In a roundtable I recently facilitated on this subject at an industry summit, three themes emerged.
First, companies across the entire health care value chain need scale to make the appropriate investments. Second, they need to focus on improving the patient experience. Third, companies must act now because the changes in incentives and payment structures are driving the adoption of digital technology.
The summit, titled “Digital Disruption: Value Shifts in Healthcare” and hosted by A.T. Kearney and Chain Drug Review, was attended by leaders from physician groups, pharmaceutical companies, distributors, payers and pharmacy retailers.
The roundtable discussion, “Value Shifts from Digital,” was led by panelists Dr. Timothy Corvino, president of Integrated Acute Care at U.S. Acute Care Solutions; Jeff Greer, vice president of IT strategy and enterprise architecture at Cardinal Health; Nimesh Jhaveri, divisional vice president of patient products and services at Walgreens Boots Alliance; and Nicole Mowad-Nassar, vice president of external partnerships at Takeda Pharmaceuticals.
We started by asking the panelists how digital disruption was affecting their companies. From the freewheeling subsequent discussion, I was particularly intrigued by the following points:
Need for scale
First, a company needs scale to be able to make the investments required to leverage all the information available from digital technologies. Investments in large digital capacity are expensive — the data warehousing capability, the analytical skills and the ability to translate findings into behavior modification. So it’s important for a company to enjoy sufficient scale and/or to enjoy extraordinary abilities to collaborate with others. Scale is also valuable because it allows the company to take on risk more confidently.
For example, to capitalize on the coming market changes, some companies are acquiring technology start-ups or expanding into adjacencies. Many are pursuing partnerships to capitalize on their strengths while taking advantage of others’ strengths. For smaller retail pharmacy chains, the key to success will likely be in leveraging the services offered by one of the larger distributors, many of which are investing aggressively in the area.
Opportunity to help patients
Changes create opportunities, and the most important opportunities come in improving the patient experience. Because the health care value chain involves so many diverse players, a patient’s journey can be complicated and frustrating, so the way to win over patients is to make that experience as seamless as possible.
Meanwhile, companies can use digital technologies to improve clinical pathways, making therapies more effective and accelerating the patient’s speed to stability. Participating in this improved delivery is another essential way to create value for patients.
One of the keys to unlocking that value will be using technology to improve communication across the entire care team, thus closing gaps in care. Technology-enabled communication can help doctors, nurses, pharmacists and other professionals efficiently gain understanding of the patient’s situation. However, the purpose of technology is only to enhance efficiency — to help individuals focus on care. Most patient care still takes place in personal relationships, such as those between a patient and her doctor or pharmacist.
For example, the opportunity for a chain drug store becomes not merely to sell shampoo but to use its proximity to the patient to enrich that relationship in ways that will help change patient behavior. As improved behaviors such as diet and exercise become more important, the pharmacies that can best use technology-enabled communication to drive those behaviors will create the most value and make the biggest difference.
Companies must act now
In many ways, it is already clear which digital technologies will transform health care. For example, advanced decision support will aid in diagnoses, while analytical engines will verify treatments against clinical protocols.
By contrast, what is not yet clear is the new business model under which these technologies will operate. The development of that new business model is being shaped by the ways that the Centers for Medicare & Medicaid Services (CMS) updates payment policies — not technology.
Providers and their networks — meaning, everybody — will be paid for quality. Increasingly, a provider will receive one bundled payment. For example, the Comprehensive Care for Joint Replacement (CJR) model tests bundled payments and quality measurements for hip and knee replacements, with the aim of later applying that philosophy to other types of care episodes.
Moreover, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) created a new framework to reward providers for the quality rather than volume of care. The quality incentives in both the CJR and MACRA models will drive demand for more timely, detailed and connected information. In other words, it’s not the digital technologies themselves that will create the revolution, but these incentives that will force companies to adopt the technologies.
Opportunities and risks
The discussion of these issues often starts — as this article did — with the way that technology seems to be creating a need for investments to improve patient care. But in any industry, technologies are generally tools rather than imperatives. Imperatives come from market forces.
Thus, from a business perspective, it’s helpful to think about these new payment structures as driving the imperatives. Being paid for outcomes and quality is what creates opportunities to provide patients with more value through better care. It is also what creates the risks: the need for innovations and for scale to support those innovations.
To maximize the opportunities and minimize the risks, companies can use the tools of powerful digital technologies. In doing so, their ultimate success will come from the clarity of their vision in how to create value, and their ability to implement that vision effectively.
Chris Paddison is a partner in the health practice at global management consulting firm A.T. Kearney. Based in Dallas, he can be reached at firstname.lastname@example.org.