Understanding Healthcare Intermediaries with modelH (5 of 8)

We are nearing the end of our mini-series on understanding and defining healthcare Customer Segments — which we know can include Users, Buyers, and Intermediaries. We will use this post to understand how Intermediaries affect all aspects of healthcare.

Not all intermediaries are bad. They usually exist when the business model has flaws. No one wants to pay more money or spend more time than they have to, yet many healthcare business models leave the Buyer and User utterly confused, the Value Proposition unrealized, and the JTBD incomplete. Many successful business models started as some type of intermediary. The problem arises when they become locked into a standard that prevents better models from surfacing.

modelH Business Model Canvas — Intermediaries

We have three objectives today:

• Defining Healthcare Intermediaries.
• Enuermating the questions to ask on the canvas for the Intermediaries.
• Identification and activation of healthcare Intermediaries

Defining Healthcare Intermediaries

The word intermediary comes from the Latin intermedius, from inter + medius, meaning “in the middle.” The dictionary defines an intermediary as a person who acts as a link between people to try to bring about an agreement or reconciliation, a go-between, or a mediator.

Intermediaries are everywhere in healthcare. While the concept sometimes gets a bad rap, such as restricting access to care or life-saving drugs, it is essential to a market-driven system. Sometimes, intermediaries act as a control mechanism to ensure quality and evidence-based care. Sometimes, they act to control costs and check unnecessary spending. Intermediaries are not just a “go-between” but a crucial support system that helps all stakeholders navigate the complex landscape of contracts, people, and vendors.

For example, let us look at the evolution of the retail clinic, sometimes called a convenient care clinic. In 2004, these clinics were seen by the American Medical Association as an unnecessary intermediary to the structure of the existing primary care doctor. Many complaints were leveled against them, ranging from lacking qualified medical practitioners to creating a gap between the patient and their primary care physician. Twenty years later, we have seen almost every general practice office staffed with NPs and PAs to create fewer and shorter visits with the doctor. Furthermore, retail clinics were the first practices to adopt electronic medical records en masse. This is now seen as a standard requirement for any practice. Finally, many regional hospitals have begun experimenting with opening their retail clinics to augment their coverage and provide smarter triage for their patients.

Here are some more examples of positive intermediaries in healthcare. These are just a few of many that demonstrate the importance of facilitators in the healthcare system.

1. Employers act as healthcare intermediaries for their employees by providing health insurance plans at group rates, typically lower than individual plans, often including employer contributions to the premium cost. They act as a liaison between the employee and the insurance company by facilitating enrollment, answering questions, and managing plan changes. They handle the administrative tasks of health insurance plans, including payroll deductions for premiums and managing claims submissions. They may also offer other benefits like Flexible Spending Accounts (FSAs) that employees can use for qualified medical expenses.
2. In the Payer space, there is value in the role of medical care organizations (MCOs), such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs), acting as intermediaries. They negotiate care service rates at scale, benefiting consumers and providers. They sit between healthcare providers seeking patients and patients searching for healthcare providers. They ensure providers maintain quality care through incentives and penalties.
3. In the Provider market, a physician-hospital organization, medical groups, integrated delivery networks (IDN), independent physician associations (IPA), and similar entities offer healthcare services to be rendered by their providers on one side to the subscribers or policyholders of an organization like a health plan, workers’ compensation company, or P&C insurance firm.
4. In Government-sponsored markets, fiscal intermediaries (FIs) play a crucial role. These are private companies contracted by Medicare or Medicaid to pay bills and ensure the smooth operation of these public healthcare programs.
5. In the Biopharma and Medical Device industries, providers act as intermediaries for the persecution of drugs and devices to those needing them to complete their care.

Questions to ask on the Intermediary Block of the modelH Canvas

Given the importance of Intermediaries in the two-sided market of healthcare, the business model canvas for healthcare calls out the need to answer some specific questions.

modelH Business Model Placemat — Intermediaries

1. How does an Intermediary influence the Buyer?
2. Does the Intermediary act on behalf of the Buyer, the Value Proposition owner, or themselves?
3. What Costs does the Intermediary add to the business model?
4. What Costs does the Intermediary add to the Customer Relationship?
5. What impact does the Intermediary add to the Experience?
6. Can the Intermediary be disintermediated?
7. Is your business model an Intermediary within another business model?
8. If so, can you be disintermediated?

Are Intermediaries Useful in Healthcare

Intermediaries are an embedded part of the healthcare system. As part of your business model, you should work to identify and activate them when needed and disintermediate them when not. How do you know which is which? If the Intermediary benefits before the User (consumer, patient, etc.) or Buyer (health plan, risk holder, etc.), then the Intermediary is at odds with the Value Proposition. When the value to the Intermediary supersedes the benefit to their clients, the Intermediary either must adapt or be disrupted.

Here is an excellent example of a somewhat valuable intermediary being somewhat disrupted. In April 2024, CMS published a final rule that could bring about positive changes. This rule limits how (and how much) Payers can compensate brokers, independent agents, and other third-party marketers for guiding enrollees toward Medicare Advantage and Part D plans. The impetus was that larger health plans were boosting compensation to ‘predatory marketers’ in ways that impeded competition and lured beneficiaries toward plans that pay brokers more but are not necessarily most suited to their customers. As a resident of Florida, I can attest that I see this annual AEP gold rush of marketing happening every year. As you would imagine, these intermediaries sued to stop the regulation.

The Department of Health and Human Services (HHS) believes “compensation should be structured to create incentives for agents and brokers to enroll individuals in the plan that is intended to best meet their healthcare needs, as the law requires.” As I stated, when the value exchange goes to the Intermediary over the Buyer, you have a reason to remove that go-between from the business model.

But healthcare is complex, and most Buyers and Users have poor situational fluency. Some healthcare businesses require a helping hand to ensure their value is understood and activated. Intermediaries can bridge that gap and assist and improve Customer Relationships. As healthcare is extensive, with established markets where only giant players can survive, there is a natural resistance to change when it yields profits for an incumbent. In these markets, intermediaries can force the legacy players to act on behalf of the Customer Segment.

Take time to understand how Intermediaries affect your business. Whether your business model targets Patients, Providers, Payers, or Purveyors, defining the Intermediaries between your Customer Segment and your Value Proposition is important to creating your best business model.

What is Next?

Ok, we are almost there. We will do our sixth and final post in this mini-series about the “who” in our healthcare business models. We aim to bring it all together and point you to some great resources where you can learn more.

Interested in what I am doing and want to learn more? You can read all about modelH business model innovation for healthcare on Medium.

To your health,

Kevin Riley