Consumerism and the age of ‘unlimited choice’ continues to revolutionize business-to-consumer markets across all verticals including health and human services (see The Age of Priceline Health Care). The latest proof: The Walt Disney Company (Disney), an entertainment behemoth that includes Marvel, 20th Century Fox, Pixar, National Geographic, and its new endeavor Disney Plus (see 5 Reasons Why Consumerism Must Be Part Of Your Strategy).
With competition for entertainment eyeballs at an all-time high, Disney’s target customers are embracing unlimited streaming services such as Netflix and Hulu over individual purchases. To enter the “streaming wars” (see The 50 Best Things To Watch On Disney Plus Right Now), Disney reevaluated its traditional service lines and developed a potential win-win strategy with Disney Plus, a low-cost, cross-platform streaming service that provides unlimited access to a plethora of entertainment options. What makes this a win-win?
- Win #1 – Delivering to target customers the one-stop-shop model they want
- Win #2 – Ensuring a consistent, predictable (and larger) revenue stream
Now you may be thinking, “Good For Disney…Why Should I Care?”
When a company the size of Disney completely transforms its strategy and combines multiple, historically high-performing and well-known service lines into one unlimited, subscription-based model (with a predictable, continuous revenue stream, I should add) …. expect others to follow suit — quickly. The consumer purchasing behavior data and trends reached the point where market opportunity exceeded risk… for Disney. Others will follow… but will this trend reach health and human services?
I believe it already has. The same transformation is happening in health care and it has been escalated by two synergistic factors: (1) the growing shift to value-based reimbursement models; and (2) the recent growth in direct-to-consumer services fueled by technology. Here are just a few examples:
- Concierge health or direct primary care services (see This Doctor’s Office Charges $150 A Month And Doesn’t Take Insurance—And It Could Be The Future of Medicine).
- Episodes of care and case rate-based care coordination models (see Prepare For Impact: The New CMS Home Health Payment Model and Why Your Performance Reporting Should Include Episodes of Care.
- Payer interest in a monthly case rate for consumers with autism spectrum disorder (see Are Bundled Payments The Future Of Autism Reimbursement?)
- New drug purchasing models, called the “Netflix model,” in Washington and Louisiana (see A Netflix Model For Hepatitis C: One Price, Unlimited Meds and How Netflix-Style Plans Could Solve Drug-Spending Dilemmas).
- Subscription-based, virtual behavioral health system therapy models such as Talkspace (see How Much Does Talkspace Cost? and How Virtual Therapy Apps Are Disrupting The Mental Health Industry).
What does this mean for traditional provider organizations?
The question that traditional provider organization executives need to ask themselves is “How much of our current revenue, of our current payer revenue, of our current consumer base will we lose in the next five years to the organizations that offer an alternative service and reimbursement model?”
In the current health and human service market, this key issue should be included in every strategic plan. Rethink your services in terms of a package sold to health plans and consumers with a critical eye on the perception of value and convenience. It’s important to note that this—a marketing-first approach—is a departure from traditional approaches to strategy taken by many organizations. The key is to reevaluate your traditional service lines — even those that are successful — with other potential financial models. Use market research to assess where your current customers are — and try to quantify lost future revenue.
If your market research shows little loss to these new service/reimbursement offerings, a more traditional incremental growth plan will likely be a successful strategy. But if your market research shows attrition of health plan contracts and consumer services due to new market offerings, a different strategy is required. Your organization needs to do just what Disney did and create your ‘next big thing’ for future market positioning and revenue growth (see Finding & Developing Your Next Big Thing and Coming Up With The Next Big Thing). For most health and human service organizations, a future core service line needs to meet three criteria:
- Win #1 – Maintenance of current market share by providing customers with demonstrated value and improved customer experience
- Win #2 – Competitive advantage that results in growth by acquiring new customers
- Win #3 – Financial stability and long-term sustainability with a service line positioned for continuous, predictable revenue streams
Don’t get me wrong. For many traditional provider organizations, there is plenty of revenue and financial stability in competing for traditional (albeit shrinking) service revenue. I heard one of our client chief executive officers describe it as the plan to be “the last man standing” in their traditional service market. But, competition in a shrinking market is also a tough strategic task. My advice is to ask the question — and plan accordingly.
For more on market-driven strategy, check out these resources in the OPEN MINDS Circle Library:
- How To Develop A New Service Line: An OPEN MINDS Seminar On Diversification Strategies, Feasibility Analysis, & Successful New Service Development
- Value-Based Reimbursement Readiness Assessment
- 5 Reasons Why Consumerism Must Be Part Of Your Strategy
- The Age of Priceline Health Care
- Integrating Digital Apps Into Your Service Lines
- Innovation Drivers In Behavioral Health: A Market Briefing
- Customer Experience Is An Essential Part Of Health Care Service
- Meeting The Challenge Of New Service Lines
- Adding A New Service Line: A Disciplined Planning Process Is Key To Success
- Finding The Path To Online Marketing Success: An OPEN MINDS Executive Seminar
And join me June 4 at The 2020 OPEN MINDS Strategy & Innovation Institute for “Succeeding With Value-Based Reimbursement: An OPEN MINDS Executive Seminar On Organizational Competencies & Management Practices For Value-Based Contracting” with OPEN MINDS Senior Associates Drew DiGiovanni and Kenneth Anderson in New Orleans, Louisiana.