September 11, 2019
“We Can’t” Disrupt Healthcare
“An average hospital bed costs about $1 million. A ChenMed clinic costs $3 million. If you truly went down the path of doing what helps your patients, you have the money. You just don’t have the business model.” – Guarov Dayal, Chief Growth Officer, ChenMed
On paper the session had potential to be yet another talk about how healthcare is too slow and needs to change. Let’s all talk about patient portals, mobile apps and maybe an Uber partnership and then call it a day.
It wasn’t that.
Instead, SHSMD Connections 2019 closed with a bang. An uncomfortable, revealing bang. It happened in a room with only about 60 people, many of whom had their roller suitcase handles up and in the locked position, ready to sprint to the airport.
Titled “Practical Disruption Models and Tools” (with an extensive subtitle we won’t repeat here), the speakers were Craig Allan Ahrens and Ethan Franklin, both from Ankura Consulting. Joining them was Dr. Guarov Dayal of Chenmed, a self-described concierge primary care provider that works with low- and mid-income seniors covered by Medicare Advantage.
They did start with all the healthcare innovation boilerplate:
- Healthcare sees things – like apps and price transparency – as disruptive that other industries don’t consider remotely innovative.
- Don’t miss the innovation train and end up like Kodak or Blockbuster.
- Consumer sentiment is growing in importance for healthcare, and providers need to think more about product, placement and timing.
Next came a framework for practical disruption:
- Align infrastructure, including the traditionally conservative HR and legal departments.
- Change how work is done.
- Focus on how consumers are engaged and make sure you have the data to segment your patient populations.
- Consider how services are delivered. For example, are you really going to build market share by highlighting “better quality” or “a better heart program?”
The answer to that last question, the speakers said, is “no.” Healthcare has become commoditized. Consolidation has led to similar services and profiles, which is, in effect, commoditization for consumers. More is needed to stand out, and providers who haven’t started to test new models are behind. Therefore, health systems have a huge opportunity to rethink their delivery of care and take some ideas from disruptors. ChenMed was given as an example in the primary/ambulatory care space.
Somewhere in this discussion – the audience had interacted with the speakers throughout the presentation – things started getting tense. The speakers made it clear that the talk was not intended to pitch ChenMed as THE way to do things. But it was apparent that some people were struggling to get their minds wrapped around it even as an example.
Though the language varied, the underlying attitude from some in the audience was “We can’t.”
Along with ChenMed, Amazon (in the form of PillPack) and CVS (with the impending launch of 1500 HealthHUBs) were highlighted. One attendee said something like, “These disruptors can pick and choose their markets; they’re not under the same constraints of a community hospital.”
In another exchange, a speaker made the by-now-cliché point that consumer behaviors and expectations are becoming important in healthcare. Millennials, as we all know, would rather go to Google than their doctor.
“That’s because Millennials are idiots!” was the instantaneous response from one attendee.
It was a bizarre moment. And a revealing one.
Let’s look at both of those exchanges. Underlying much of the audience commentary was a sense that it’s all very unfair. In the first case: It’s easy to show up with some VC money, a nice brand and shiny vans to transport your patients to state-of-the-art-clinics. Traditional providers, meanwhile, are stuck in a system that restricts their movement and forces them to just work to keep the lights on.
The speakers acknowledged that’s true. Then, they went on to repeat that segmentation is critical. If you can’t pick and choose who you serve, you have to route people differently so they don’t bump into each other. As we listened to the exchange, the metaphor of an interstate freeway came to mind. It was as if the audience member was saying that some cars drive fast, others slowly. Accidents are inevitable when they’re all mixed in with each other. Ok fine, responded the speakers. Paint some lane markers and keep the fast drivers on the left and the slow ones on the right.
In the second exchange, which essentially said some consumers – Millennials – don’t know what’s good for them… It’s wise to remember that Millennials are now the largest population group in the United States. The oldest are approaching 40 and we are witnessing the largest transfer of wealth in human history from Baby Boomers to the tune of $30 trillion, according to an earlier SHSMD session. What if they are idiots? Do you really want to alienate a majority segment of your customer base with massive spending power? Seems risky. And of course the reality is that Millennials aren’t idiots, they simply have different expectations for the healthcare industry. Expectations that the industry has not done a great job meeting.
In both cases, the speakers pointed to the rise of consumer choice in healthcare. Why would someone go to a hospital for an outpatient procedure when they know they’ll be saddled with facility charges when they could go to a standalone surgery center and pay a set price? Why wouldn’t someone step into an independent primary care clinic (Walmart Health, opening today!) instead of trying to navigate the arcane scheduling process and long waits of a traditional health system?
Rather than looking to these new models as examples and taking what lessons they can under the existing system with its admittedly significant restraints, too many people in the room seemed willing to write off the whole thing as impossible and then point fingers.
After the talk, one of the speakers reframed the issue. People are worried about disruptors taking away their patients, he said. And if they don’t do something, that’s exactly what will happen. His point was that the emerging shift of patients away from traditional models of care and the emergence of disruptors small and large isn’t happening in a vacuum. Rather, it’s happening as a response to lack of change from the traditional providers. Disruption happens, whether the incumbents want it to or not. The way to avoid being eaten by disruption is to move with the tide, not to paddle against it.
What we found ironic was that the pushback came against ChenMed, which is running a fully capitated model treating elderly patients covered by Medicare Advantage. While you could argue that Medicare Advantage is a financially exciting place to be, it’s covering older, sicker patients. They bear the risk for outcomes. As a result, said Dayal, “Everyone says this but [ChenMed] is structured around the patient. Not just because it’s a good thing to do but because our survival depends on it.” Doing hard things is risky for the disruptors, too.
To be clear, not everyone in the audience was so resistant. Some gave examples of transitional projects designed to start the move to a consumer-driven model. And the conversation was encouraging precisely because it was contentious. The topic and presentation were structured to generate real discussion. We’re pretty sure the speakers came in with the intention of making all of us a little bit uncomfortable. Nothing changes if everyone agrees all the time, and that alone was worth the price of admission.