Healthcare Transformation & Your Value Proposition

October 21, 2012 — Leave a comment

There are constant reminders that the U.S. healthcare system is undergoing a transformation.  It may be too slow for some, but change is happening.  The transformation is a focus on quality, costs, and outcomes.  I borrow the term “transformation” from the Delos Cosgrove, the CEO and President, of the Cleveland Clinic.  He recently wrote about the transformation occurring in healthcare (1).

In his article, Mr. Cosgrove talks about the way that self-insured employers like Lowes have developed special bundled payment programs with the Cleveland Clinic to give employees access to the cardiac surgery program at the Clinic. The retailer pays a bundled rate for cardiac services. If the employee’s local physician recommends cardiac surgery, the employee has the option to travel to the Clinic. The company even pays their airfare and waves the usual deductibles.

In another sign, Walmart recently announced that covered employees and their families needing heart, spine, or transplant surgery will have access to six prestigious health systems at no cost. Under what Walmart calls the “Centers of Excellence” program, employees and dependents enrolled in the company’s health benefits won’t pay out-of-pocket for medical care or related travel when they receive complex, expensive procedures (2). It’s recognition that receiving care at these institutions will actually improve quality and reduce costs.

In yet another sign of transformation, WeCare TLC, a worksite primary care clinic and medical management firm is now offering $450 MRI exams in markets that had technical fees ranging between $1,750 and $3,200 (3). Companies like WeCare TLC are responding to the stakeholders’ needs to reduce costs by providing appropriate care. Some might say this is classic low-end disruption as described by Clay Christensen. A “good enough” solution at a substantial discount is able to better serve a portion of the market that doesn’t need the full performance at the high-end. In this case, it’s a disruptive business model.

These changes, along with the Accountable Care Act (ACA), are all signs that the US healthcare system is slowly transforming into an evidence-based-medicine system from a monetary incentive-based-medicine system. In the old system, there were few incentives to reduce costs and improve quality of care. With a largely fee-for-service payment system, quality, costs, and avoiding unnecessary tests and procedures where not in focus. In the transforming healthcare system, improving quality and reducing costs will clearly be in focus.

There are critical questions medical technology companies should be asking:

  • Are you prepared for the transforming healthcare system?
  • Is your strategy aligned with this transformation?
  • Is your innovation strategy aligned?

Ultimately, in order to win in the future, you’ll have to determine if your value proposition is aligned with the transforming healthcare system.



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