By Joel Kranc
The rapid shift in healthcare distribution and consolidation, which was already occurring prior to the pandemic, is only accelerating and changing the landscape at an even faster pace.
Cases in point: Walgreens-owned VillageMD recently completed an $8.9 billion deal to acquire Summit Health, which operates urgent care centers. Also, Amazon is getting into the mix and announced it is spending $3.9 billion for primary care company One Medical. National pharmacy chain CVS is buying home-health company Signify for $8 billion. Even Walmart, which has attempted to get into the healthcare game previously (and unsuccessfully), has also signed a 10-year agreement with UnitedHealth Group.
These mega deals mean a couple of things. Large corporations are interested in scale and that needs to happen fast to recoup investments. With that, competition will become even fiercer for regional and smaller clinics already looking to retain customers and/or grow what they have.
“Their competition is going to be community-based hospitals or local medical centers that have a multi-specialty group attached to it,” says James Bonomo, President and CEO with Caduceushealth, an MSO, which has helped manage large medical practices since 1997. “And the problem these [larger companies] have is they will never have a full suite of services.” In other words, notes Bonomo, patients can get more of a “boutique” service and be fast-tracked through a healthcare system if they need a specialist or something that does not require an overnight stay.
“These guys will be fine in the mass level healthcare delivery but when you get more complex cases, I don’t see how they are going to answer that question,” he adds.
Dr. Erin Ney, Management Consultant, with Bain & Co., notes that the influx of money from non-traditional healthcare companies and so-called disrupters is an acknowledgement of how much money is spent in healthcare and care delivery in the U.S. That money also indicates, “that there is significant room for improvement,” she adds. “There is opportunity now as we see increased interest in risk-taking in value-based care (VBC) in thinking about not just care delivery in on a fee-for-service basis, but how can we innovate around care delivery to really affect clinical outcomes and do that at a lower cost.”
In a report by Bain & Co, co-written by Dr. Ney, called It’s Time to Elevate the Patient Experience in Healthcare, the argument is made that: “Customer-centric organizations outperform their peers, growing twice as fast and generating median total shareholder returns up to five times the U.S. median. In particular, customer-centric healthcare providers often enjoy better clinical outcomes as a direct result of higher patient satisfaction and adherence, stronger brand differentiation, increased employee engagement and satisfaction, higher revenue growth from repeat customers, and increased share of wallet—not to mention the ability to stave off competitive disrupters.” In fact, a Bain survey shows that 65% of healthcare consumers expect a more convenient experience and 70% expect more responsiveness from providers compared with how they felt three years ago.
This would appear to agree with Bonomo’s sentiment about boutique service, which does not leave the patient to fend for themselves, but rather provides a full spectrum of convenience and service.
He adds that large corporations or private equity firms are investing in the lowest margin part of the business by investing in primary care. “So obviously it’s a loss leader for them where they want to get you in to do other things like buy prescriptions which are a high margin.” But that model may not be viable for long, explains Benomo, because the cost of running these practices will eventually consume them. Two or three years down the road, when the euphoria has ended, he says, these business will have a “come to Jesus” moment and realize the margins are low and will need to increase incentives to keep doctors on board.
“It’s still in the early innings,” says Dr. Ney, “and we still need to see what [the large companies’] strategies are and how they execute on that strategy.” The issue for primary care services is that they have mostly been focused on delivering high quality care. The problem is that it does not always translate into a high quality experience (things like follow up, researching, paying bills etc.). “With the entry of all of these disrupters, the traditional providers have to start upping their game and making customer experience as much a priority as high quality care delivery,” she stresses. If they don’t, she adds, they will lose customers as more and more options become available.
In the Bain report, four steps are mapped out for traditional providers to raise the bar for patient experiences. They include:
Map your patients’ journey – Determine what your customer journey looks like and how it could look in the future as a competitive differentiator.
Identify your moments of truth – Providers will need to assess customer satisfaction and pain points.
Build a true feedback system that goes beyond metrics – Customer feedback should be at the center of the organization with a commitment from leadership to improving the patient experience.
Make improvements based on insights – Incorporating patient-centric thinking does not have to be huge, transformative change. Moments of truth such as paying a bill or answering a coverage question, while not part of care, improve the customer experience.
Bonomo agrees and says “eventually customer services is going to win the day.” He adds that traditional players will have to form some affiliation with larger hospitals or institutions to create the fulsome experience. Patients/consumers are beginning to have more choice and if they are to remain with the smaller organizations, those organizations will need to offer as comprehensive a service as possible.
He explains it this way: “Our growth year-over-year as a company is probably about 25% to 30%. Our largest clients that are aggregating practices are about 15% to 18% of that number. If I didn’t do anything this year, and I don’t add any new enterprise clients, our growth would be 18% just because our existing clients are just adding practices.”
By 2030, 30% of primary could be delivered by non-traditional providers, according to the Bain report. While it remains to be seen how those providers tap into markets and customer loyalty, their presence will be felt regardless. For smaller players, a focus on loyalty, affiliations and the customer experience as a whole, may give them a leg up on the competition while the larger players are only just getting started.
