traditional fee-for-service care.
Health systems are also facing a number of financial challenges (described, in part, by The Big Squeeze), including EBIDTA (earnings before interest, taxes, depreciation, and amortization) which has been negative for years. This can make it difficult to find the funding for strategies that address the increased competition from businesses new to healthcare. In this environment, it is important for health systems to focus on strategies that can help them improve efficiency and reduce costs while still maintaining or improving the quality of care. This can include finding ways to streamline processes and eliminate unnecessary steps, using technology and people in a more efficient manner, and finding opportunities to partner with other organizations to share resources and expertise. Health systems may also need to consider diversifying their revenue streams and finding new ways to generate income, such as through partnerships or goods/services related to clinical care delivery.
There are three aspects that health systems can address to thrive within the increasingly competitive marketplace for health goods and services.
The first is to focus on the clinical services that sit at the intersection of organizational strengths and opportunities in the local market and that are most aligned with its mission. Specializing in a particular area can help create a strong market presence and attract patients. Examples include chronic disease management, population health, care in the home, or serving as a center of excellence for a specific type of care (e.g., orthopedic surgery, cancer treatment, pediatrics, etc.). This also allows the health system to remain competitive and differentiate itself from other care providers, while still being part of a larger care ecosystem.
The second is to recognize that it is impossible to compete on all fronts, so it will necessary to partner with other health systems, new entrants, and community organizations to provide a more comprehensive range of services. Partnerships will need to focus on building the infrastructure of people, processes (clinical and operational), and technology to interact effectively with other organizations. This will support a steady pipeline of referrals, the elimination of care gaps (by ensuring better handoffs and support for care navigation across health entities), and data exchange that is sufficient to represent the patient’s care journey and their environment.
The third is around looking for enterprise-wide initiatives that combine people, processes, and technologies to gain new efficiencies. Creating efficiencies in health systems is not just about cutting costs and finding ways to streamline processes and use resources more effectively in order to improve quality and outcomes. One way to create efficiencies is to GROSS out: to eliminate unnecessary or "stupid" steps in processes or interactions with technology that do not add value. Health systems can learn from other industries about how to use technology and people in a more efficient manner. There are also examples from inside healthcare, such as command centers, which allow clinicians to operate at the top of their licenses and provide care to a larger number of patients than previously. These models can also be moved outside of the hospital to deliver care in new settings, such as in patients' homes or in community-based clinics. By finding ways to use resources more effectively, health systems can improve quality and outcomes while also reducing costs. This is an important aspect of thriving in an increasingly competitive marketplace.