The Future of Consumer Healthcare
How the consumerization of healthcare has fundamentally changed the game
As a heavily regulated sector, healthcare is one of the few industries that has so far largely evaded the wave of digital disruption that many other consumer-facing verticals — such as media and retail — have had to reckon with. For the average care-seekers, the healthcare experience has remained largely the same as it was ten years ago, before the smartphone transformed our daily lives.
Today, the defining trend in U.S. healthcare is the ongoing consumerization of health, largely thanks to the increased access to consumers that digital platforms provide health care services. Instead of patronage based on geographical proximity and peer recommendations, the tech-savvy consumer is now shopping for health services like they would with any other consumer products via digital channels, with convenience and good reviews winning over loyalty and word-of-mouth. This trend is spurring various implications for the near-future of U.S. healthcare, which we will delve into in the first half of this article.
Looking to the future, there are five key challenges driving innovation and shaping the future of healthcare. Changing lifestyle trends, an aging population, an increasingly automated workforce, climate change, and a shift towards value-based care are all crucial factors that will determine the long-term trajectory of the U.S. healthcare system. We will examine each of these five challenging factors and their respective impact on the healthcare industry in the latter half of this piece.
The Consumerization of Healthcare
In many other industrialized countries, healthcare is deemed a public utility, tightly controlled and run by government-owned institutions and programs. In the U.S., however, the healthcare system is run by a complex network of private companies including payers (insurers, mostly), providers (hospitals, medical clinics, etc.), and suppliers (pharma companies, medical equipment manufacturers and distributors, etc.). While this open market approach may have resulted in arguably the worst healthcare system in the developed world in terms of access, cost, and efficiency, it also leaves the door open for new entrants to enter the space and shake things up with innovative products and services that prioritize the patient experience.
And now, healthcare is going through a rapid phase of consumerization with more digital-native players entering the market, granting easier access and tailored services to consumers and experimenting with new points of integrations. As a result, consumers are seizing more control over the way healthcare is accessed and delivered, upsetting the status quo and threatening incumbents’ top lines. This is especially true among younger generations, as 16% of millennials and 18% of Gen Zers said they were “dissatisfied” or “very dissatisfied” with the efficiency of operations like billing, compared to just 8% of baby boomers who said the same, per a 2019 study by Accenture.
Digital Health Drives Consumerization
Many aspects of the healthcare journey are inherently information and data-based, which means they can be digitized, and the high adoption of digital technologies ensures that they will be, for consumer expectations tend to travel across categories. If one can pick a restaurant based on Yelp reviews, why can’t they select a primary care provider through ZocDoc? Increasingly sophisticated sensors on consumer devices, most of which coming from the smartphone value chain, are making it possible for consumers to track various different data points about themselves. As we saw at CES 2019, a number of startups are also aiming to consumerize medical exams with portable, connected devices.
The internet and smartphones give heath service providers access to consumers directly. Like in other industries, new entrants are taking advantage of this, which is forcing incumbents to respond. However, cumbersome legacy systems and regulations are preventing both incumbents and new entrants from transforming the industry at a pace that matches many other industries. Nevertheless, the growing prevalence of wearables, health-oriented mobile apps, and integrated healthcare services has prompted the majority of consumers to use technology to take control over their own health, helping to propel interest in the development of digital health.
As consumer interest grows, tech giants and startups are increasingly looking to enter the consumer health market, despite heavy regulations in place. Amazon has acquired the direct-to-consumer pharmacy company PillPack, and formed a high-profile joint venture with JPMorgan Chase and Berkshire Hathaway to manage the healthcare service for its employees. Apple has been doubling down on the healthcare features for its marketing-leading Apple Watch, which can now offer you an ECG and, soon, track your sleep quality.
Beyond big tech, digital upstarts like Pear Therapeutics and AdhereTech are gaining momentum by tackling various pain points, such as a lack of transparency and medication adherence. Meanwhile, a bevy of startups is bringing on-demand access to healthcare. Digital-native services like ZocDoc and DocPlanner have digitized the process of finding a healthcare provider and making an appointment while companies like Pager and Heal are working to bring on-demand house calls to patients.
As the digitization accelerates, consumer healthcare is facing a fundamental shift in patients’ preferences, behaviors, and demands around healthcare services, and it is redefining how consumers engage with healthcare providers and payers. No longer required to go through the traditional channels, consumers are open to choose the most convenient channel for their lifestyle and demand simplicity and transparency across the board.
Integrated Services
The consumerization of healthcare has been slowly terraforming the previously fragmented healthcare landscape into a more integrated system with democratized access, as various incumbents and disruptors integrate different parts of the healthcare value chain into their existing products and services to offer convenience and a consumer-first experience. Tech-focused primary care startups, such as Forward clinic, and retail outlets including Walmart and CVS are starting to offer patients on-demand access to healthcare providers via mobile apps and convenient locations to receive standard healthcare services, thus luring them away from incumbent health systems.
Telemedicine also brings a new access point for healthcare services. Startups like 98point6 and Doctor on Demand are leveraging video calls and texting to allow patients to chat with clinically certified doctors for remote diagnosis and healthcare advice. Talkspace is doing the same for mental health. Beyond convenience for consumers, it is yielding positive results for providers too. For example, by leveraging telemedicine tools, Tallahassee Memorial Hospital has reportedly saved upward of $1 million annually in cost avoidance, lowered readmission rates, and increased the number of patients served without sacrificing overall patient satisfaction. Of course, telemedicine is not without its drawbacks, as it is not suitable for all cases and dependent on internet access, but it is a worthy venue for healthcare providers to explore virtual care.
The consumerization of healthcare is also reflected in the rise of a handful of D2C healthcare brands like Hims, Lemonaid, and EverlyWell. Aided by the rise of telemedicine, which supports remote evaluation, diagnosis, prescription, and ongoing treatment, these newcomers follow the D2C playbook to acquire customers through digital channels and serve them with ease and quality experience they have come to expect in other great consumer companies. As in the case in many other industries, the digital entrants lean on their lack of legacy infrastructure and digital prowess to cut costs, focus on core value propositions, and push the entire healthcare industry forward.
Data Interoperability As A Roadblock
Building on the quantified-self movement, which refers to consumer interest in tracking aspects of daily life — particularly health — through the monitoring of behavior or biometric performance, more and more consumers are adopting wearables and connected healthcare to track their exercises and monitor overall health. As a result, consumers paradoxically feel both empowered yet powerless when it comes to healthcare. They feel empowered by the data they now have and the quantified knowledge they know about their health, yet often overwhelmed by the multitudes of available options, puzzled by the lack of real insights and personalized, actionable recommendations.
One reason behind this frustration is the lack of data interoperability — how health data is shared among the various stakeholders in the healthcare system. Interoperability issues have long plagued US health systems, and policymakers and tech giants have tried to improve data sharing — but providers and payers are still struggling with sharing medical data securely and effectively, especially now that they have significantly increased in volume for the early adopters of digital health devices.
Despite the current lag, recent efforts by big tech companies could start moving the needle on greater interoperability. Apple recently partnered with Allscripts, a leading electronic health records (EHR) vendor, to incorporate its Apple Health Records app into Allscripts’ system. And Microsoft recently struck a partnership with major health system Providence St. Joseph, which will in part allow its many hospitals to access siloed data. French drugmaker Sanofi is teaming up with Google to use the latter’s data tech to improve their understanding of key diseases and extract patients’ insights and feedback.
Amazon, with the most investment in consumer healthcare out of all major U.S. tech giants, was recently dealt a blow when digital prescription service Surescripts announced it is terminating its relationship with ReMy Health, a third party that supplied Amazon-owned PillPack with information about patient prescriptions. Nevertheless, we expect to see large tech giants upping their efforts to improve healthcare data interoperability as they put their expertise in data management and AI-powered analysis into good use.
But even with better data interoperability, the consumerization of digital healthcare doesn’t always include a related service, and consumers need help interpreting all the data our devices are capturing. While there has been an uptick in startups facilitating remote patient monitoring and diagnosis by doctors. Integrated service could be one solution for data interoperability. One Medical, for example, is a digital-first care provider that integrates into a hospital system by allowing users to opt in to share records with Mount Sinai, thus combining primary care and specialized medicine. Still, there is a big opportunity for brands to come in and leverage their expertise to help users interpret the collected data and turn them into actionable suggestions.
The Long-Term Future of Healthcare
Beyond the consumerization of healthcare under the influence of digital health, here are some emerging trends that we believe will play a crucial role in shaping the future of the U.S. healthcare industry in the long run.
Changing Lifestyle
With rapid urbanization, the rise of wellness economy, and a rethinking of our relationship with food, our collective lifestyle is about to undergo a major transformation along with these emerging trends, which will affect how healthcare services can reach consumers with a new set of demands and needs. Embracing wellness as a lifestyle choice, in particular, would push the healthcare industry to move beyond “illness treatment” and focus on holistic, preventive care. This, in turn, will further blur the line between healthcare and wellness services, with wearable devices and digital touch points enabling healthcare providers to stay connected with patients and offer sustained and personalized care. Food-as-medicine, gamification of fitness, and new methods for stress management will also heavily factor into the future of healthcare as it shifts towards a lifestyle business that prioritizes constant maintenance and preventative measures.
Aging Population
With better healthcare and longer life expectancy comes new problems brought by an aging society. The number of Americans 65 and older is projected to double its share of total U.S. population today and hit 24% by 2060. This profound demographic transformation is by no means unique to the U.S., as many industrialized countries are facing the same issue, and it will wreak havoc on the healthcare industry if we are not properly prepared for it. It is no secret that, on a whole, elders require more healthcare services, with some of them under long-term care, and thus demand more devoted resources. About 40% of U.S. adults age 65 and older today will need a nursing home or other long-term care services within the next five years, which requires policymakers to work with stakeholders to properly set up a senior care system that can handle a gradual increase of demand. Thankfully, many offers and features spurred by digital health will make not only make elder care easier to manage, but also empower the senior citizens to better take care of themselves.
Automated Workforce
The aging population will also have the unwelcome side effect of a shrinking labor force. This, combined with advancements in automation, would likely result in a significant portion of the workforce being replaced or supplemented by automated software and robots. Even doctors wouldn’t be exempt, given the number of AI-powered diagnostic tools and apps in development. Considering that researchers already estimate that the U.S. could see a shortage of up to 120,000 physicians by 2030, perhaps the development of AI-powered diagnostic tools could be a much-needed solution, and they are getting pretty good too. In recent tests, one system developed by researchers at the University of California in San Diego could diagnose children’s illnesses with between 90 and 97% accuracy. On the other hand, caretaking remains a high-touch occupation that seems unlikely to be threatened by automation, although robots are already being tested in Japan for senior care in response to a shrinking labor force. Thankfully, many offers and features spurred by digital health will make not only make elder care easier to manage, but also empower the senior citizens to better take care of themselves
Climate Change
Studies have shown that the environment we inhabit has a direct impact on public health. With seemingly irreversible climate changes and impending ecological disasters, any forecast on the future of healthcare would be remiss if it doesn’t factor in the unforeseen burden a deteriorating global ecosystem will impart on public health and the healthcare system. For example, one research estimates six of the weather and climate events that struck the United States between 2000 and 2009 resulted in over 760,000 encounters with the healthcare system and increased health care costs by $819 million. While we could still hold out hope for new technologies and a shift in culture to curb its impact, we should also start to think about ways to retool the existing healthcare system in anticipation of mass health issues caused by pollutants and environmental causes so as to better address the challenges ahead.
Value-based Care
Much has been written about the ongoing debate over shifting from the existing fee-based, volume-dependent pay system to a value-based care model where payments are tied to the outcome of the treatment, thus incentivizing healthcare providers to provide quality care that improves patient outcomes. While the benefits of adopting a value-based care system may be rather obvious and straightforward, opponents of the model are quick to point to the lack of transparency in data and inconsistency in reporting models as a major flaw, which, combined with a reasonable feature that this shift, if it becomes mandatory, would add to the already substantial administrative and regulatory burden on healthcare providers. Most of the drawbacks and hurdles associated with the value-based model would theoretically be solvable with the development of digital health and the health data interoperability we discussed earlier, thus making value-based care a viable model in the long run. The challenge therefore lies in how we can implement it at the right time and in a way that causes minimal disruption.
Want to Learn More?
Healthcare is a complex industry that involves many stakeholders and moving pieces, and we’ve only scratched the surface here. The Lab is closely monitoring disruptions in the healthcare industry and charting the development of digital health. To start a conversation around the numerous trends shaping the future of consumer health, and discuss how your brand can leverage these opportunities, reach out to Josh Mallalieu at josh@ipglab.com.
