Big Ideas: Aping Amazon

Philip Betbeze, December 1, 2016

In a world where the consumer is king and transparency is an expectation, health systems are taking their cues from the online retailer in strategically remaking their service offerings with customer service and value in mind.

This article first appeared in the December 2016 issue of HealthLeaders magazine.

Howard P. Kern
Howard P. Kern

The consumer's responsibility to pay directly for a larger portion of his or her healthcare through increased deductibles and coinsurance charges is an undisputed fact.

Many words have been written about this reality, but a less obvious consequence of the unrelenting trend is a realization of the patients' increasing power to change how healthcare is administered, albeit in ways that are still unclear.

What does seem clear is that organizations that don't prepare for a world in which acute hospital care is increasingly commoditized and deemphasized will ultimately lose control of their destiny. Innovative leaders know that their organization's future success will be built not only on great reputation and better-than-average outcomes but also on customer service, price competitiveness, and an appeal to consumer loyalty through service and efficiency.

For many organizations, necessary strategic adjustments will need to be massive if the trend toward more out-of-pocket consumer responsibility for costs continues to accelerate at its current rate. A recent Deloitte report shows that even now, out-of-pocket healthcare spending outpaces aggregate consumer spending on new motor vehicles, clothing and footwear, and telecom and Internet services, for example. Consumers still spend more on groceries, but the gap is closing. A 2015 report from U.S. News & World Report's proprietary Health Care Index shows that deductibles, the amount of cash beneficiaries must spend before their health insurance kicks in, have the highest growth rate of any of the components that make up the index. Finally, the Kaiser Family Foundation shows that the percentage of covered workers enrolled in a plan with an annual deductible of $1,000 or more has risen to 46% compared to 10% in 2006.

What are the implications of that growth in out-of-pocket consumer costs on hospital and health system strategies?

At least one effect may rest in the irony that their ability to grow revenues and margins becomes impaired as consumers do more shopping, and express through their wallets their demand for better value in their spending. As other consumer-oriented industries have demonstrated, in healthcare the stickiness of your ecosystem should develop into the new currency for success.

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.

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