Greetings from New Orleans, where we had another great day at The 2019 OPEN MINDS Strategy & Innovation Institute. The issue of the day, and the one that should be preoccupying health and human service executives as they consider their future strategy is disruption. It appears that a major disruption of traditional financing and service delivery models—primary care, therapy, case management, service access, and more—are all the focus of major transformation. Those disruptive forces and the best path for traditional organizations to “ride the transformation wave” were the focus of my closing keynote, What Does It Take To Outlast The Disruptors? Building a New Strategy For A New Market.
So, what is “market disruption?” Disruptive innovations create new market structures with new value chains of stakeholders—eventually displacing established market leaders. But disruption is not a single organization (though a single organization can be a significant player). Disruption in a market is a process. And, disruptive innovations, through a group of leading-edge organizations, generally take hold in the low-end and new-market spaces—spaces often ignored by market leaders. Disruptive organizations offer services that are novel, or simpler, more convenient, and/or less costly.
During my session, I highlighted what I see as the top twelve disruptors in the complex consumer market.
- Transportation companies facilitating in-home services—Transportation has always been a health care issue, with Medicare spending $1.2 billion for non-emergency health care transportation (NEMT), and Medicaid spending $1.5 billion. Uber and Lyft are now forging business relationships with health and human service entities, providing convenience for consumers, while cutting costs and improving quality ratings for provider organizations and health plans (see Uber & Lyft Enter The Health Care Market). UPS also announced that it is going to test a U.S. service that dispatches nurses to vaccinate consumers in their homes (see UPS Eyes In-Home Health Services With U.S. Vaccine Project).
- Performance-based purchasing of pharmaceuticals—Performance-based contracting is effecting every aspect of the heath care market, and pharmaceuticals are no exception. For example, the Centers for Medicare and Medicaid Services (CMS) has an outcomes-based contract with Novartis for its leukemia drug Kymriah. Under the contract Novartis only receives payment if consumers respond within the first month of treatment (see Novartis, CMS Collaborate On Outcomes-Based Pricing For $475k Leukemia Drug). And last year, UPMC Health Plan announced two new initiatives with pharmaceutical companies-tying reimbursement to performance outcomes among members prescribed medications. UPMC also announced a value-based contract with Alkermes for VIVITROL®, a long-acting injection of naltrexone for medication-assisted addiction treatment (MAT) (see UPMC Health Plan Enters Value-Based Contract With Alkermes For VIVITROL®).
- Amazon’s investment in PillPack – There still isn’t a lot of information available for this announcement, except that it once again involves Amazon attempting to reinvent the health care market. In June 2018, Amazon acquired PillPack, a prescription drug distribution company, setting them up for an entrance into the pharmaceutical market (see Amazon acquires online pharmacy PillPack in move into health care). The acquisition opens the door to digital pharmaceutical services for consumers shopping through Amazon. My question: what other health-related services will Amazon start to sell?
- Pharmaceutical companies entering the tech-enabled service space—Tech-enabled automation, driven in large part by the need to deliver on value-based reimbursements, is coming to pharmaceutical companies. One example of this came recently from Lupin, which launched a new chatbot that dispenses medical information for consumers. The chatbot-titled ANYA, or “inexhaustible”-seeks to help alleviate health concerns and uncertainty for individuals as they manage diseases (see Pharmaceutical Company Lupin Launches Chatbot To Dispense Medical Information). Other examples are the market launch of Otsuka’s Abilify MyCite (see OIG Approves Otsuka Plan To Loan Smartphones To People Taking Its Digital Medicine Antipsychotic, Abilify MyCite) and the Sandoz partnership with Pear Therapeutics (see PEAR Therapeutics & Sandoz Launch reSET-OT Mobile Digital Therapeutic For Opioid Use Disorder).
- Payers limiting consumer choice for specialty services to “Centers of Excellence”—The “center of excellence” has morphed beyond the traditional academic view to the search of payers for “best value” providers of specific types of health care services (see What Does ‘Center Of Excellence’ Mean Now?). Examples include Walmart, which pays travel and expenses (see Walmart Expands Bundled-Rate Centers Of Excellence Program In Its Employee Health Plan and Emory Healthcare To Launch ACO, Bundled Payment Program With Walmart), as well as a Texas health plan made the news when it designated a center of excellence for providing children’s therapy services and in Arizona, one of the state’s health plans has designated centers of excellence for autism services (see Superior Health Selects Care Options For Kids As Preferred Provider For Therapy Services and Mercy Care Plan and Mercy Maricopa Launch Medicaid Centers Of Excellence For Autism For All Ages).
- Chains of low-cost, convenient service centers (CVS/Aetna)—“Unusual combinations” of stakeholders are reshaping service delivery and financing and bringing a new and potent combination of funding and resources to the market, particularly in retail health offerings. The most prominent (but certainly not the only) example of this is joining of CVS and Aetna (see Unlikely Bedfellows and The ‘Melting’ Value Chain) that combines an insurance company with a pharmacy/retail health care organization with their 1,100 retail locations.
- Health plans paying for, and being reimbursed for, social services – There has been lots of activity by health plans arranging and/or paying for social services. The big examples that have recently sent a wave through the field include several initiatives coming out of the Kaiser system, including $200 million in housing projects with the goal of supporting more housing projects in the future (see The Future Of Housing Support); the UnitedHealthcare (UHC) announcement to support the creation of 23 new ICD-10 codes related to social determinants of health (see AMA & UnitedHealthcare Partner To Propose New ICD-10 Codes To Identify & Address Social Determinants Of Health); and The Humana Foundation announcement to invest $7 million to address social determinants of health (see Humana Foundation Dedicating $7 Million To Address Social Determinants Of Health). And new CMS rules for reimbursement of social services in Medicare Advantage plans will take this a step further (see Why New Medicare Rules For ‘Non-Medical Benefits’ Matter).
- “Netflix” pricing model for pharmaceuticals—New payer models for purchasing medications may permanently change the pharmacy management landscape. The state of Louisiana has launched a “subscription model” for Hepatitis C medication with Asegua Therapeutics LLC. Under the contract, the state will have unlimited access to Asegua’s authorized generic of Epclusa for Medicaid beneficiaries and incarcerated individuals diagnosed with hepatitis C (see Louisiana Awards Subscription Model Contract For Hepatitis C Medications To Asegua Therapeutics). The Washington State Heath Care Authority (HCA) also released a request for proposals seeking a contractor to provide direct acting antiviral medications for hepatitis C virus (HCV); under the proposed contract, if the unit price reaches the maximum annual threshold, the contractor will provide additional medication units at minimal to no cost (see Washington Issues RFP For Hepatitis C Medications With An Annual Spending Ceiling).
- Augmented-intelligence companions—Artificial intelligence (AI), augmented intelligence, machine learning, and big data are providing “companionship” for consumers with complex needs. A series of HIPAA-compliant Amazon Alexa Skills that allow users to consult the digital assistant with health-focused questions (see Introducing New Alexa Healthcare Skills). And we’ve covered other “companion robot” offerings just entering the market (see We’re Way Past The Jetsons).
- National chains for high-value specialty providers winning national contracts with payers—The emergence of national specialty provider organization “chains” that can further utilize organizations like virtual specialty care provider organizations or “medical tourism” to specialty services destination hubs will change how health plans search for a sustainable model, with or without local provider organizations (see Is All Health Care Local?). Examples include CleanSlate, which is working with Optum and Humana (see Developing A Value-Based Partnership: The Optum Case Study and Humana Partners With CleanSlate Centers To Provide Outpatient Addiction Treatment Services In 8 States); and national ambulatory surgery center (ASC) system SurgCenter Development which recently entered into a national contract with Humana (see Humana, SurgCenter Development Announce National Agreement Expanding Availability of Outpatient Joint Replacement at Surgery Centers).
- Smart homes—The smart home concept, which has been growing slowly for over a decade, is about building a “home” that is enhanced with technology. This means building enhanced computer systems to control many of the management functions (think lighting, temperature, security, etc.) to build a highly convenient, remote-monitoring environment. The goal will be to decrease costs, better outcomes, reduced errors, better consumer management, better consumer self-determination … the list could go on (see The Internet Of Things – The Future & Now). A recent example includes Cedars-Sinai’s pilot program that allows consumers to use an Alexa-powered platform, called Aiva, in inpatient rooms, and that runs on Echo Dot smart speaker devices with the Amazon Alexa voice assistant, as well as on Google Home devices with Google Assistant (see Cedars-Sinai Pilots Aiva Virtual Assistant In Patient Rooms); as well as Nest Labs, which develops and markets automated home monitoring and safety devices (see Google Enters Smart Home Space With Acquisition Of Nest Labs).
- The expansion of virtual care—Recent research also shows that 96% of all health plans use telehealth, including 41% of all health plans that use eCBT, 21% that use an online engagement tool, and 16% that use consumer-facing portals (see Trends In Behavioral Health: A Reference Guide On The U.S. Behavioral Health Financing & Delivery System). One big example of this in practice? Last year at The 2018 OPEN MINDS Consumer Engagement Technologies Summit, Roberta Montemayor, Director for Telehealth of Optum Behavioral Health shared information about Optum’s new Virtual Visits program, which includes over 4,700 clinical professionals offering telemental health services (see Virtual Visits: An Overview Of Telemental Health Services From Optum).
What are the big strategic implications for specialty provider organizations serving complex consumers? The quick summary for your next strategic meeting—there are new (and well-funded) competition, metrics-based management is the path forward, and when in doubt, make sure you focus on customer service and consumer convenience (see Don’t Let The Big Disruptors Out Of Your Sight and What Does It Take To Outlast The Disruptors?). And though some these market disruptors may feel a long way off, the market repercussions are already starting to take place. Now is the time for your organization to prepare. Remember my favorite quote from Dwight D. Eisenhower: “Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.”
For more on the market, don’t miss our series of market intelligence reports—which include all the information organizations need to navigate the market:
- State Medicaid Programs With MLTSS: The 2019 OPEN MINDS Update
- The Medicaid Vertical Carve-Out Landscape: The 2019 OPEN MINDS Update
- State Medicaid Behavioral Health Carve-Outs: The OPEN MINDS 2019 Annual Update
- The 2019 OPEN MINDS Medicaid Managed Care Market Share Report
- The 2019 OPEN MINDS Medicaid Managed Care Update: A State By State Analysis
- 2018 Spending Trends For The Medicaid-Medicare Dual Eligible Population: An OPEN MINDS Market Intelligence Report
- The 2018 OPEN MINDS Medicaid ACO Trend Update
- The 2018 OPEN MINDS Medicare ACO Update: A Four-Year Trends Report
- Medicare-Medicaid Dual Eligible 2018 Market Update: Enrollment & Coverage
- The Social Services Market: Over $331 Billion In Spending In FY2016
And for more on how to successfully navigate these changes and incorporate innovation into your organization’s strategy, stay tuned for tomorrow, when I will share my four-part action plan for responding to the disruptions. You can continue to follow our coverage of the institute on Twitter @openmindscircle – #OMstrategy.