As the Stakes Get Higher, One Consultant Examines the Industry’s Slow Progress to Meet Consumer Expectations
Just this week came news that Amazon made another move into the healthcare space with the acquisition of PillPack, a Boston-based online pharmacy startup. This follows Amazon’s move earlier this year to partner with Berkshire Hathaway and JPMorgan Chase & Co. on a healthcare initiative to improve satisfaction and reduce costs for their companies’ employees. Just recently, the organizations tapped Atul Gawande, M.D., as CEO of the initiative.
For healthcare executive leaders, the stakes are getting higher in an era of growing consumer expectations and new competitors focused on access, convenience and low price. According to a new report by Kaufman Hall, a Skokie, Illinois-based provider of enterprise performance management software and consulting services, senior executive leaders at healthcare provider organizations are aware of the need to adopt consumer-centric approaches, but are struggling to implement these approaches. What’s more, the progress that is being made is not occurring fast enough to keep pace with more advanced industries.
Kaufman Hall’s 2018 State of Consumerism in Healthcare: Activity in Search of Strategy report is based on a survey of425 executives at 200 hospitals and health systems nationwide The survey examined four areas—access to care, consumer experience, pricing and developing consumer insights. Healthcare leaders across the country are placing greater emphasis on consumer-focused strategies, particularly around access to care and consumer experience. Yet, despite these efforts, initiatives generally lack foundational consumer-focused insights, the necessary analytics for success, and have not overcome longstanding problems with the consumer healthcare experience, the survey found.
In the report, one survey respondent said, “The traditional healthcare industry is so far behind in terms of meeting, much less anticipating, consumers’ expectations, that I fear for our ability to adapt quickly enough to remain relevant.”
According to Kaufman Hall’s Healthcare Consumerism Index, which categorizes organizations into four tiers, there are few top performers when it comes to consumerism, despite broad awareness of evolving consumer expectations. Only 8 percent of organizations are rated Tier 1 performers for aggressively pursuing consumer-centric strategies. These organizations outlined a consumer focus roadmap early on that has evolved over the years. Of the survey respondents, only 23 percent are rated Tier 2 performers for piloting consumerism initiatives and identifying needs relative to the organization’s overall strategy.
The majority of organizations, about 70 percent, are in Tiers 3 (52 percent) and Tier 4 (17 percent), indicating that they either have not yet begun, or are in the very early stages of their consumerism efforts. Compared with last year, a significant number of organizations have moved from Tier 4 up to Tier 3, but the percentages in Tiers 1 and 2 are relatively flat, according to the report.
In an interview with Healthcare Informatics’ Associate Editor Heather Landi, one of the report’s authors, Dan Clarin, senior vice president in Kaufman Hall’s strategic and financial plannig practice, discusses the healthcare industry’s progress to become more consumer-centric, the biggest challenges facing healthcare executives in this effort to meet consumer expectations, and the growing urgency for change as huge new competitors jump into the provider space. Below are excerpts of that interview.
What are the biggest takeawaysfrom this survey?
One of the things I would point out is that the level of interest in the topic of consumerism, particularly how healthcare providers can become more consumer-centric, is continuing to increase. Compared to last year, we saw a 60-percent increase in the number of organizations that completed the survey. The level of activity that we are seeing among healthcare providers is growing as healthcare providers have more initiatives underway, especially in the areas of trying to improve the customer experience and increase the accessibility of care; a lot more activity underway than even a year ago. The third point is that this continues to be a difficult area for healthcare providers. In some of the results of the survey, indications are that they’ve not been able to make as much progress as they’ve hoped, and they are behind in certain areas, such as pricing and building capabilities around generating a better understanding of the consumer.
Are healthcare organizations under pressure from the entrance of new competitors into the provider space, using the CVS Health and Aetna merger as an example?
Absolutely, and I think they are feeling pressure from a few angles; certainly, new entrants and companies that they may not have viewed as a potential threat in the past, such as CVS Health and Amazon. The competitive landscape is shifting and they are feeling that and paying attention to that. There’s a lot of interest and attention, among healthcare providers, of the employer community as well, just in terms of how employers are changing benefit design and putting more incentives on consumers to make decisions about their healthcare. And, there’s the consumers themselves and the level of awareness of changing consumer expectations, whicht is certainly increasing among healthcare providers. There’s an expectation and understanding that the way consumers navigate the rest of their daily lives with their smartphones and Internet, that those expectations are being translated to healthcare. And, there’s an understanding that, often, consumers are disappointed by healthcare, because they are required to fax hard copies of documents to their doctor’s offices when haven’t seen a fax machine in their lives in 10 years.
The survey findings indicate that consumer-oriented capabilities at healthcare organizations are on the rise, yet only 8 percent are top performers. What does this indicate about the state of consumerism?
The shift of providers from Tier 4 to Tier 3 is reflective of the increased activity around consumerism. What we’ve seen is that more and more healthcare providers are doing pilot initiatives, at least doing something to try to be more consumer-oriented, whether it’s opening up new physical facilities or trying to fix some of the customer experience pain points around things like billing or wait times. We’re seeing more activity and effort, so that’s the move from Tier 4 to Tier 3.
The stagnation around Tier 2 and Tier 1 is a reflection of the fact that a lot of this activity is not clearly translating to results yet, for a few reasons. One is they haven’t been at it all that long, at this point. Many organizations are just getting started with these initiatives. What’s more, many healthcare providers are finding, through this effort to be more consumer-oriented, that they are having to measure success differently than they have in the past. A lot of healthcare providers’ measurements in the past have been very operational-focused and around the clinical operations and the clinical quality. Measuring how they’re doing with consumers, how they are generating loyalty and repeat visits, and share of spend; these ways of measuring how they are doing with consumers, these are not things that healthcare providers have a lot of experience measuring.
Healthcare providers have been slow to adapt because they’ve never had to be consumer focused in the past. This shift requires a new mindset and new way of thinking that go beyond traditional approaches. This is really hard work and it’s hard to see the payoff right away. Even if, as a management team, you believe this is the right way to go, convincing all the different stakeholders—the physicians, the operational leaders, board members—convincing them this is the right thing to do, and then developing a plan and executing that plan, it’s hard and it takes time. The traditional way of doing business for a long time has been successful, especially for the large health systems that have been successful and have grown over the past 20 years. For them to try to fundamentally change the way they have been doing business, even if they are seeing some of these risks and recognizing some of them as being very real, it’s hard to fix [that way of doing business] when it may not seem fully broken at this point.
With regard to enhancing access to care, are healthcare providers moving forward with more innovative approaches in this area?
We see activity increasing, but organizations continue to be focused on traditional, “brick-and-mortar” approaches. We’re seeing more traditional thinking about fixing the traditional way of doing things, or fixing what’s broken, rather than coming up with new ways to operate. For example, if you have a waiting room and you understand what your average wait time is in that waiting room, the initiative might be around reducing that wait time. However, more innovative approaches to access are less common, where healthcare providers are focusing instead on ‘Why do we have a waiting room in the first place? Is there a way that we can totally eliminate waiting?’
Howe can healthcare executive leaders move forward more effectively on consumer-oriented strategies?
It’s a huge challenge for healthcare providers. They are bombarded on a daily basis with everybody’s recommendations and sales pitches on the latest mobile app, the latest digital technology that’s going to solve their problems; being able to prioritize that is a huge challenge. Effective consumerism strategies are built on a foundation of consumer insights and analytics, yet most organizations continue to struggle in this area. This is around building the capabilities and the resources internally at a healthcare provider system to develop a better understanding of what the consumer wants and needs, and then use that to inform your prioritization.
My recommendation to healthcare organizations is that if you want to know how to prioritize, go ask consumers and listen to consumers as to what they think is important and what are their biggest pain points, then use that to prioritize the initiatives and the digital tools you invest in. What we saw in the survey results is that most providers have not built those capabilities internally around better understanding the consumer. You need that understanding of the consumer first. Otherwise, there is a risk and a temptation is to see all the options that are in front of you, whether it be digital tools, a new urgent care center, a video visit solution, and then start to pick and choose among those options because you feel you must do something to be more consumer-oriented, rather than taking a step back and saying, ‘What does the consumer actually want?’ and using that to prioritize your strategy.
The survey also indicates that only 5 percent of healthcare organizations are aggressively pursuing pricing strategies and price transparency. Is this area an overlooked opportunity?
Before I came to Kaufman Hall, I was with Walgreens, so clearly, in the retail space, pricing of products is a very serious and complex discipline. Millions and millions of dollars are made and lost on pricing decisions. Coming into healthcare, I noticed that there has not been much effort or resources focused around two big questions around pricing decisions: What should our prices be? And, how do we communicate those prices to consumers? There are things that are commonplace in other industries, such as understanding the elasticity of demand for certain services and how much does demand or preference change based on changes in pricing. If you look at the survey results, only 11 percent of respondents said they have done that kind of work before. Pricing is an area in particular, especially with the rise in high deductible health plans and more consumer decision-making, that the industry is going to need to do some catching up.
Overall, the survey shows an increase in activity designed to improve consumerism performance, however, the rate of progress is still not fast enough to catch up with more advanced industries, and when I say more advanced, I mean industries that, for a long time, have been more consumer-oriented. The name of the report, “Activity in Search of Strategy,” reflects that; we’re seeing this increased level of activity, but we’re not seeing the level of consumer-informed prioritization that we would like to see going forward.
