Will Your Health Business Model Survive?

Jen van der MeerBusiness Model Practice

Stress-testing your business for a new policy agenda

Since the election, US stocks are mostly up. Except hospital stocks. Public hospitals like HCA are worth looking at the stock charts to see how wrong we were about the election – rising high the day before, tanking the day after.

HCA Post Election Ticker

Then there are the health insurance companies like Aetna and Cigna are on the rise. United Healthcare is the best-performing stock of the year.

United Healthcare Ticker

The promised repeal of the Affordable Care Act (ACA, a.k.a. Obamacare) is expected to impact hospitals more negatively than insurers. A recent Barrons survey of C-Suite executives in healthcare found that “MCO (Managed Care Organization) executives are more optimistic than acute-care hospital executives about the outlook for the respective fundamentals in their industries.”

But as of today, we only know which way the winds are blowing. We do not know exactly how the ACA will change, or when, or what it specifically means for any given company strategy.

Do the same trends play out if you are a startup? Were your pre-election business model assumptions correct? Does the recent shift in political stance change your trajectory?

In short, yes. No matter what your political views, it’s time to stress test your assumptions, and determine how dependent you are on policy-driven shifts in your future plan.

First, Re-Locate that North Star

Look up from your to-do list, your weekly calendar, your scrum, sprint, or annual operating plan. Why did you get into healthcare in the first place? Answer that question on a personal level. Convene a futuring session with your team.

Has the ACA been positive for your business or are you still struggling to implement technology and systems to manage and measure care? How should healthcare happen? What are your ideas for a better future?

For inspiration, The Institute for the Future published a Health Futures Map to help navigate the post-ACA decade. The Institute for Health Improvement recently partnered with five foundations to produce the Better Care Playbook to help accelerate system transformation. What questions do these future statements and best practices generate for your team? 

IFTF Post ACA Care Models

Ask big questions to frame and reframe your company’s direction. What role do you have to play in healthcare transformation driven not by federal policy shifts, but through connections and partnerships with other companies in the healthcare industry, not-for-profit organizations, advocacy groups, and your local community?

Second, Check Your Customer Target Assumptions

Who are your core customer segments? Were you selling to hospitals? Insurance companies? Pharma? Should your priorities shift in preparation for what comes next?

Even if you’re up and running and executing against your defined plan, it’s worth re-engaging in customer discovery. Pick a selection of health systems leaders, clinicians, administrators, and ask everyone how they envision the shift. You may find that your question is the first time they have stopped to pause and think about what is to come.

Third, Re-Validate Your Core Business Model Hypotheses

It’s time to go back to your original business model assumptions. If you haven’t been tracking changes to your assumptions using a Business Model Canvas tool, now is a good time.

Value Proposition Design

List your target customer segments, in order, and based on your customer discovery findings, consider how your core value proposition may need to shift.

Take a hard look at your core resources, activities, and partners – do you need to think about what you do differently?

Lastly, your biggest and boldest question is to re-consider your costs and revenues and stress-test where you fall in the shift to value-based reimbursement.

Fourth: Take a Stand on Value-Based Reimbursement

The hardest element to predict is how and when we start to shift to value-based care, payment based on outcome, rather than traditional fee-for-service.

The shift to value-based payment and care will cause health providers and everyone delivering to the healthcare system to change the way they bill for care. Instead of being paid by the number of visits and tests they order, devices used, and pharmaceuticals prescribed (fee-for service), providers’ payments will start to be based on the value of care they deliver (value-based care).

This shift is happening, but not everywhere. A number of health systems, not-for-profits and health companies and startups have each chosen where to play; with a number of stakeholders claiming bold stakes and risks, and others avoiding the change for as long as they can.

A rollback of key elements of the ACA will affect the contours of this shift, but the “train has left the station” according to many health leaders. Payers are demanding value-based payment models, integrated hospital systems are taking on population risk, and startups are experimenting with pay-for-outcomes and pay-for-performance models. Will you be a leader? Or a follower?

Finally: Rinse, Repeat and Lead

To be sure, those that work inside of healthcare complain that the pace of change is slow and incremental, particularly in front line health delivery systems. Startups have had to play at the edges, selling solutions consumers who can afford to pay, to workplace wellness efforts where ROI can be proven, or are living off of a derivative data-selling business model. Incumbent technology and service vendors are deeply locked in and want to protect their market share and flows of revenue and profit.

But one thing is certain – there is no comfortable status quo in healthcare. Even in the heart of the most cynical, money-minded hospital administrator, there is an acknowledgment that patients matter. The US is an outlier in health, and “not in a good way:”

US Healthcare System

 

If you believe your initiative or technology innovation can bend this curve away from more cost/worse outcome, then it’s time to double down. Change will come from government, but progress will come from leaders in the patient communities, advocates, caregivers, healthcare systems, and innovative companies that can move beyond our current trend. We only have our health and our lives to improve.

Share this Post

Reason Street's Most Popular Business Models

Pay-Per-Use

In a pay-per-use business model, use of a product or service is metered, and customers are charged when they use the service. “Pay-per-view TV” and online journal publications, custom research firms, who sell access to high value content on a per use or per download basis.

Two-Sided Marketplace

A two-sided-marketplace business model is a platform for economic exchange between two distinct user groups that provide each other with the benefits of a large network.

Business Model: Subscriptions

The explosion of the “subscription economy” is upon us with everything from flowers to car sharing to data storage to beauty care products now being billed to us on a monthly basis.

Share this Post