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Searching for Power Players in the New Health Economy



HRI shows why the industry is ripe for picking; players compete to be healthcare’s new Amazon.com


In 2010, CellScope was birthed in tech-savvy San Francisco with the mission of creating a home medical kit of smartphone-friendly devices. Its debut offering – Oto, an otoscope that takes digital images of the ear canal – was promoted as a way to reduce up to 30 million office visits annually for ear infections in the United States. Oto represents an early wave of players threatening to bulldoze the healthcare landscape in the $2.8 trillion, consumer-slanting New Health Economy.


“We’re our own construction workers and we can do our own contracting jobs. We’re our own travel agents. We’re our own movie producers. We’re accepting all of these technologies to do things for ourselves and … healthcare is the next frontier,” CellScope CEO Erik Douglas told the Health Research Institute (HRI) for the recently released report, “Healthcare’s New Entrants: Who will be the industry’s Amazon.com?”


“Dramatic change has been predicted for the healthcare industry many times over,” wrote HRI. “This time, the environment is finally ripe for that transformation. Revenue will circulate differently, and to many new players. Consumers, spending more of their own money, are exerting greater influence and going beyond the traditional industry to find what they want and need. In the New Health Economy, purchasers increasingly will reward organizations providing the best value, whether it’s an academic medical center, a tech company with a great app, or a healthcare shopping network.”


At play: Sharp new recruits versus healthcare incumbents. Potentially disruptive entrants to the playing field include well-established companies outside the industry expanding to the medical field, and non-traditional companies creating new modes of care.


Case in point: At the JP Morgan Healthcare Conference in January, Walgreen CEO Gregory Wasson, a Purdue-trained pharmacist, reminded investors that “hardly anyone went to a drugstore for a flu shot” five years ago. Now it’s a mini-healthcare center.


Another example of the ripple effects of slight shifts in the $2.8 trillion pie: If half of all patients choose new alternatives for some dozen medical procedures, such as an at-home strep test, it could impact roughly $64 billion of traditional provider revenue, according to a December 2013 HRI-commissioned consumer survey.


Here’s the rub: Even though the U.S. healthcare system is known for piloting life-saving medical interventions, it’s failed in attempts to produce efficient business models to deliver outcomes proportionate to cost. The trend leaves an opening for power players traditionally outside the medical sector. For example, of the 38 Fortune 50 companies listed in 2013 with a major stake in healthcare, 24 are new entrants. Of those, 14 are traditional healthcare organizations, seven are retailers, five are technology companies, four are financial firms, three are telecommunications companies, and two are automakers. One of those is developing services such as chronic condition management while driving.


Companies that already possess impeccable consumer credentials, such as Walgreen, with its active customer base of 74 million, are poised to upend the health sector via cost-saving products and services:


Apple was issued a U.S. patent in 2013 for a “seamlessly embedded heart rate monitor” for iPhone and other devices.




AT&T opened its mHealth platform to developers in 2012, hoping to become the essential component in healthcare’s game-changing apps. Nasrin Dayani, executive director for AT&T ForHealth Solutions, told HRI, “We believe the ultimate jury … is the consumers themselves. It won’t be decided by the providers or payers.”




CVS Caremark, a 7,600-store chain, made a splash in February with a revised strategy to brand itself a healthcare company that includes having tobacco-free pharmacies by year’s end.




Google last year rolled out Calico, a company with expertise in both healthcare and consumer-oriented technology that focuses on aging and associated illnesses.




Samsung unveiled its new Galaxy S5 smartphone earlier this year, with a built-in heart rate monitor.




Time Warner Cable recently revealed a “virtual visit” pilot project with Cleveland Clinic caregivers to interact with patients via telemedicine.



Who’s going to grab the most pie dollars?


“Is it going to be some random startup or … your doctors?” Target CMO Joshua Riff, MD, questioned. “You have the infrastructure. You have the knowledge. You have the experts. You need to be leveraging these technologies.”


Editor’s note: Please see companion article, “Compete or Partner?” in this edition, also focusing on the Health Research Institute’s recently released report, “Healthcare’s New Entrants: Who will be the industry’s Amazon.com?”



 
 
 
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