hospitals in the internet economy · patient-provider relationships in the internet economy,...

© 2016 Kaufman, Hall & Associates, LLC. All rights reserved.

Hospitals in the Internet Economy

Ken Kaufman, Chair Kaufman, Hall & Associates, LLC

Lake Geneva, Wisconsin | July 18, 2016

© 2016 Kaufman, Hall & Associates, LLC. All rights reserved. HFMA Region 7 2

The Central Question of the Internet Economy

Or, asked another way…

“Why should a patient/consumer choose to use your healthcare services as opposed to all of the

expanding choices?”

“What is the value proposition of your hospital?”


Hospitals Are No Longer Isolated from Consumer-Focused Innovations

A powerful group of innovative companies is rapidly encroaching on the domain of traditional providers,

especially low-intensity services

Retail Care Telehealth

House Calls Mobile Monitoring

Urgent Care


Growth of New Care Options for Patients Has Been Rapid

Telehealth

• Revenue expected to grow from $585 million to $3.1 billion by 2020

• Annual visits expected to grow from 75 million to potentially 300 million

Retail Clinics

• Number of clinics has grown from 0 to 1,800 between 2000 and 2015

• CVS surpassed 26 million retail-clinic visits

• Walgreens is the second largest provider of flu shots in the U.S.

• 27% of ED visits could be appropriately managed in the retail/urgent care setting

Sources: Bachrach, D., et al.: The Value Proposition of Retail Clinics. Robert Wood Johnson Foundation/ Manatt, April 2015; CVS Health; Frost, P.: “Flu Shots Drive

Traffic for Pharmacies.” Chicago Tribune, Sept. 21, 2012. s; Winfrey, G.: “The 5 Fastest-Growing Industries in the U.S.” Inc.., March 18, 2015.


Two Critical Mistakes of Legacy Organizations

In the face of such disruption, Professor Clay Christensen notes that legacy organizations make two critical mistakes.

First: Legacy organizations do everything possible to defend the existing revenue model.

Second: Legacy organizations tend to double down on the existing business model even though that business model is actually going away.


What We Will Address Today

• What are the critical lessons of the Internet economy?

• What changes will allow hospitals to be effective competitors going forward?


Five lessons we can learn from the Internet economy


Lesson 1: The More Traffic the Better

Successful companies draw traffic through a large number of high-volume, highly desirable products and services


Communication-Savvy Companies Have Enormous Power to Drive Traffic • Myhealthfinder.gov is a government web tool that gives

personalized information about preventive services

• To drive more traffic, HHS worked with CVS Health to include a banner and link on the MinuteClinic website

Exposure by Source During First 45 Days

600,000 2.5 million


Driving Traffic to the Healthcare Portal: Are You a Small-Tent or a Big-Tent Hospital?

Small tent: Inpatient, ER, outpatient, community-based physicians

Big tent: Population health management, public health services, website, telehealth


Low-Intensity Patients Are a Critical Part of the Healthcare Portal

Low-intensity services:

• Are challenging to deliver

• Are outside a hospital’s historic core services

• Make up a relatively low portion of overall revenue

BUT…

• They make up a high volume of services and significant traffic in the overall portal

Keeping as many people as possible within the healthcare portal keeps hospitals top of mind as the principal source

of healthcare in their community.


Lesson 2: Make Interactions and Transactions as Smooth as Possible — A New Definition of Customer Service

Easy-to-find items, customer reviews, one-click ordering, two-day or same-day delivery

Click a button on an app, within minutes, a car appears, no cash changes hands


Hospitals Have Struggled with Digital Engagement

• 66% of hospitals have mobile apps…but…

• Hospitals are reaching just 2% of their patient populations through mobile apps

• Less than 11% of hospitals have apps that satisfy the most desired digital health capabilities

─ Access to medical records

─ Ability to manage appointments

─ Prescription refill requests

Source: Accenture: Losing Patience: Why Healthcare Providers Need to Up Their Mobile Game, 2015.


Lesson 3: Know Your Customers

Focus on the user and all else will follow.

First item from “Ten Things We Know To Be True,” Google, 1999


The Internet Has Turned Knowing Your Users into a Technical Science

Retailers access consumer information from…

• Checkout scanning

• Credit card purchasing

• Loyalty programs

• Web browsing

• Social media

• Smartphone

• In-store cameras

And use the information for improved…

• Staffing

• Inventory

• Pricing

• Store locations

• Store layout

• Customer engagement


The Evolving Hospital Business Model Is Dependent on New Questions to Meet Patient Needs

• Which patients prefer retail clinics, urgent care clinics, or physician office visits, and for which kinds of conditions?

• How do patients choose a physician in competitive environments?

• How important are convenience factors such as location and parking?

• How many patients want to and do compare prices?


In Addition, Population Health Management Requires Answers to New Questions

• Which members of a population are most likely to require which kinds of healthcare?

• Which members are most likely to require focused outreach to avoid unnecessary hospital visits?

• What demographic and environmental factors are associated with patients requiring more intensive levels of care?

Answering these new questions scientifically will require a sophisticated mix of demographic, socioeconomic,

behavioral, and attitudinal information, and the ability to manage that information.


Lesson 4: Innovate Continuously

In the Internet economy, successful companies relentlessly and aggressively generate new ideas

—sometimes they’re off the wall.


Lesson 5: Once Customers Leave for a New Model, They Are Gone

The Legacy Train

People may leave Netflix for the next big thing, but they won’t return to Blockbuster.


Now… what are the implications for hospitals of these lessons from the

Internet economy?


Hospitals Need to Fundamentally Rethink Patient-Provider Relationships

In the Internet economy, paternalism is not a basis for creating loyal customers. Service is. And the patient has

to be part of the service conversation.

Traditional: Paternalistic Today: Democratic

Physician determines patient access

Patients want more information, choices, control

Patient role the same regardless of health status or attitude

Patient role varies based on health status and attitude

Hospitals focus on patients who are sicker and more dependent

Hospitals need to improve relationship with less acute, more independent patients


We’re beginning to see some legacy healthcare organizations pivot toward new consumer

relationships, structures, and value propositions.

Hospitals Need a New Role and Value Proposition


MD Anderson Cancer Center Moon Shots Program

• Launched: 2012

• Goal: Reduce mortality for seven types of cancer

• What’s involved: Public policy, education, community services, research, and clinical care

• Example: Use of indoor tanning before age 18 results in 85% increase in melanoma risk; MD Anderson persuaded Texas lawmakers to raise minimum age for use of tanning beds to 18

MD Anderson sees this effort to prevent and control cancer as the “highest expression” of its mission.

• Significance: Suggests a new way for providers to think about mission: stepping outside institutional walls and into the community


Mount Sinai Health System Campaign • Goals: Healthy population,

care in least intensive setting

• Sample components: Mobile Acute Care Team

treats patients at home who might otherwise be admitted to the hospital

Preventable Admissions Care Team provides assistance to patients at high risk for readmission: 58% reduction in ED visits and 45% reduction in readmissions for target group

Rather than focusing on what has been good for Mount Sinai— filled hospital beds—Mount Sinai is focusing on what’s good for

patients and consumers—staying out of the hospital.

• Significance: Important declaration and example of an organizational mindset and structure for healthcare’s new environment


These Examples Demonstrate a New Value Proposition for Hospitals in the Internet Economy

• Something people want, rather than something that providers decide for them

• Something that distinguishes hospitals from non-traditional competitors

• Something not just for acutely ill or injured, but for all segments of the population in need


Hospitals Need to Deliver Value for All Segments

For the entire community, hospitals need to coordinate care across the continuum and help people navigate the system.

For people who… Hospitals need to…

Need a basic service Make transactions as smooth and easy as possible

Suffer discomfort Provide prompt, convenient access to a caregiver

Have chronic conditions Provide assistance with living conditions, transportation, nutrition

Want to improve their overall health

Help teach, practice, and track healthy behaviors


In Short, Hospitals Need to Move from Caring to Helping

Helping

Quality

Better Health

Innovation Access

Caring

People want to know that one organization will be by their side as their health status and health needs change.


Five Critical Tasks to Be Competitive in the Internet Economy

1. Strategies for major organizational change

2. Deeper and more rigorous cost reduction

3. Enhanced software and communication tools

4. A new relationship with consumers

5. Constant and consequential improvement in the patient experience


“Failure is not fatal, but failure to change might be.”

John Wooden Former UCLA men’s basketball coach 10-time NCAA champion

The Time for Transformation Is Now


About the Speaker

Kenneth Kaufman Chair and Managing Director Kaufman, Hall & Associates, LLC 5202 Old Orchard Road, Suite N700 Skokie, Illinois 60077 847.441.8780, ext. 102 [email protected]

Kenneth Kaufman is Chair of Kaufman Hall – a management consulting firm that provides advisory services and software to hospitals and health systems nationwide.

Since 1976, Mr. Kaufman has provided healthcare organizations with expert counsel and guidance in areas including strategy, finance, financial and capital planning, and mergers, acquisitions, and partnerships. Clients include organizations of all types and sizes – community hospitals and health systems, academic medical centers, and regional or national health systems.

Recognized as a leading authority and committed to industry education, Mr. Kaufman has given more than 400 presentations at meetings such as those organized by the American College of Healthcare Executives (“ACHE”), American Hospital Association, Healthcare Financial Management Association, The Governance Institute (“TGI”), and others.

Mr. Kaufman has authored or coauthored six books, most recently authoring Focus on Finance, published by TGI, and Best Practice Financial Management, 3rd Edition, published by ACHE. In addition, he’s often quoted and his articles regularly appear in major healthcare publications.

Mr. Kaufman has an M.B.A. with a concentration in Hospital Administration from the University of Chicago Graduate School of Business.


Qualifications, Assumptions and Limiting Conditions (v.12.08.06):

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