Written by Giovanna Dughera, Shobha Joshi, Thy-Diep Ta, Lindsay Van Landeghem

As stated in the UN Sustainable Development goals, “ensuring healthy lives and promoting well-being for all at all ages is important to building prosperous societies”. However, the healthcare industry is highly inefficient in terms of processes, direct and indirect costs and equality of access. To achieve the goal of improving its competitiveness and sustainability as well as access for society at large, the health industry should aim at solving the conflicts that currently impact it – climate change affects human health, but hospitals are among the main energy consumers across industries; previously incurable conditions find treatment, but pollution harms us continuously. The healthcare should strive for a coherent set of sustainability goals – lighter environmental footprint, a more holistic system of disease prevention, tailored and cost-effective treatments. What type of initiatives should be put in place to solve this riddle?

At a purely operational level cost saving and optimizing activities can drastically reduce not only the spending potentially resulting in more affordable care for patients but also the environmental footprint of the industry. Digitalization can also play a role well beyond the optimization of the IT infrastructure: in particular, great potential exists for promoting prevention and early intervention initiatives. Using new technologies to track patients’ health records, habits, risks and proactively promoting behavioral change can substantially reduce the incidence of diseases, reducing the saturation of hospitals and clinics and avoiding treatment costs, allowing to dispense resources where most needed. A virtuous cycle can promote improved health levels in the human population and higher living expectancy, in turn increasing the labour supply and fostering overall economic growth. It is easy to see that achieving social and environmental sustainability goals can easily spill over in multiple areas well beyond the healthcare industry arena.

What are the challenges in healthcare today?

The healthcare industry is currently riddled with inefficiencies and high prices, which is particularly problematic in a highly inelastic market in which patients are willing to suffer poor, expensive service to gain access to life-saving treatments for themselves and for their families. In 2015 in the United States, nearly one in four non-elderly people had past-due medical debt, and medical expenses are a top driver of personal bankruptcies.^[3] Indeed, the United States has the most expensive healthcare system in the world, at $9,451 per capita relative to the OECD average of $3,814. Despite this high expenditure, though, the US lags behind other nations in areas such as life expectancy and health insurance coverage.^[4] Additionally, health care needs will increase as the global population grows, life expectancy increases and chronic health conditions exert pressure on existing healthcare services.^[5]

Despite these issues, true reform is challenging as it requires engaging a gamut of relevant stakeholders, including the government, industry players and end-users. Additionally, in order to partake in the digital healthcare revolution patients may need to make major adjustments from accessing remote instead of in-person health care services to accepting the utilization of big data and artificial intelligence to in the development of treatment plans. Such innovations could increase the accuracy of diagnoses and could reduce the costs associated with hospital intake and with repeated, diverse and expensive medical tests. These developments could thus dramatically disrupt the existing industry, reducing the high costs associated with insuring and providing healthcare to patients. However, this trend could also potentially make existing services obsolete causing backlash from existing industry winners. Regardless, companies that are positioned to understand what patients want and need, to deliver services that fundamentally improve healthcare delivery and to continuously add value to patients are positioned to catalyze the healthcare industry’s digital future.^[6]

Opportunities through business model innovation: technology and behavioral nudging

Health care is consuming an escalating share of income in developed and developing nations (estimated at $7 trillion a year globally). To address the rising cost, healthcare companies must find effective ways to get people to adopt healthier behaviors. A new person-centric approach to behavior change is at the heart of healthcare. The old model of healthcare, a reactive system that focuses on treating acute illnesses is evolving and becoming more centered on prevention and ongoing management of chronic conditions. In an analysis conducted for US healthcare costs (which are now nearing $3 trillion annually), 31 percent of these costs could be directly attributed to behaviorally influenced chronic conditions.

The amount of digital information now available to us is essentially unimaginable and simultaneously the healthcare industry is being transformed by digitization of healthcare systems. This is an opportunity to revolutionize healthcare using big data. There are two sets of data which health care organizations are already using:

Retrospective data: Basic event-based information collected from medical records
Real-time clinical data: The information captured and presented at the point of care (imaging, blood pressure, heart rate, etc).

New technologies have succeeded in linking these two sets of data together so that medical professionals can now identify trends that will impact the future of healthcare (predictive analytics) and target behavior change.

The new person-focused business model for behavior change has four major components:

Awareness – Targeting and customizing information can help improve effectiveness, engaging individuals more effectively by taking advantage of new insights from behavioral psychology and behavioral economics is in the heart of this model.

Adopting approaches from the retail sector healthcare companies can mine their member databases to better target specific individuals with relevant content based on risk factors and psychographic profiles. Behavior based segmentation should be used to deepen insights into specific groups of customers. Current approaches to patient segmentation and predictive modeling tend to center on clinical conditions.

However, behavioral targeting is more likely to be successful if they consider additional factors, such as a person’s behavioral profile or motivation to change. These insights enable more focused targeting of the groups of people for whom impact is most likely to be achieved. Text messaging is being increasingly to send educational materials, medication reminders and tips on disease management. Some companies are also beginning to think about extending their outreach efforts through the creative use of communication channels. For example, teenagers may be less likely to pay attention to messages on smoking or obesity posted on healthcare providers web-site than to an ex-smoker’s testimonial on YouTube or a weight-loss group on a social networking site such as Facebook. To implement these ideas healthcare organizations, need to radically enhance their skills in behavioral segmentation, communication, customer relationship management and health informatics.

Insights – Healthcare companies can create an integrated platform that provides “one-stop shopping” for health information, personalized dashboards with individual’s health performance data and care records. Using this platform, members can access their health records, communicate with practitioners, schedule appointments, order prescription refills, build personalized wellness plans or book themselves into health classes. This can also be used by individual to help them set personal health goals and attain these goals through a broad range of incentives and rewards for healthy behaviors.

Action and Rewards – Healthcare companies need to focus towards enhanced communication, care management support for patients and remote monitoring. Mobile apps, for example, can facilitate tracking and monitoring. Wireless devices can transmit adherence information directly from pill boxes or scales. Ultimately, these remote and self-care-oriented technologies may help create a truly interactive healthcare ecosystem for patients. Some healthcare companies are using sophisticated methods to constantly monitor the health data coming in from the wearable devices, analyzing it in the context of individual’s medical history and linking it in with environmental data. Individuals and their doctors are alerted when any potential health issues arise. The use of contracts and commitment devices is another approach to motivate individuals to pledge to a certain behavior or goal.

Rewards and incentives are key to motivate and sustain these behavior changes, members can be given points for behaviors ranging from undergoing diabetes screening to healthy purchases in supermarkets and in turn receive a mixture of short and long term rewards, including cinema tickets, discounts on electronics purchases, frequent-flier miles and insurance premium rebates. For example, to encourage physical activity among diabetes patients in a region in England, Humana supplied free pedometers and daily targets for the number of steps to take. Humana also provided a way for patients to check their step numbers online and share this information with their health coaches. Because friends and family members could also see the patient’s progress online, the program took on a competitive social-networking element which encouraged participants to continue. The initial pilot included 400 patients, and the program has now been extended to 20,000 people making it a big success.

We believe that the new person-focused paradigm described here is likely to deliver stronger results than traditional behavior change programs have produced. Based on the studies published to date, it is estimated that programs designed under the new paradigm could deliver a 10 to 15 percent reduction in healthcare costs in addition to better quality of life for individuals.

Risks and critical success factors

One of the most crucial success factors for the suggested business model innovation to work is its approach towards managing interface risk between the public health system, the health care system and the non-health care sector. To achieve sustainable long term benefits for society (i.e., low cost and high performance both in prevention and treatment), these three layers need to work more closely together. This is even more true for companies operating in countries where the government subsidizes health care (e.g., Germany).

However, up until now, incentive alignments have not been very successful. There is still need for regulators, payors, providers to jointly define their future mode of operations and develop a more integrative – and therefore more sustainable – ecosystem for health care.^[7] As history has shown, the one who benefits most is not always the one who will benefit from innovation. So the question in the end is: Will it be the end consumer, the employer, or will the payor be a governmental organization (e.g., state insurance)? How can value be allocated and captured in this integrated system of prevention and treatment?

The solution towards the interface risk problem will also need to address the question of who will pay for investments into innovation (and subsequently introduction and adoption) of it in the future. Only if the players can find an attractive (and flexible) revenue models (e.g., bundling of services) can this new system enjoy widespread update.

Another major risk factor is individual data privacy and data security. Fear of data misuse by companies to the detriment of the individual has led to public opposition towards liberalizing / adopting of existing regulation on use of medical data in IT in countries such as US and UK. As a result, policy makers have been reluctant to address necessary reform and are still struggling to find the right balance between risk and rewards from using big data in analytics.^[8] Protection against cyber risk has been a high priority for operators in the industry, leading to double digit growths for insurance companies.^[9]

Operational risks to successfully scale this type of business model innovation can be inequality of access to technology due to broad band limitations and lack of interoperable patient records.^[10] Governmental support in driving or facilitating the development of a nation-wide standard for data transfer between different operators will be crucial to spread risks and incentivize faster development.

Finally, as with every systematic change, in the end the system will succeed or fall with the adoption of its users (doctors, patients, health care staff). Reluctance to technology will be a major drawback of widespread implementation of this new business model innovation.

Use cases for successful companies

Increased digitization enables businesses and consumers to make smarter choices, decreases time spent on routine tasks, and revolutionizes the way in which value is created for consumers. Innovative companies have sought to leverage these benefits to develop more effective solutions for the healthcare industry. Indeed, a recent McKinsey study shows that more that 75% of all patients expect to use digital healthcare services in the future, and that digital service use is expected to increase across all age groups.^[11] Patients hope that digital health services will facilitate more efficiency, greater access to information, channel integration, and the availability of a real person in the case that the digital interface does not provide sufficient support. Digital businesses are thus developing in the healthcare industry to respond to the needs and demands of consumers, especially in an inefficient, expensive environment. A few examples of companies revolutionizing the industry are as follows:

UK-based digital health startup uMotif developed a mobile health app with sensors that allow patients to record their symptoms, including those from sleep and mood patterns to clinically relevant symptoms such as dizziness or breathlessness. Patients can send such data to health care providers, a mechanism that will allow doctors to develop more accurate treatment plans. This software has been deployed in dozens of hospitals, as the design thinking employed improves patient quality of life, treatment outcomes, and the overall healthcare experience.^[12]
US-based company Geisinger Health System is a pioneer in the use of medical records and other data to increase healthcare efficiency. This services allows doctors to avoid conducting unnecessary procedures and to develop preventative diagnostic plans. They are further incentivized to improve patient healthcare outcomes as they also insure many of the patients utilizing their services. The company has a scalable model that has dramatically reduced emergency room visits and readmission rates, attesting to the facilitation of better, cheaper health care for patients, and thus the reduced strain on hospitals.^[13]
San Francisco startup Doctor on Demand is providing on-demand remote healthcare services, which can preempt hospital and health clinic visits. Patients can consult with physicians via phone or video from kiosks located, for example, in their workplaces. Doctors can virtually take vital signs, including temperature, pulse, and blood pressure, and they can send a prescription to a local pharmacy.^[14]

These preemptive, data-driven, and on-demand services are revolutionizing the healthcare industry, which is particularly powerful in a time in which the healthcare industry is characterized by its inefficient, expensive nature, a phenomenon which will be exacerbated as life expectancies extend.

Conclusion and Outlook

Many innovative models already exist and are applied successfully in the healthcare industry, providing benefits to companies and patients alike. As highlighted above, 75% of patients across all age groups are expected to transition to digital healthcare services in the future, and they represent a powerful opportunity for the industry to bring forward innovations that can not only improve their operational efficiency but also benefit the sustainability of the system and overall affordability and quality of patient care, as well as drastically reduce the incidence of illnesses such as diabetes and cancer. Overall, the whole ecosystem has plenty to gain from the healthcare industry striving from goals that also benefit society and environment at large.

Virtual medical assistance, social platforms, tracking mechanisms – all represent increasingly applicable and viable solutions for the future healthcare system. However, their application will require both industry-side commitment in new technology investment and a change in patient perception. Some challenges are already evident in this early stage, such as the need for more transparency in data management and protection. The promotion of behavioral change, a likely industry driver in coming years, also will require an extensive degree of patient education to persuade users of the short and long-term benefits on health, treatment and longevity.

With the healthcare spend projected to reach $8.7 trillion by 2020, diabetes incidence increasing dramatically worldwide and population aging^[15], business model innovation focused towards behavior nudging will be key in ensuring the sustainability of healthcare and all stakeholders, including regulators, should play an increasing role in promoting this transition.