Is Subscription-Based Digital Health on the Horizon?

COVID-19’s reset of the U.S. economy will reverberate well beyond the pandemic. For health care executives, the critical question is to what extent the business model and nature of competition in care delivery may change.

The answer will involve two key challenges, notes Ken Kaufman, managing director and chair of health care for the consulting firm Kaufman, Hall & Associates, in the recently released Futurescan 2022-2027: Health Care Trends and Implications publication from the AHA’s Society for Health Care Strategy & Market Development (SHSMD).

First, health care executives will need to define their approach to telehealth, digital health care capabilities and care delivery. Second, consider how services are organized and presented to consumers.

Implications for Health Care Leaders

Assuming a continued strong demand for virtual care, hospitals and health systems need to think of competition broadly in two ways:

  • The extent to which tech companies will continue to encroach upon traditional providers.
  • How to improve digital offerings as the basis of market competition shifts to greater digital sophistication.

Health Care Executives Were Asked: By 2027, one or more technology companies will have developed a successful digital platform for managing health care across the continuum. Very likely: 50%. Likely: 24%. Already happening: 9%. Source: Futurescan survey, Society for Health Care Strategiy & Market Development, 2021.Tech giants like Amazon, Apple, Google and others have been disrupting health care for years. Amazon, in particular, has taken decisive steps to integrate its virtual, clinic and at-home/at-work health care offerings for employees.

Most Futurescan survey respondents can see this occurring within five years. Nearly three-quarters consider it likely or very likely that by 2027, one or more tech companies will have developed a successful digital platform for managing patients across the care continuum.

Hospitals will need to decide when to partner with or compete against tech companies in digital health care.

Improving digital offerings and providing greater sophistication in these systems to enhance the consumer experience is a costly proposition — not only for high-end technology, but also high-end talent. Some of the largest health systems may have the resources and capital to support truly transformative digital care strategies.

New Business Models

Companies that drive the post-pandemic economy will be looking beyond transactional, episodic relationships with consumers and may instead focus on subscription-based programs. The subscription business model means offering a high-quality bundle of products and services at an attractive price.

As new entrants continue to encroach on the health care market, expect them to apply the subscription business model to how they organize and deliver services. They may connect with consumers in ways that are so convenient we cannot yet imagine them. And they will use the subscription model to build a loyal customer base and steady cash flow.

Last year, Scott Galloway, a New York University professor and analyst of big tech business trends, suggested that Amazon could develop “the most robust, liquid health care platform on the planet.” He suggested that the subscription-based offering could be called Prime Health and would be fully integrated with Amazon’s retail platform and would allow members to get to the right physician immediately at a lower cost.

3 Ways to Compete in the New Digital Economy

Kaufman points out that legacy health care organizations have some advantages relative to companies like Amazon. Most importantly, many people and patient populations are still strongly attached to their hospitals and health systems. The question is: How can provider organizations capitalize on this momentum while developing more sophisticated capabilities necessary for success? Kaufman offers these ideas.

1. Focus on the bundle.

Assess which services would be highly desirable by a high volume of consumers. One possibility is a hospital-at-home model for lower-acuity inpatients, where diagnostic testing, therapy and other services are provided in the home. Lower-cost alternatives to hospital-based services (e.g., imaging, ambulatory surgery and other procedures) are another possibility.

2. Assess bundle economics.

This extremely sophisticated analysis requires an understanding of fixed and variable costs, potential demand and downstream revenue, clinician payment and consumer price sensitivity, among other factors.

3. Develop your digital platform.

Develop or collaborate on a simple digital system for patients to navigate during their health care journey. Patients will migrate to the easiest solution available.

Want to Learn More?

Visit the SHSMD home page to purchase a print or digital copy of Futurescan 2022-2027: Health Care Trends and Implications, register for a Feb. 16 Futurescan webinar led by health care futurist Ian Morrison, Ph.D., and explore SHSMD member benefits.

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