Becker's Hospital Review

167 PRACTICE MANAGEMENT THOUGHT LEADERSHIP PwC Strategy&: 12 plays for disruptors in healthcare By Jay Godla, Igor Belokrinitsky and Sundar Subramanian I n early February, Amazon, JPMorgan Chase, and Berkshire Hathaway an- nounced a partnership to tackle rising healthcare costs for their U.S. employees. e announcement, which didn't do much beyond outlining the formation of the part- nership, is a sign of the times. e details of the Amazon–JPMorgan Chase–Berkshire Hathaway plan, which, notably, does not in- volve a health industry incumbent, have yet to be fully revealed. Although the three com- panies have a substantial number of U.S. em- ployees — 1.1 million between them — they are not aiming to produce value via scale. e consortium's stated goal is to help improve health costs via technology and to create value by providing greater transparency and competition, reallocating risk and eliminat- ing waste and intermediaries. But the announcement is interesting for a few reasons. Even though it is directed at the companies' own employees, it highlights the types of capabilities and platforms that may be needed to win in the future health mar- ketplace. It points to the potential for new entrants to disrupt incumbents in insurance and care delivery, and throws into relief the kinds of bold moves that resilient players can afford to make. The Plays A consortium between companies with com- plementary capabilities and scale has the potential to optimize the matching of sup- ply and demand within healthcare via new mechanisms (i.e., exchanges), the facilitation of easier transactions (including faster, mul- tichannel delivery), and new products (such as wellness and healthcare bundles). And as a consortium begins to target health spend- ing successfully, it could move from lower to higher clinical complexity and from local to national marketplaces. Accordingly, we see three classes of potential plays for a consortium of companies banding together, ranging from the least disruptive (and quickest to implement) to the most dis- ruptive (with the longest time to implement). ey are incremental innovation (testing the waters with gradual and piecemeal innova- tion); technology and analytics (enabling the improvement and redesign of the existing system); and radical disruption (creating new platforms, marketplaces, and ecosystems). Incremental Innovation Plays 1. Buy/partner with a third-party ad- ministrator. Use the buying power provided by the companies' large number of members to buy or partner with a third-party admin- istrator, thus removing the need for payers. e service could then be extended to other employers. 2. Offer near-site clinics. Leverage the combined physical footprint of the consor- tium members to invest in up-front care that would in turn reduce downstream hospital costs. is would include partnering with fa- cilities/care delivery providers and recruiting general practitioners to offer on- or near-site primary care clinics. 3. Enable direct-to-provider contract- ing. Segment the employee base into groups — e.g., chronic conditions, healthy, risky — and directly contract with providers to man- age those populations. 4. Enter pharmaceutical/durable medical equipment (DME) distribu- tion and manufacturing. Ship drugs in one convenient monthly package directly from manufacturers, and use cloud comput- ing to create a more efficient pharma supply chain. A consortium could potentially ex- pand into the manufacturing of biosimilars and generics drugs. Technology and Analytics Plays 5. Offer virtual services. Build or host a network of virtual care services such as tele- health and second opinions, and eventually evolve to operate a "virtual hospital" in which specialists supervise medical care from a dis- tance. 6. Offer a customized consumer (member/employer) portal. Leverage data and analytics capabilities to personal- ize consumer engagement and experience, provide targeted concierge services, and inte- grate health and productivity incentives. 7. Offer data-driven insights. Use data collection, tracking, and management to automate discovery, fuel artificial intelli- gence-enabled decision-making, and offer insights to stakeholders on topics such as the relative effectiveness of wellness programs. 9. Offer services for providers/em- ployers. Leverage data, technology, and analytics capabilities to relieve the adminis- trative and regulatory burden for providers and employers. Radical Disruption 9. Develop a B2B and B2C clinical ca- pacity exchange/marketplace. Much as Airbnb does with rooms and OpenTable does with restaurant tables, enable care-deliv- ery providers to monetize current and excess capacity and let consumers identify, compare (on price, quality and availability), and book needed clinical capacity at the required time and for the needed procedure. 10. Develop a direct-to-employer (D2E) reverse auction platform. Simi- lar to a private exchange, the D2E platform would let employers segment their employee base by micro geographic and risk segments, aggregate similar risk pools across employers, and enable payers or health plans to offer cus- tomized plan options for consumers. Short- ening the distribution chain and bundling healthcare products and services would make healthcare more shoppable. 11. Roll out an encounter-based, claimless model. Partner with large care-delivery organizations that cover the full continuum of care and are in risk-shar- ing/capitated arrangements to create an en- counter-based, claimless network. For certain populations or certain types of care, patients would have unlimited access to physicians without having to file claims. 12. Develop next-generation health- care connectivity platform. Create a consumer-centric, plug-and-play connectiv- ity platform aimed at improving the overall health, wealth and productivity of individ- uals. Much in the same way a financial por- tal accommodates a range of products and services, this platform would allow payers, providers, consumers and external partners to coordinate whole health and wellness products and services. Imagine logging onto an Amazon-like portal, filling out a risk as- sessment, receiving advice, interacting with nurses and having Alexa act as a concierge to set up appointments, order pharmaceuticals, and provide behavioral nudges. The Responses Regardless of the plays they pursue, consortia will force incumbent stakeholders to create a more competitive market and more clearly define their value. As such, they will only add to the pressure being placed on the industry by disruptive and aggressive mergers, such as the one between CVS Health and Aetna. e fact that a new group of entrants — bless- ed with deep pockets and strong capabilities — is potentially entering the market only heightens the urgency for the industry to fo- cus on its strategy. Companies that react with

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