The Consumerization of Healthcare
By Pano Anthos, Founder & Managing Director of XRCLabs.com
Takeaways
- While product innovation is necessary, it is not sufficient to compete in today’s market. In-store services are the next generation of opportunity. Those who don’t offer services are going to miss a huge portion of the overall consumer spend.
- At the intersection of healthcare and wellness is a new area in the consumerization of healthcare, Light Medical, emerging by way of customer discovery and saving customers time.
- 5G wireless technology, cloud computing and advancements in AI and machine learning are essential to Light Medical.
There is a dramatic new trend in the retail and consumer goods markets where the consonance around location and time are becoming more pressing. This trend is not only paving the way for advancements in retail as a whole, which we’ll explore here shortly, but is also accelerating the emergence of new technologies, products and services in the Consumerization of Healthcare.
Retailers & large CPGs are beginning to deliver on product innovation
Retailers and large CPG companies, like the P&Gs of the world, know they need new products to remain relevant. These massive leaders in the space have been under a great deal of inspection by Wall Street for not being successful in inventing new products.
But in the last two to three years, retailers and CPGs are focusing attention on product innovation in the way of launching new white space categories like ingestible beauty and gut health, and introducing digitally native brands into their marketplaces. At the same time, retailers are beginning to open up their shelves to more experimental and innovative products produced by smaller companies.
While product innovation is necessary, it’s not sufficient to compete today
Discovery and saving the customer time during this journey will satisfy customer needs more than just offering innovative products. Retailers are helping customers navigate this discovery process partly through services, which increase profitability and drive foot traffic to stores. A classic example of this would be going to a spa. You go to a spa for treatments; but, before you know it, you’re leaving with a bunch of new beauty products. Disney is another classic example of leveraging services; or, similarly in this case, experiences, to drive product sales. After exiting an amusement park ride, you find yourself in a gift shop buying a keepsake.
Customers who buy services, drive incremental revenue
Retailers are trying to figure out how to increase profitability, while driving foot traffic. We would strongly suggest that in-store services are the next generation of opportunity in light of all the product innovation taking place. If you don’t offer services, you’re going to miss a huge portion of the overall consumer spend.
Nordstrom, for example, documented that services don’t just drive profitability from the services themselves, they actually drive add-on product revenue. Customers who worked with a Nordstrom personal stylist, spent 5x more than those who didn’t. And with Nordstrom’s store reserve and buy online/pickup in-store services, customers on average spent 2x more, while alterations increased spend by 3x the amount. There is a value proposition for both the customer and the retailer. For the customer, they engage in discovery and save time. For the retailer, services generate an increase in overall foot traffic, promote cross-selling and drive overall consumer spend. Now, what does this mean for the CPGs and healthcare space?
Chain drug stores & general merchandisers are beginning to look at services in their stores
At the end of 2018, CVS completed its $69 billion acquisition of Aetna — the largest healthcare deal in history. Today, CVS is piloting “HealthHub” locations nationwide, bringing healthcare services directly and conveniently to customers while positioning CVS as a healthcare destination. Similarly, Walmart has entered primary care with the launch of Walmart Health last fall in Dallas, GA. The clinic offers patients primary care, labs, X-rays, dental, and additional healthcare services conveniently and at more affordable pricing.
The spectrum of health and services in retail: Wellness, healthcare and the emergence of Light Medical
At the intersection of healthcare and wellness is the emergence of a new area in the consumerization of healthcare we refer to as Light Medical. By healthcare, we mean in the context of when an in-person appointment with a doctor is necessary either due to advanced testing, such as blood work or surgery. And by wellness, we are referring to products and services improving your overall wellbeing. Wellness products do not require FDA approval and are not typically regulated. Whether it’s fitness, nutrition, sleep, or medication, there are a million products on the market today that focus on this idea of making you a better you. We would argue there’s a real opportunity in between these two sectors worth expanding — the area of Light Medical.
Light Medical: A distributed health services platform
Light Medical has a broader capability. If you have ever used tele-medicine at home, then you know this as a service that would fall under our definition of Light Medical. It’s about having doctor supervision with a diagnosis and/or a prescription of medication or treatments, but remotely, while you’re in the comfort and convenience of your home.
During the Covid-19 epidemic, we’ve seen a significant acceleration in the adoption of this service nationwide. Practitioners are part of the process, but not physically present — they’re, instead, telemedicine-present or tele-present.
The technologies that enable this Light Medical architecture: 5G, Cloud computing & AI
5G wireless technology is fundamental to providing customers and providers with superior tele-presence capabilities that lend to quick and responsive interactions. The idea is minimizing friction for the customer. No matter how innovative and groundbreaking the service, if the technology is clunky or unreliable, it simply won’t catch.
Obviously, there’s no room in telemedicine for filing cabinets full of customer charts. It goes without saying, but the Cloud is essential. The not so obvious need for the Cloud, though, is the enormous benchmarking potential. For example, a light medical startup will soon be launching a heart diagnosis device that can perform an EKG and stethoscope at home. It registers the waves and pushes them onto the Cloud. From there, it can compare one’s results to a baseline driven from thousands of previous real heart diagnostic results and give that customer a risk profile. It goes back to that old saying, “an ounce of prevention is worth a pound of cure”, as we push light diagnostics closer to the consumer.
The last area of technology advancing this sector dramatically is with artificial intelligence. We’re also seeing a lot of work in x-rays with AI. Google has demonstrated, and now it is accepted wisdom, that a computer is much more accurate in examining x-rays than a doctor given that computers can catch minuscule variations that might escape the human eye.
Case Study: Dentists are now able to increase earnings by adding tech-enabled orthodontics as a service
The game-changer, however, isn’t that now we can make services easier through advancements in technology, but that both the customer and the provider of the service benefit. It’s actually transforming the marketplace and creating new opportunities for businesses. While the value to the customer may be clear (time and cost savings), the value to the supplier may not seem as obvious. Today, a dentist charges approximately $80 per hour for general services like cleanings. Whereas, orthodontists earn on average $400 per hour for orthodontic services. There are an estimated 100,000 dentists in the US vs. 7,000 orthodontists. The technology in this space has advanced to the degree in which a dentist can now perform light orthodontics (aligners for any age) and do so remotely, transferring much of the traditional wisdom, science, and training of the orthodontist to the dentist, driving an increase of revenue by 5x per dentist. It’s a very powerful way to scale many services. OrthoFX, an XRC Labs portfolio company, is empowering dentists with access to the clear aligner industry, combining direct-to consumer communication with dentist supervised care.
Case Study: Diagnostic testing and management of Anemia in the home
With the rapid growth of tele-health services, it’s only natural for routine and on demand self screening and management to follow suit pre- or post-diagnosis. Not only have physician and orthodontic visits moved into the home, but so have some lab services. Over-the-counter testing has already grown to a $22 billion market and will only continue as consumers look to optimize and manage their health and wellness in their home.
One example of this is in the management of anemia. Anemia affects more than 2 billion people worldwide; and, in the US, there are more than 83 million at high risk for anemia. Characterized by low hemoglobin levels, the symptoms are persistent extreme fatigue, lightheadedness or dizziness and chest pain, shortness of breath or a fast heartbeat. While we know anemia is prevalent, previously it was only screened for in hospitals or clinics, which can take several hours, usually requires time off from work, and can incur copays or lab charges for the patient. Ultimately, this is inconvenient and expensive, and as a result, many forego screening and treatment. For those who do know they have anemia, screening and management of anemia should be done more frequently and isn’t due to inconvenience, leading to a lower quality of life and less productivity. Screening is the barrier for treatment, therefore, there has been a profound need for screening in the home setting. Enter Sanguina. Sanguina developed AnemoCheck, a simple, color-based, disposable, test for hemoglobin level screening done at home. The self-test is complete in two minutes and delivers a simple color result in the comfort of the person’s home, at any time. In conjunction it also includes a mobile smartphone application to non-invasively prescreen, guide, remind, and track hemoglobin levels.
Medical specialties to consider for future distributed health services platforms
When we take a look at all of the medical specialties that are out there, one would be surprised by how many can actually be delivered in the form of Light Medical and not by way of the traditional doctor’s office or emergency room visit. There are many more opportunities like in the areas of: allergy and immunology, orthopedics, physical medicine and rehabilitation, pediatrics, pathology, radiology, and so many more. This is only the beginning.
Select light medical startups:
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