A New Way to Achieve Healthcare Value: Multi-sided Business Models for Patient Consumers
“It takes a burning platform for change to happen.” This is a common refrain among healthcare leaders implying that severe constraints can open minds to new ideas. Healthcare today is fraught with constraints. Almost half of public spending in some North American jurisdictions already goes toward healthcare. According to the Agency for Healthcare Research and Quality, 84 percent of US health care dollars are spent on patients with chronic conditions – a cohort that will continue to grow as baby boomers age. Healthcare spending will continue to increase unless new models of care and funding are deployed.
Information technology is often held up as an answer to healthcare’s challenges. Health IT strategy is typically focused on efficiency improvements within and across healthcare provider organizations. But information technology has the potential to enable far more than clinical efficiency. Two trends driven by information technology receive far less attention from health system strategists; multi-sided business models and the ‘rise of patient-consumers’. Together, these trends point to an alternative path forward that both lowers public spending and improves patient outcomes.
First, let’s talk about the rise of patient-consumers. For over a decade, people have expected that scheduling appointments, receiving lab results, and filling prescriptions online should be as simple as online banking and travel booking. Until recently, personal health technologies have been considered relative novelties. Today people are rapidly taking advantage of personal health management apps and devices. There are now over 100,000 health management apps available and Apple Watch (HealthKit) is just “End of the Beginning” for Wearable Devices and Consumer Healthcare. These technologies are empowering people to better manage their own health and wellness.
Now let’s talk about multi-sided business models. Examples include Google, Facebook and LinkedIn (see Business Model Generation for more on this). Google’s original money printing machine was a multi-sided business model that delivered different value to different customer groups. Consumers flocked to Google for its powerful search engine and free tools like Gmail. Advertisers were willing to ‘subsidize’ these tools in exchange for reaching a large audience with their ads. And website owners could monetize their content by displaying Google ads. Everyone won. While Google has been diversifying into consumer devices and enterprise software-as-a-service, their multi-sided business model remains a foundation of their business.
There is an analogy for healthcare to consider. The major ‘customer groups’ in healthcare include patients, providers, payers, and pharmaceutical manufacturers. “Patient-consumers” want free tools manage the health data from their devices and to live healthier lifestyles. Providers need to deliver high-quality care (and increase revenue in privatized systems). Payers need to contain costs. Pharma needs to increase revenue by ensuring quality therapies are adhered to. Large numbers of providers and patients are attracted to free tools for managing health and wellness attract. Payers and Pharma are willing to subsidize these tools because they increase medication adherence, improve outcomes and reduce payouts. Everyone wins.
Pinterest is another example. Pinterest is a website that lets people keep a visual scrapbook of things they like on the internet by ‘pinning’ them. A ‘pin’ is a visual bookmark that saves a picture and hyperlink. Users can create any number of theme scrapbooks for any of their interests. Apparently, people love to pin. Pinterest is only 3 years old and has 70 million users who have ‘pinned’ over 30 billion times. Unlike most social media sites where advertisers need to infer user’s interests based on demographics and site activity, Pinterest provides direct data about what users want to buy. Advertisers can make pin-point (pun intended) suggestions based on what people are already aspiring to spend money on. Investors see value in this. Pinterest has yet to fully implement advertising and has little revenue, yet it has been valued at about $5 Billion.
Pinterest could offer another analogy for healthcare. Formal health services account for only 10-15 percent of a person’s health status while behavior accounts for over 40 percent. (The rest is genetics, social and environmental factors.) Yet healthcare payers, pharma and providers do not have insight into people’s daily behaviors. Payers and pharma are willing to sponsor tools for patients and providers to capture and appropriately use de-identified behavioral data to increase medication adherence, improve outcomes and reduce payouts. Once again, everyone wins.
Healthcare has a burning platform: some jurisdictions are spending half of each public dollar on healthcare; over 80 percent of that is spent on chronic conditions; and, the prevalence of chronic conditions is rising as the baby boomers age. Something needs to change radically. Today’s technologies could catalyze this kind of change because they represent an opportunity for interested sponsors to fund tools that help patients to be active partners in managing their health and healthcare.