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March 30, 2016
Healthcare disrupted: Next generation business models and strategies
By: Anne O'Riordan

As the life sciences industry shifts from a volume-oriented to a value-oriented approach, four new business models are coming into focus.

Over the past five years we’ve seen tremendous challenges to the business models long tested throughout the business world, and the healthcare industry hasn’t been immune. Life sciences companies—pharmaceutical, biopharmaceutical, medical device and medical diagnostic companies, and health services providers—have been forced to re-examine their value proposition in the market and monitor the shifting needs of their customers.

Moving from Inputs to Outputs
Accenture is seeing a move from an input-based approach – number of patients seen, or drugs and devices sold -- to an output-based approach that is based on attaining patients’ best possible health outcomes. When reimbursement or payment is based on inputs, there is a built-in adverse incentive to do as little as possible and receive the same compensation. But when payment is based on outputs, the incentive is to optimize productivity and maximize system benefits.

In Europe we’re seeing a move toward value-based reimbursement. Health authorities and providers are balancing the needs of the system as a whole with the treatment provided to individuals. The idea is to assess the healthcare industry on its ability to provide the greatest possible benefit to a population. Variants of this approach are moving into place in the US as part of the Affordable Care Act.

A Pivot to the Patient
The patient’s power as a consumer is also evolving. The priorities of an individual patient with a specific disease or health condition can drive a real determination of value in therapies, interventions, and services. In part by becoming more digitally-aware, the patient is taking on more direct responsibility for outcomes, viewing them from a new vantage point as beneficiary and active customer. Healthcare is pivoting to the patient.

Emphasize Outcomes and Value
To thrive in this new environment, healthcare leaders will have to give thought and consideration to their business strategies and models. They will have to address several core areas of their business. They’ll need to:

  • Clarify their company’s market positioning regarding patient outcomes and value to the healthcare system;

  • Define the differentiating capabilities necessary to deliver on those goals;

  • Create a high-performance enterprise of partners, collaborators, and talent.

The very nature of the value they are looking to provide is also changing, influenced by the pressures of healthcare costs, the increasing role of the patient as a consumer, omni-accessible and persistent digital channels for communication, and the availability of real-world patient data for both research and commercialization.

Emerging Models 
As part of this catalytic change in healthcare, new business models, which incorporate fundamentally different economics, are solidifying. They are setting precedents and standards for others to follow. Four business models – centered on patient outcomes and value – are coming into focus:  

  • Lean Innovators: companies that combine generics-efficient manufacturing and supply chain best practices with M&A to facilitate rapid growth and challenge existing cost structures, productivity, and operating models.

  • Value Innovators: companies that improve patient outcomes and system efficiency through the integration of drugs, devices, and digital services with clinical processes.

  • Around-the-Patient Innovators: companies that put patient value and outcomes at the center of their strategy, leveraging analytics to create novel specialty therapeutics and complimentary services.

  • New Health Digitals: non-healthcare companies that change the how and where of patient care through cross-industry collaboration, rooted in digital innovation.

For individual companies, these models represent potential strategies and direction they may take. How they implement any of them will depend on their journey – where they’ve come from, and what place they want to hold in the healthcare system of the future.

These models can be arrayed on two dimensions: the value they deliver and who pays for that value.

In our next post, we’ll describe the first of these new models—Lean Innovators.


Co-author:

Jeff Elton
Managing Director – Strategy and Life Sciences
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