“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Peter Drucker
In a period of massive change, franchises die and are born, previously unimagined models emerge, and incumbents that are too focused on “protecting share” find themselves closing their doors. The healthcare industry represents nearly a fifth of U.S. GDP and it is going through such a period of dramatic change as we speak. The product companies that dominate the marketplace today find themselves cash rich but growth poor. At the same time an army of inventors and visionaries in biotechnology, medical devices, diagnostics, health care services, healthcare IT, and consumer health fields are eager to provide a new model for the future.
Healthcare venture funding is extremely tight, entrepreneurship remains a technically sophisticated pursuit, and “evolutions masquerading as innovations” abound. But smart entrepreneurs who harness the dazzling new tools we now have at our disposal have everything to gain if they focus on creating offerings aligned with the emerging value system. Their products and companies will be highly sought after by today’s market leaders… some will overtake existing market leaders entirely. And patients will benefit tremendously.
Our mandate as health care investors and entrepreneurs must be to channel our time, capital, and expertise exclusively into companies that will thrive in the face of extreme scrutiny, forcing inadequate, expensive legacy systems and interventions into rapid obsolescence.
Inflection points insist on innovation. Here’s what’s on the horizon:
Clinical Models are changing: Fee-for-service, volume-based care models of the past will be replaced by results-driven models. For institutions and individuals providing care to patients this will mean a sharper focus on prevention, minimizing readmissions, better care coordination etc. For companies that market pharmaceuticals and medical devices this will mean being part of a “total care” integrated solution that goes beyond an individual pill or device.
Insured population is growing: The “disappearance” of an uninsured population will increase the number of people who access care. As utilization increases, expenditures will rise, even if prevention becomes more commonplace. As a result, overall costs will receive more scrutiny and payors will exercise more negotiating leverage. In some cases this will result in new price pressure on a specific product. In other cases it will mean less price sensitivity if a new product can show it lowers the total costs of treating a condition.
Marketing target shifting: In the past, physicians were the dominant focus of pharmaceutical and device company marketing efforts. Now, physician sales forces are shrinking, marketing methods are changing, and the targeted audience is shifting. On the one hand, technology has enabled more efficient, lower cost “virtual detailing”; on the other hand it requires a sophisticated understanding of real time, crowd-driven and social tools. With patients-as-consumers and institutional payors demanding more evidence of the value of a service or product, the importance of messaging tailored for these audiences is difficult to overstate.
Deductibles and out-of-pocket expenses on the rise: Insurance reform will result in larger deductibles for more individuals. As consumers pay more out-of-pocket and become more aware of direct costs, they will become more sensitive the ways they access health care. The ability to make a direct value proposition to consumers will be a competitive advantage, if not a competitive necessity for product and service providers.
New Data Thresholds for studies are emerging: Placebo/sham-controlled trial data has been the standard for demonstrating safety and efficacy of new therapeutic interventions. With a new focus on value, there is demand for data that compares new interventions against existing standards of care. Additionally, there is more interest in data that measurably demonstrates enhancements to quality of life, convenience, compliance and adherence improvements, and holistic reductions in disease burden. In the service of this demand, new data sets will complement standard sets including patient reported outcomes data, unstructured data, quantified-self data, and “the Internet of Things” data generated by medical devices, supplies, and even drugs. As these data sets grow, Big Data techniques will transform the raw data into useful information with applications we haven’t even begun to imagine.
Cost Transparency is coming: Health care cost transparency is nonexistent today, both at the level of patients and surprisingly at the level of providers. Tools are now being built and incentives are being put in place to allow cost transparency along with value tracking and optimization. In the not-too-distant future, purchasers will view the absence of such data as inconceivable and intolerable.
Decision Making support tools are in demand:Decision-making around a patient’s diagnosis and the optimal course of therapy has been driven by a combination of clinician observations and instinct. Physicians reach conclusions by integrating inputs from the physical examination, family history, and lab/imaging data, all in the physician-specific context of past experience, medical training, and emerging science s/he may have had the chance to review. Increasingly, doctors and patients expect systematic, up-to-date integration of an increasingly exhaustive set of inputs to support decision making. Furthermore integrating case-specific information real time in validated ways into reference data sets will bridge the time and expense gap between the metaphorical “R&D bench and bedside”.
The smart phone will see you now: Health applications and accessories enabled by smart phones, wireless connectivity, and telepresence technologies will expand access, improve efficiency, and increase convenience for patients and providers. They will also allow better data generation, data tracking, data portability, and data organization.
Data Transparency will be the new normal: Institution-specific paper files are becoming a thing of the past as electronic, ubiquitous, patient-accessible records become the new standard. In parallel, patients and clinicians are seeking more clinically-focused annotations in the records in the place of claims-focused coding.
Cost, convenience, quality, and consumer preference will have a significant influence on how and where care is delivered. Within large clinics and hospitals we are already seeing consumer-focused practices like same-day appointments, private waiting rooms, and concierge-like care navigation services. We will also see more care move out of centralized institutions into alternate settings: walk-in clinics in drugstores and airports, self-administered at home lab tests, virtual house calls.While such services and technologies are desirable for their ability to improve patient satisfaction, their ability to drive efficiency, broaden access, reduce costs, and improve outcomes is even more compelling.