The Healthcare Platform Revolution

The Platform Economy is disrupting every industry. This notion of digital matchmaking—creating value by bringing buyers and sellers together in an entirely new way—is changing how we sell goods and services in both B2C and B2B markets, and what customers expect from the buying experience. But more than that, it’s also impacting the entire value chain of how goods and services are sold and manufactured. The end seller is no longer the only one that has a relationship with buyers. Thanks to the Platform Revolution, brands, distributors, manufacturers and service providers can all build connections with the end customer.

PLATFORMS, unlike the linear pipeline, create an ecosystem comprised of the platform operator, a network of sellers, and a system of third-party support services. Rather than forcing margin down the value chain and asking the customer to pay in full, platform participants all benefit from the relationship. This customer-centric model is bringing transparency to the commerce transaction. Platforms are shifting power back to the buyer, and traditional pipeline merchants are paying the price. By expanding its network to include third-party sellers, the platform operator is able to build greater value beyond its own brand and enhance its relationship with customers by offering the convenience, broad product selection, pricing transparency and overall value buyers expect.

WITH THE PLATFORM MODEL, EVERYONE WINS

THE CUSTOMER gains access to a wider selection of products, better pricing and one-stop shopping— conveniences that have become baseline expectation for both B2B and B2C eCommerce buyers.

THE SELLERS can reach new customers through a risk-free sales channel where the technology, infrastructure and marketing costs are all borne by the operator.

THE OPERATOR grows customer loyalty through “endless aisle” supply, the ability to offer more competitive prices, and by collecting customer demand data to further refine their offerings. Operators can also add new products with no logistics or inventory risk by simply bringing on new sellers—an approach which can completely transform their business.

And in Healthcare, THE PROVIDER improves their communication, coordination and control over the patient experience and the extended care team. These new capabilities integrate care plans and alert all care providers of changes to patient condition and compliance with orders.

THE PLATFORM MODEL CAN TAKE SEVERAL FORMS

ON-DEMAND SERVICES, where buyers can access the services they need when they need them. Uber, Lyft, DoorDash, and Instacart are great examples.

SHARING or PEER-TO-PEER PLATFORMS, in which individuals offer their own goods or services to other individuals. These range from Airbnb and Homeaway, in which people share their homes, to Car Next Door and Toolsity, for cars and power tools.

MARKETPLACES, where an eCommerce operator offers third-party products and/or services through its platform. Amazon, Alibaba, eBay and Walmart are the big players here, along with many, many others.

FIRST MOVER ADVANTAGE

First movers of the marketplace model have reinvented the way we do business, how we think about customer engagement and customer relationships, how we sell, and how we market. These Platform Pioneers have re-invented commerce as we know it. And, here’s the proof:

• In 2017, over 50% of global online transactions were made on a marketplace, with a trajectory that is expected to exceed 65% by 2022.

• Marketplace sales as a percentage of overall digital commerce sales have doubled in less than 10 years.

• On Amazon alone, third-party sellers outsold Amazon’s first party business by $43 billion in 2018.

A massive opportunity exists to revolutionize the healthcare industry by leveraging the power of the Marketplace platform model. There is still a first mover advantage to seize this billion-dollar market opportunity, backed by a team of industry veterans and technical experts.

HEALTHCARE INDUSTRY BACKGROUND

Over the last five years the healthcare industry has undergone a radical shift that is putting purchasing power in the hands of consumers, directed by physicians. The federal governments Center for Medicare and Medicaid Services (CMS) has motivated the creation of physician led Accountable Care Organizations (ACOs) based on offering Medicare shared savings program (MSSP) incentives for practices with lower average healthcare costs per patient. CMS has also implemented a new physician reimbursement regime called MACRA (Medicare Access and CHIP Reauthorization Act of 2015) that is pushing physician practices into ACOs. Approximately 10% of patients (35 million) are now covered under ACO physician groups (>700 nationwide) and growing. The bottom line is that physicians are more focused on ensuring high quality patient outcomes by carefully managing patient care and costs.

The current patient experience is disjointed and disorienting when it comes to physician orders for treatment, including drugs, medical equipment and supplies. Everyone has stories of struggling to help elderly parents understand and manage their chronic care issues at home (i.e. diabetes, mobility, incontinence, wound care, etc.) Until now the average patient experience has been self-guided, as they are jostled from primary care to specialist physicians to hospitals/outpatient episodes to post acute care to therapy and home care, with multiple contradictory care instructions. Based on physician orders and educational handouts/brochures, patients are expected to acquire and use drugs and medical supplies for their ongoing home care. Most people have to turn to relatives, therapists, home care aids or the internet for education and decisions about the medical equipment and supplies they purchase.

THE MEDICAL SUPPLY ECOSYSTEM

The direct to consumer medical purchases include Drugs, Durable Medical Equipment (DME) and Disposable Medical Supplies (DMS). The direct to consumer pharmacy market is covered by PBMs (Pharmacy Benefit Managers) and Drug Store Chains (e.g. CVS, Walgreens, Walmart), with Amazon quickly making inroads. The DME and DMS markets are much more local and distributed, with a few national players who are focused on specific chronic diseases. Most DME/DMS purchases are driven by a limited set of chronic conditions, including diabetes, incontinence, mobility, stroke, wound care, respiratory/sleep apnea, renal/ostomy supplies and home convalescent/palliative care.

In 2017 the $453 billion (~$50 billion in DMS) US healthcare supplies marketplace grew by 16%. Only $16 billion of this was internet direct sales, led by Amazon (35%), CVS, Walgreens and a small number of other internet marketplaces, such as VitalityMedical.com and BettyMills.com. Amazon carries 50,000+ consumer medical supply SKUs in a dozen product categories, with minimal customer support.

Similarly in 2019, the $50 billion US durable medical equipment marketplace grew by 6%. Common DME includes wheelchairs, blood sugar monitors, sleep apnea devices, orthotics and nebulizers, as well as home convalescence equipment such as hospital beds, infusion pumps, remote monitors, bedside commodes and oxygen. The market includes local specialist companies (i.e. sleep apnea), local DME rentals and national ecommerce suppliers.

ACO physicians have an additional responsibility of managing patient chronic conditions. They employ Care Management staff to educate and coordinate care with their chronic care patients to ensure that they are following their care protocols (recovering and staying healthy). This costs approximately $60 per member annually or $3 million for a 50,000 patient ACO.

THE CHALLENGE

Unlike an integrated hospital work flow where nurses implement physician orders, educate patients, monitor progress and communicate care outcomes to physicians for quick response, the outpatient work flow is broken – missing the critical education, direction, coordination and feedback to ensure that patients are following orders for the correct purchase and use of medical equipment and supplies.

The current consumer medical supply market is confusing for physicians, patients, caregivers and merchants. There is a huge opportunity to improve the patient experience, physician management, quality outcomes and reduce costs by providing a more comprehensive and coordinated patient care marketplace on the internet.

CURRENT COMPETITIVE SITUATION

An effective patient centered healthcare platform will need to integrate the workflow across physicians, outpatient providers, pharmacy, medical supplies, retail services, distributors and payers/employers. Over the last five years several initiatives have brought industry leaders together to address innovations for portions of the platform solution.

Amazon is the leader in efforts to reduce the cost of outpatient clinical delivery with the Haven Healthcare partnership (Amazon, Berkshire-Hathaway, Citi Group), clinical partnerships with hospitals (Beth-Israel Deaconess), clinical innovators (Pittsburgh Health Data Alliance), pharmacy (PillPack), healthcare systems (Cerner) and primary care (Amazon Care). These initiatives have yet to coalesce into an integrated platform to streamline patient care plans, medical supplies and self-care.

Walmart also has a formidable distribution network for drugs/medical supplies with an online platform and an advanced approach to employee care management and cost controls. But, Walmart still lacks the physician and care management components to support the extended care community that improves the patient experience and outcomes.

As in consumer retail, there is room for multiple online marketplaces. Other major healthcare B2B players, such as Cardinal, McKesson, HealthTrust and Premier could extend their current capabilities into a B2C platform direct to patients. But these competitors appear deeply invested in their B2B model growth strategies focusing on hospitals and ambulatory sites.

In fact, the quick advent of the JET retail platform (acquired by Walmart) demonstrates that developing the online B2C product platform and distribution system has become a well understood business model. The addition of healthcare regulation, privacy, security and payment issues will make the development of a health market platform more complex.

The challenge for a health market platform is integrating the clinical ordering workflow to guide the care management, supply choice and patient experience. The care-management vendors focus on the physician-centric hospital or office-based workflow, not a consistent and comprehensible patient-centric care plan that integrates multiple provider orders and protocols into a clear guide to simplify the patient experience.

THE SOLUTION

To effectively improve the patient experience, healthcare outcomes and lower costs, a solution must integrate the physician ordering, patient education, DME/DMS purchasing, care management and patient monitoring/reporting. The ACOs already provide the ordering and some care management, but they lack the integrated supply purchasing/delivery and monitoring. An integrated supply chain solution could help the ACOs reduce the cost of Care Management and increase medical shared savings from improved patient outcomes. Commercial healthcare insurers would embrace this solution as it would increase their control over costs and outcomes.

This new integrated approach would simplify the patient experience by providing a platform that would use physician orders and protocols to drive care coordination and simplify patient experience, including:

· Physician Orders/protocol driven Work Flow

· Patient Access- communication and coordination

· Patient Education – information, medical education, and care needs

· Care management/ coordination of care

· Medical supply purchasing and logistics

· Integrated payment/reimbursement

· Communication/reporting across patient’s extended care team

During a patient visit a physician or assistant would explain the patient orders and show how to access them on a portal that helps patients manage their work flow from ordering of drugs, supplies and DME to the ongoing reordering and care monitoring. Care managers could track patient progress, answer patient inquiries and document patient interactions. An integrated ecommerce marketplace platform would provide an easy selection, purchase, education and delivery of drugs/supplies. Integrated billing could automatically make Medicare or Commercial insurance claims/reimbursements and only charge patients thier co-pays. Patients, physicians, care managers and payers (insurers) would have real time visibility into the patient care plan progress and expenses.

This solution requires the integration of multiple currently available applications, including:

· Electronic physician ordering and care plan entry (from Electronic Medical Record systems)

· CMS (Customer/Care Management) to contact, report and track patient needs

· e-Commerce Marketplace to manage patient product selection, ordering and fulfillment

· Multi-vendor Marketplace capability (to handle contracted services and third parties)

· Knowledge management to provide product education, installation and use content

· Healthcare Revenue Cycle to manage reimbursement

Since ACOs do not want to supply these services, this solution could be provided as an integrated subscription service. The organization could provide care managers or the solution could provide the care management software to be used by care managers at ACOs or health plans. The key is to capture physician orders and the supply work flow so that it is easier and less expensive for patients to use the supply marketplace to purchase medical supplies and coordinate/report progress with their caregivers.