Patient Engagement

PwC: Healthcare reform represents a $1.5T ‘gold rush’

Changes in the way healthcare is delivered, paid for and analyzed through big data, as well as the slow emergence of empowered patients, are creating a “modern-day gold rush,” according to three strategic consultants at PricewaterhouseCoopers.

Changes in the way healthcare is delivered, paid for and analyzed through big data, as well as the slow emergence of empowered patients, are creating a “modern-day gold rush,” according to three strategic consultants at PricewaterhouseCoopers. As much as $1.5 trillion in annual spending and $150 billion in profits are “up for grabs” during this healthcare reform, they said.

The winners will be those who can bring critical thinking and radical redesign of a broken industry, rather than people looking to make a quick buck by exploiting current flaws, said the consultants, Carl Dumont, Sundar Subramanian and Christoph Dankert, of PwC’s Strategy& consulting team.

“Confronted with the changes, incumbents will have to reconsider their competitive positions. And upstarts and those in adjacent industries will be compelled to assess where — and even whether — they can fit in,” they wrote in PwC publication Strategy+Business. “Players that thrive in this boomtown will do so by decreasing medical spending in a consumer-oriented manner, and by capitalizing on newly informed consumer choices by improving outcomes.”

They expand on the “gold rush” analogy by dividing healthcare companies into gold miners and bartenders. Gold miners are “vertically integrated” organizations that “take ownership of healthcare,” the authors said.

They profit by mining value out of a resource — for example, by managing the health of a specific population, such as patients with diabetes, heart disease, or cancer. The gold miner strategy is closely aligned with population health management, which takes a deep understanding of chronic care to promote a 360-degree, long-term management approach. Dealing primarily with people who are sick, these large institutions — insurers, hospitals, and physicians groups — profit by improving outcomes and sharing in the savings.

Population health management incorporates patients empowered by data transparency and care outside of traditional settings, though physicians still have an important role in care coordination, they said. “Gold miners prosper by harnessing technology to develop new processes that let them conduct established business more efficiently and effectively.”

Bartenders, on the other hand, are more consumer-centric:

They serve healthcare consumers by offering customized and convenient options to address routine or everyday needs. Bartenders often have a narrow focus, providing specific services to rapidly growing niches. They prosper by selling goods and services with a margin. Unlike gold miners, whose primary innovation often lies in developing new processes, bartenders innovate with new products, and with marketing and design. Although a bartender company may also serve the chronically ill, its intent is not to preserve the existing patient–doctor relationship but to run parallel to it or to nibble away at it.

Examples they cited include Walgreens, Theranos and Fitbit.

“Just as was the case in gold rush towns, gold miners and bartenders generally complement each other. Rather than offer a stark either–or choice, these typologies help provide a framework for understanding how to design business models to compete in the evolving market,” the PwC consultants said.

Some of their statements are rather idealistic. “Healthcare information is quickly transitioning from its traditional repository in static, handwritten charts that reside in a doctor’s office. It is moving to devices that sit in the palm of the hand while reaching back into the cloud, where patients can access and add to their records at any time,” they said.

If patients truly could access and add to their records at any time, then we wouldn’t have the nascent Get My Health Data movement. We wouldn’t have hospitals misapplying HIPAA to prevent release of records to patients rather than facilitate it. And we wouldn’t have Congress holding hearings on “information blocking.”

However, they are spot on when they say that a third group, “railroad pioneers,” are also has an important role to play. “Already, we’re detecting the presence of a third set of players. So-called railroad pioneers build the infrastructure that binds bartenders and gold miners together, construct the platforms on which the new solutions stand, and develop services and technologies that eliminate bottlenecks and help systems run more smoothly,” the three explained.

These railroad pioneers included EHR giant Epic Systems, as well as payment processors; the PwC crew cited a nontraditional healthcare player, Citigroup, and its Money2 for Health service.

Like a real gold rush, nothing is guaranteed. “Tech startups, consumer firms and innovative health systems all have the chance to strike rich veins in this new frontier, where healthcare is more continuous and less episodic; where it is more tailored and less one-size-fits-all; and where analysis and decision making are shared among consumers, clinicians, and artificial intelligence. The future will be more virtual and yet intensely personal and close to home,” they said.

“But a hundred staked claims mean nothing if one of them doesn’t hit it big.”

Photo: Smithsonian Science Education Center/Creative Commons