The emergence of consumers as a force to reckon with in the healthcare arena is priming the market for convenient new, cost-effective ways to purchase services. If traditional health firms don’t serve up the innovative fare fast enough, dynamic operators from outside the industry already are working to fill the gap.
Apple’s recent launch of HealthKit, its app-building kit for health data, is just the latest high-profile announcement made by new players in the $3 trillion US health industry. In recent months, technology giants Samsung, AT&T and Google have also announced new health products and services.
An analysis by PwC’s Health Research Institute (HRI) concluded that 24 of the Fortune 50 are “new entrants” to healthcare–defined as new players disrupting the status quo or insiders seeking to expand beyond their traditional business boundaries. Fortune 50 new entrants include Wal-Mart, Comcast, and Target.
New health players large and small are developing products and services that mirror the way we bank, book plane tickets and watch movies. They are emphasizing convenience, mobility, connectivity, price transparency and an “anywhere, anytime” ethos. They also are more do-it-yourself, thanks to technology that allows, for example, smartphones to be transformed into vital sign monitors, virtual doctors’ offices and more.
Consumers are ready to abandon traditional care venues such as hospitals and doctor’s offices for more affordable and convenient alternatives. In December 2013, HRI surveyed 1,000 US adults, asking them how likely they would be to choose 13 treatments and services if offered in new ways, such as using a home diagnostic kit to diagnose strep throat, snapping a digital photo of a rash for remote evaluation by a dermatologist or having chemotherapy administered at home.
On average, nearly half of survey respondents told HRI they were likely to choose these options for themselves or a loved one. For example, almost 60% of respondents said they would be likely to choose to use an off-the-shelf kit to diagnose strep at home. Almost 50% said they would use a smartphone otoscope to check for ear infections.
Surprisingly, the respondents most likely to embrace these new options were between the ages of 35 and 54 – common caregivers for kids and aging parents. These are the people most likely to be pressed for time, happy to arrange for care while waiting for T-ball practice to end or grocery shopping on a Sunday afternoon.
HRI estimates that the 13 treatments and services in the survey represent more than $64 billion in annual traditional provider revenue immediately at risk. This is the tip of the iceberg as new entrants and forward-looking health organizations devise new services and products to attract consumers and their dollars.
This consumer migration to more convenient, price transparent options is underway. Witness the rise in popularity of retail-based medical clinics. In 2007, just one in 10 US consumers had visited one. Last year, one in three consumers had.
“Five years ago, hardly anyone went to a drugstore for a flu shot,” Walgreen Co. President and CEO Gregory Wasson told investors at the JP Morgan Healthcare Conference in January. Today, Walgreen’s share of the $10 billion immunization market is 4%, with room to grow.
Healthcare companies now face critical decisions about whether to compete with these emerging players, align with them or lose business. Revenue, market share and relevance are at stake.
Thriving in this developing new health economy will mean reorienting operations around the consumer. Most Americans must still telephone physicians’ offices during business hours to obtain an appointment, a small detail symbolizing how the industry lags others where convenience and flexibility are key.
In recent months, we have watched partnerships between new entrants and traditional firms emerge. Apple linked arms with Epic Systems and Mayo Clinic. Wal-Mart is working with Kaiser Permanente to pilot telehealth-equipped micro-clinics within its stores. Cleveland Clinic is forging a telemedicine project with Time Warner Business Cable.
Disruption already is transforming healthcare, just as it did so many other industries, from publishing to music to transportation to retail. Remember records, cassettes and CDs? Within a decade, the health business will look and feel much like these other consumer-oriented, technology-enabled industries. Revenues will flow to new players. And health will have its own Airbnb, its own Netflix, its own Amazon.com.
Ed is a principal in the Health Industries practice at PwC. Ed has over 30 years of experience in innovation, product development and operations across medical device/diagnostics, life sciences, pharmaceuticals, high-tech and alternative energy industries.
Trine is a director in PwC’s Health Research Institute (HRI), where she develops national thought leadership on provider and insurer topics, including new delivery models such as accountable care organizations.