Disruptive Forces Driving a New Order in Healthcare Business Models

A new socio-economic reality, a shifting marketplace, scientific breakthroughs, and the digital revolution are all combining to change the definition of what healthcare truly is, and how it will be delivered and experienced in the next few years. 

Healthcare is on the cusp of a seismic shift that’s being driven by a combination of scientific, economic, social, and technological forces. A new, patient-centric order is emerging, one in which financial incentives are linked to the value a product offers. In addition, volume is shifting to outcomes and value, with the overall aim of driving better health for patients and greater benefits to the healthcare system.

A catalytic moment of change

New targeted therapeutics, smart diagnostics, advanced informatics, and digital technologies are transforming and redefining healthcare. Moreover, digitally-aware patients are becoming more proactive in determining their own health outcomes. Many factors are catalyzing this change, including the availability of genomic, health, and lifestyle data, and an abundance of technology solutions that help patients monitor, measure, and adjust their habits to improve their health and outcomes of treatment.

For the first time, large-scale collaboration is occurring across industry boundaries. Providers, pharmaceutical companies, medical device organizations, payers, nurses, caregivers, health care personnel, patients, wellness companies, and technology company disrupters are joining forces in innovative ways - centered on driving the health and wellness outcomes that are critical for long-term economic sustainability.

Only the most agile and quick-responding healthcare and life sciences companies will find success in this new healthcare ecosystem, in part by building value-enabling partnerships and by embracing new collaborative technologies. Top management, boards of directors, and various industry leaders will have to comprehend the new implied redefinitions of markets, the evolution of

services-centric approaches, and the parameters of new outcomes- and value-centric performance models, as well as how fundamentally these models will impact their organizations.

Volume to value

The shift from volume to value is leading to the development of new roles in the healthcare ecosystem value chain. Volume drivers, with their emphasis on revenues, market shares, and gross margins, are giving way to value drivers, with their emphasis on increased patient value, increased provider value, and increased payer value.

Payers are moving into the direct provision of care; technology companies are connecting remote clinical monitoring technologies together as a service; and medical device companies are providing direct patient care management services. Health providers are managing financial risk, make tradeoffs among the services they offer, and pursuing payment through “alternative” or outcomes-based approaches.

Each organization is working with other partners to create, advance, or deliver their services. The relationships are extending back from early drug discovery, right through clinical development, to commercialization and patient use.

The digital impact

The new value-based healthcare paradigm in part is emerging from digitally enabled patient services. Currently, value propositions focus on the clinical attributes of products compared with those of competitors’ and physician prescribers. In the emerging healthcare ecosystem, value propositions will focus on delivering outcomes-based health and therapy management services that have been enabled through the use of connected devices, sensors, services, and social engagement.  

Then and now

We used to think of “evidence” of effectiveness as meaning the results of clinical trials and post-approval studies that took years to complete. Pharmaceutical and device companies would put their products on the market, but wonder why results in actual clinical settings were different from what they expected.

Now, with the digital ability to track activities and outcomes in almost real time, healthcare and life sciences companies can identify the factors in people’s lives that influence the effectiveness of treatments and therapeutic products. They can see the extent to which extenuating circumstances, such as gaps in treatment, influence outcomes. Armed with this information, they can contemplate new strategies to fill those gaps for patients.

Providers used to see patients in their offices, and after an examination or procedure, tell patients what to do, and then, barring an emergency, wait until the next scheduled visit to learn how treatment plans were working out. Now healthcare professionals can extend their involvement with patients beyond the office or hospital, digitally track progress in real time, and adjust treatments as necessary.

Moving from inputs to outputs

Accenture is seeing a move from an input-based approach - number of patients seen, or drugs and devices sold - to an output-based approach that is based on attaining patients’ best possible health outcomes. When reimbursement or payment is based on inputs, there is a built-in adverse incentive to do as little as possible and receive the same compensation. But when payment is based on outputs, the incentive is to optimize productivity and maximize system benefits.

In Europe we’re seeing a move toward value-based reimbursement. Health authorities and providers are balancing the needs of the system as a whole with the treatment provided to individuals. The idea is to assess the healthcare industry on its ability to provide the greatest possible benefit to a population. Variants of this approach are moving into place in the US as part of the Affordable Care Act. 

A pivot to the patient

The patient’s power as a consumer is also evolving. The priorities of an individual patient with a specific disease or health condition can drive a real determination of value in therapies, interventions, and services. In part by becoming more digitally-aware, the patient is taking on more direct responsibility for outcomes, viewing them from a new vantage point as beneficiary and active customer. Healthcare is pivoting to the patient.

Emphasize outcomes and value

To thrive in this new environment, healthcare leaders will have to give thought and consideration to their business strategies and models. They will have to address several core areas of their business. They’ll need to: 

• Clarify their company’s market positioning regarding patient outcomes and value to the healthcare system;

• Define the differentiating capabilities necessary to deliver on those goals;

• Create a high-performance enterprise of partners, collaborators, and talent.

Emerging models

As part of this catalytic change in healthcare, new business models, which incorporate fundamentally different economics, are solidifying. They are setting precedents and standards for others to follow. Four business models - centered on patient outcomes and value - are coming into focus:  

• Lean innovators: companies that combine generics-efficient manufacturing and supply chain best practices with M&A to facilitate rapid growth and challenge existing cost structures, productivity, and operating models.

• Value innovators: companies that improve patient outcomes and system efficiency through the integration of drugs, devices, and digital services with clinical processes.

• Around-the-patient innovators: companies that put patient value and outcomes at the center of their strategy, leveraging analytics to create novel specialty therapeutics and complimentary services.

• New health digitals: non-healthcare companies that change the how and where of patient care through cross-industry collaboration, rooted in digital innovation.

For individual companies, these models represent potential strategies and direction they may take. How they implement any of them will depend on their journey – where they’ve come from, and what place they want to hold in the healthcare system of the future.

Technological impact

These are four models that are clearly emerging, but there may be additional ones. Technological advances are foreshadowing breakthrough opportunities in medicines and business models. In August 2015, the FDA approved the first 3D-printed drug, Spiritam, developed by US-based Aprecia Pharmaceuticals.[i] Used in treatments for epileptics, Spiritam is made by layering powdered medicine with liquid to create a pill that dissolves almost instantly when taken with water.

By making the pill easier to swallow, more patients will stay the course with their treatment. But the implications of the technology are potentially greater. It may be possible to localize production “to order” in the dosage form best suited for individual patients. The therapeutic combinations needed to manage a specific patient’s comorbidities might be made in a single dose to aid compliance and lessen medication errors. Visualize streamlined ordering and manufacturing processes, and delivery within hours that would disrupt traditional retail pharmacies, pharmaceutical generics, therapeutics distributors, and patient adherence services.

In another technological advance aimed at improving health outcomes, last January, Boston Scientific and Accenture announced their development of a cloud-based, data-driven digital health solution for hospitals intended to help improve patient outcomes and reduce costs to treat patients with chronic cardiovascular diseases.[ii]
 

Strong fortitude needed

Executives in the healthcare and life sciences industries will need persistence to shape the healthcare environment and transition successfully. They’ll have to explore business and operating models that go beyond their companies’ traditional products or services. They’ll have to work through questions of privacy and use of sources of data for the benefit of the patient, advancing new levels of trust and operating competence.

Management at all levels will also need to break down organizational barriers within their organizations and act as integrators. They must resolve all dilemmas, ethical or financial, in favor of their responsibilities to patients. Collaborations founded on trust and courage may even prove to be as important as having economic fundamentals and a winning business model.

The move to a value- and outcomes-based healthcare system will make the system a proactive force for health maintenance and health solutions. The next few years are crucial for companies in transition, as they are buffeted by a changing healthcare ecosystem, market pressures, and regulatory demands.  

To learn more or about the opinions shared, click on Healthcare Disrupted. Healthcare Disrupted is a call to action for life science and healthcare leadership to evolve new strategies and business models and reshape the future for better health, outcomes and value for the healthcare system overall.

About the authors

Anne O'Riordan is the senior managing director of Accenture’s Life Sciences industry. Jeff Elton, Ph.D., is a managing director, Accenture Life Sciences, and global lead of Accenture Predictive Health Intelligence and Accenture Intelligent Patient Platform. 

[i] 3D-Printed Pills Are a Thing, and Could Make Treatment Easier. Mark Thoma. AMERICAblog. Aug. 10, 2015. http://americablog.com/2015/08/3d-printed-pills.html.

[ii] Boston Scientific and Accenture Develop Data-Driven Digital Health Solution to Help Improve Patient Outcomes and Reduce Cost of Treating Chronic Cardiovascular Conditions. Jan. 28, 2016. https://newsroom.accenture.com/news/boston-scientific-and-accenture-develop-data-driven-digital-health-solution-to-help-improve-patient-outcomes-and-reduce-cost-of-treating-chronic-cardiovascular-conditions.htm.