Video: Oliver Wyman’s Terry Stone on Who Will Win in the New Healthcare Economy

In Idea 10 of Oliver Wyman’s “Ten Ideas” compendium, Health & Life Sciences Managing Partner Terry Stone explores how encouraging consumers to make healthier choices will yield big savings and better outcomes. “If the industry could figure out how to do that at scale, backed by the enormous market power of employers and the government,” she writes in “Help Patients to Help Themselves,” “the impact would be measured not just in dollars (roughly half of healthcare costs are related to lifestyle choices) but in years of better living across the population.”

If accomplished, Oliver Wyman estimates the United States could save nearly $500 billion in healthcare costs. That’s more than 15 percent of the $3 trillion health market, as illustrated by the graphic below. Highlights Stone in the video above: “The player in the market that can best help the consumer feel like they give them better value, better guidance and advice, and ultimately make them feel like a more empowered consumer will ultimately be the player who will win in the new healthcare market.”

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Yelp for Health: Stand Out With Transparency, Access, Personalization

yelp-imageYelp recently announced a new partnership with ProPublica to make data on hospitals, dialysis centers, and nursing homes available to consumers on its review pages, as reported by the Washington Post. Consumers can now look up hospital wait times, the quality of doctor communications, noise levels, readmission rates, and other quality markers. Oliver Wyman Partner Helen Leis explains why this move is yet another step in the evolution towards more consumer-centric shopping markets for healthcare:

The Yelp announcement is a great step forward in giving consumers credible information about the quality and experience they can expect from healthcare providers, just like the information they would find for restaurants, hair salons, and hotels. Our research shows consumers are already more likely to seek advice about a health concern on Pinterest or Instagram than to contact a physician, and in an earlier post we examined innovative startups similarly focused on value transparency.

But why is the timing right now for this consumer-driven health market to finally take shape? We’ve been talking about the consumer in healthcare and health insurance for more than a century: It’s been 100 years since the first Blues plan was founded, 50 years have passed since LBJ signed off on Medicare, and we’ve experienced 40+ years of shared decision making, 30+ years of ambulatory urgent care, 22 years of health savings accounts, and 16 years of Medicare and Medicaid reimbursing for telemedicine.

Follow the data and you’ll see the same trend. Today, in an average year, the average American is paying nearly all of his or her own healthcare costs. This is a first. In the past, winning with the consumer was about being the best of the worst, because they were spending someone else’s healthcare dollars. Now, it’s their money, and they are making tradeoffs between healthcare and rent and transportation—or their smartphone bills, apparel, and entertainment. That fundamentally changes the dynamic pushing health plans and healthcare to be the best of the best.

Now the context is that healthcare organizations have to compete with everything else that consumers buy—not just other healthcare needs. – Oliver Wyman Partner Helen Leis

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Thinking Like A Retailer: The Future of Customer (And Patient) Loyalty

LON-MKTDMK01-075_Exhibit3_webHealthcare leaders might find some ideas to borrow from innovative retailers as they increasingly think of patients more as customers. A new report from Oliver Wyman’s Retail & Consumer Products team called “The Future of Customer Loyalty” builds a case for change and offers solutions for how retailers can more effectively approach customer loyalty programs. As in healthcare, market trends demanding a shift include:

  • New competitors are disrupting the market and challenging the status quo
  • Customer expectations are changing, and they want different things from their loyalty scheme
  • The right technology used in right way can help meet customer needs

The authors recommend taking a future-flexible approach to technology and adopting a start-up mindset to enable long-term investment in the loyalty proposition. One of their examples of a smart loyalty scheme is taken from healthcare: Balance Rewards by US health and beauty retailer Walgreens. “The scheme is built around unique, non-purchase rewards and creates additional value for both customer and retailer,” notes the report. In the infographic below, the team summarizes how loyalty programs like the one at Walgreens can operate:

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Consumer Experience: Leading-Edge Brands Across Industries Rethink the Whole Customer Journey

The second edition of “Ten Ideas from Oliver Wyman” represents the firm’s latest thinking on what it takes for companies to remain relevant to their customers. In the article “Innovate the Experience, Not Just the Product,” Randall Stone, the director of experience innovation, and Rick Wise, the Chief Executive Officer, of Oliver Wyman’s Lippincott brand advisory practice, point out how today’s product innovations, and the growth they create, are often incremental, narrow, and fleeting. Across an array of industries, including healthcare, companies are realizing that redesigning the customer experience – not just traditional product features – is the best way to differentiate their brand and grow. See below how companies, such as health insurance company Oscar, are reimagining the customer experience by introducing innovations that surround the core offer, which can range from enhancements to completely new avenues of growth (click to enlarge):

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POV: How Healthcare’s New Front Door is Opening Up Opportunities

surviving-new-front-doorWalgreens, in collaboration with MDLIVE, recently announced an expansion of its telehealth platform to users in Colorado, Illinois, and Washington. The service provides 24/7 access to MDLIVE’s network of U.S. board-certified doctors, and is planned to be available to users in 25 states by the end of 2015. Oliver Wyman’s Josh Michelson and Graegar Smith explain how the expansion illustrates the emerging “new front door” to health and what it means for the market:

For decades, the main front door to the healthcare system has been a provider-centric blend of primary care, specialty care, and the ER.  All bricks and mortar, almost always on the provider’s schedule, and a cold first encounter. In the past few years, providers, retailers, consumer technology organizations, and even payers have been investing in new forms of access and care – with an eye towards offering modalities that are approachable, always available, easy to navigate, lower cost, and transparently priced. Here are some of the new entrances – the new front doors – consumers are using to cross the threshold into the healthcare system today:

  • Next-generation retail care. There has been a steady climb of retail clinics over the past decade with the likes of Walgreens and CVS Health leading the charge (nearly 1900 clinics nationally, up from ~300 in 2007 and ~900 in 2008). But retailers appear to view the organic build of clinics as the starting line. CVS made a splash with the announcement that it would buy Target’s pharmacy and clinic business – and rebrand approximately 80 clinic locations previously operated by Target as part of its plan to operate 1,500 clinics by 2017. Even payers, like GuideWell in Florida, have opened up freestanding retail centers and clinics.
  • Retail setting as a health hub. In addition to the Walgreens partnership with MDLIVE, Rite Aid is collaborating with providers through their Health Alliance to extend care and bring in coaching and other medication therapy management services – all on the provider’s platform. And HealthSpot, a start-up organization, has introduced a kiosk model in retail settings – completely changing the ‘visit to fill’ paradigm through a virtual encounter and a set of diagnostic tools.
  • Virtual convenient care. Companies like Teladoc, MDLive, and AmericanWell are at the forefront of telehealth innovations. More often than not these earlier forays into the medium have been proprietary networks of physicians. Increasingly, however, we are seeing telehealth companies integrate with a provider’s own network of doctors so the virtual visits can leverage existing high trust relationships. One company leading this charge is Carena, which has partnered with the likes of OSF HealthCare in Peoria, IL, INTEGRIS Health in Oklahoma City, OK, and UW Medicine in Seattle, WA, to extend their clinician footprint in local or expansion markets via smartphone, tablet, or computer.
  • Advanced telehealth. Broadband companies are taking telehealth even a step further. For example, Cox Communications, one of the largest broadband and cable providers in the U.S. (and an investor in HealthSpot), recently formed a strategic alliance with the Cleveland Clinic. Called Vivre Health, their shared ambition is to bring healthcare to the home digitally – using the same technology that is transforming consumption of information and web services.
  • Low cost, on-demand primary care. The retail and e-visit setting can be an ideal venue for treating lower acuity episodes, but questions persist about whether individuals with chronic conditions or complex issues warrant higher levels of care. Enter an organization like Walmart. The giant retailer currently has 17 primary care clinics in three states with $40 visits for customers and $4 visits for associates – leveraging learnings from their $4 drug program to make primary care more affordable – potentially at a national scale. Startups like Zest Health and ZocDoc are also helping create ‘spot markets’ by marrying supply with demand for services locally – helping direct patients to same day primary appointments and in doing so reduce system inefficiency.

Over time, we envision a model where ‘new front doors’ are available for unique population and consumer segments – with the power to reshape the traditional PPO network. For example, healthier consumers could be happy relying mostly on a network that includes on-demand access to medical services via telehealth, in-person access via a clinic or kiosk in a pharmacy, and a wrap-around social engagement platform that rewards them for making healthy choices.

A ‘new front door’ can take on greater significance as the healthcare market moves toward value. – Oliver Wyman’s Josh Michelson & Graegar Smith

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Datapalooza: Top Insurers Share Health Plan Investment Strategies

Datapalooza "Insurer Perspectives" panel: Terry Stone, Sander Duncan, Bjorn Thaler, and Kent Marquardt

Datapalooza “Insurer Perspectives” panel: Terry Stone, Sander Duncan, Bjorn Thaler, and Kent Marquardt

The Health Datapalooza 2015 conference underway in Washington, DC, provided yesterday a rare look into the investment strategies and approaches of leading providers and insurance companies. Oliver Wyman’s Health & Life Sciences Managing Partner Terry Stone moderated the afternoon panel discussion “Insurer Perspectives: Health Plan Strategy and Investment” with Sander Duncan, manager for new ventures at North Shore-LIJ’s North Shore Ventures; Bjorn Thaler, vice president and head of corporate development for Aetna; and Kent Marquardt, executive vice president and chief financial officer for Premera Blue Cross. Highlights below (condensed for length and clarity):

Terry Stone asks, “What will it take to manage healthcare costs and improve quality?” There is a huge opportunity in the healthcare space. Some 30+% of the $3 trillion the US spends on healthcare each year could have been avoided and can be applied to new solutions. In 2014 venture funding for digital health companies was $4.1 billion, nearly the total of all three prior years combined. In the payer administration space alone, year over year growth increased 269%, according to Rock Health. We estimate there is a $1 trillion value opportunity for new players and new business designs to capture. In addition to payer administration, there are a number of other opportunity categories—personalized medicine, population health, data and analytics, consumer engagement. Healthcare companies are looking at what bets to make on new technologies—do they buy companies outright? Take stakes in companies? Form strategic partnerships and other special relationships? What are the unique perspectives of these players? We’ll hear from our panelists on their investment strategies and the role data plays in their plans.

Sander Duncan explains how the ventures arm of North Shore-LIJ was created to tap into the innovation already occurring across the healthcare system, the largest in New York State. Our mandate is both inside out and outside in. We scour the system to find doctors and nurses engaged in innovative activities. If we can identify a true new platform, then we will write a business plan around it, seed it, and bring it to market with North Shore as the first customer and then to peer institutions across the country. The value added is that we’ll have a product that has already been tested with large systems as customers. We also serve as the front door for outside-in innovation. North Shore is hit by hundreds of proposals that can all be slightly iterative. They can be hard to evaluate without a comprehensive view of the system, so we provide a single point of entry. We have a process that allows us to rapidly evaluate the proposals, both on the clinical and business sides. We want to make sure both the company and the system will get something out of the relationship. We take a top down approach. We can’t reasonably take a look at the full buffet of amazing companies out there without referencing our strategy first. Examples of new initiatives include partnering with an outside company to pilot a program providing at-home care in Manhattan. Internally, we’ve started our own insurance company CareConnect, which gives us the benefit of a hyper-narrow network. We’re looking for partnerships that help us move and cleanse data and get it to the right people.

Aetna’s Bjorn Thaler outlines how a new consumer-centered focus is changing the way insurers do business. In the past, as long as nobody was complaining, everyone was happy. We sold on price and the employer was considered the primary customer. That model has fundamentally changed. We have to change the way we look at our business. How do we help the consumer navigate the healthcare system? How do we change from competing by paying claims faster than the last guy to helping bend the cost curve and helping consumers have a better experience? It comes down to data. Help me as a physician understand how my patient population is doing. Where do I need to deliver better care? A win for the doctor is a win for the patient.

We are not looking for incremental improvements. The solution has to be a new approach to doing a part of our business. – Bjorn Thaler, Vice President & Head of Corporate Development at Aetna

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Experience Innovation: Solving Consumer Hassles in Healthcare

Helen Leis, a Health & Life Sciences partner at Oliver Wyman, says her understanding of health innovation is grounded in a deep understanding of consumers. Through visits with consumers in their homes and discussions with them about their health and healthcare concerns, she has found that people’s conditions are far more complex than their apparent symptoms often are.

“Many people do not recognize the patterns in their lives, do not understand the cause and effect relationships between nutrition, physical activity, and health,” she observes, adding that many also “do not believe they need to change and do not believe they have the resources (time and/or money) and support available to achieve their goals, or make a new lifestyle a reality.” Above, she shares a summary of her recent findings on consumer hassles and the best approaches to solving them.

For more on experience innovation, read her earlier post “Creating Transformative Consumer Experiences: Make It Magnetic.”

Slide Show: What is the Center of Your New Business Model?

WHAT IS THE CENTER OF YOUR NEW BUSINESSSince 2012, MobCon has brought together top industry influencers to showcase how mobile innovations and strategies can transform business. Today, its MobCon Digital Health conference in Minneapolis is zeroing in on how advances in technology are moving healthcare forward. Terry Stone, Oliver Wyman’s managing partner for Health & Life Sciences, will be leading a breakout session on the Patient-to-Consumer Revolution. Below, she shares her perspective on industry trends:

There is no doubt that fundamental disruption is underway in healthcare. The new marketplace is not yet fully realized, but we have lots of indicators that it is coming, and that the speed of change is building. Two main forces are at play:

  1. Shift from value to volume—Accountable Care Organizations (ACOs), bundles, Centers of Excellence, and other new models are emerging for driving total health management and accountability for quality and cost;
  2. Rise of consumerism—Consumers have more accountability today for their healthcare costs and more options for how to access healthcare services. They also have much more information to inform their choices and how they track and manage their own health day to day.

There are more than 600+ formal ACOs operating in the US today, and 2/3 of all Americans live within range to receive primary care access from an ACO. Many ACOs today are still struggling to transform and deliver the promised impact, but with pressure from the Centers for Medicare and Medicaid Services (CMS) to have 90% of Medicare spend in some form of value or quality-based payments by 2018, the sector will be very focused on accelerating its progress.

Meanwhile, on the consumer side, deductibles are now up to $5,000—even $10,000—for some insurance products to enable greater affordability. Tools like Castlight Health, ZocDoc, and iTriage are readily available to help consumers understand their options, whether for an ER or a local clinic, hospital A or B, or drug 1 or 2. These new services include information on relative costs and quality. Studies have shown when consumers pay a percentage of the cost instead of simply a flat, small co-pay, they are 50% more likely to ask for alternatives and choose more efficient solutions. This can amount to 10% savings in total costs—simply by being a better, more informed shopper for healthcare services.

In addition to smarter decision making, we are also arming consumers and clinicians with much more information about our health and well-being in between doctor visits. Devices like Fitbits, Apple Watch, and Nike FuelBand track various types of activity, sleep patterns, and increasingly heart rate and other biometrics. Livongo Health’s device and care management programs for diabetes enable convenient glucose monitoring for the consumer, and wireless transmission of data to the clinician to help drive timely interventions that help keep diabetics healthier and out of the hospital. Peer to peer solutions such as PatientsLikeMe, or even Facebook, are new sources of advice that many consumers turn to.

The question for healthcare is who is going to simplify it all for us, who is going to “make it easy”? That’s the business that I want to invest in. – Oliver Wyman’s Terry Stone

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Webinar Replay: Welltok & Oliver Wyman on Healthcare’s Dilemma

Webinar: Long-Term Risk of Short-Term Strategies Amid a Consumer Revolution

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Two leading healthcare strategists – Welltok CEO Jeff Margolis and Oliver Wyman’s Tom Main – take on one of the healthcare system’s greatest dilemmas: how to successfully pivot to a consumer-centric model. This webinar on Wednesday, March 18, 2015 at 2:00 pmE will expose the long-term risk of health plans’ short-term strategies amid a consumer revolution. Key themes to be debated and discussed include why payer incumbents may resist change, and how they can become a hero. Register here.