It is that time of the year to take an honest look at operating performance. The busy season is over, and budget season is just a few months away for many. And as we have written in our blog recently, it seems the competitive and strategic landscape for on-demand medicine is changing.
We are entering a highly competitive and disruptive phase of the healthcare ecosystem. Over the next 10 years this new phase will be characterized by a battle for the “front door” of healthcare services between traditional health systems and new entrants. That battle will be waged over creating a new healthcare “experience” driven by seamless and frictionless technology, high-performing and highly engaged teams, and a radically changed payer environment.
Every year after our annual on-demand strategy symposium, we reflect on what transpired in the previous year and what appear to be the dominant trends in the year to come. This year’s 11th Annual Strategy Symposium was perhaps the most compelling evidence that we are entering some dynamic, if not transformative times in the on-demand world of healthcare.
Someone once asked me why I write so often about primary care when Merchant Medicine’s focus as a consulting firm is urgent care strategy, development and operations. It is a very legitimate question, and one that naturally leads to what I believe is a roadmap of how primary care and urgent care will evolve over the next few years.
We have many health system clients who ask: “If we were to start from scratch, what should our urgent care model look like?”
The answer is to look not at the current state of urgent care, no matter how slick, consumer-friendly or retail-oriented it may appear. Unfortunately, many health systems are caught up in the look and feel of urgent care, many of them hiring executives from places like Neiman Marcus or Amazon. There is also the “rear guard” focus on justifying purchased medical group assets, referring patients downstream to places that may not necessarily be expeditious or economical, and spending large sums on outdated, system-level patient experience programs.
Many articles have been written about the CVS/Aetna merger, both when it was first announced and more recently when the merger was approved. From a Merchant Medicine perspective, the main question for the on-demand industry boils down to whether CVS will transition from the MinuteClinic model to a full-service primary and urgent care model. Based on their recent investor presentation highlighting the benefits of the merger, we believe this transition is a real possibility.
During the last six months I have been struck by how suddenly the economics, culture and technology underpinnings of healthcare are changing. These changes seem poised to disrupt the on-demand medicine landscape in a major way.
Our current fee-for-service healthcare system is similar to global warming: there are still many people who deny there’s a problem. And those who recognize it as unsustainable are overwhelmed with how much needs to change (and how much they need to give up) to embrace a more sustainable reality.
The urgent care industry has grown significantly over the last 10 years, with lots of smart money flowing into the sector from private equity, publicly traded health insurance companies and large health systems. That growth is a tribute to a lot of hard work and entrepreneurial spirit on the part of many of the industry’s pioneers. But despite all of this growth, investment and participation from large companies, the industry is still a far cry from the level of sophistication that it should be, at least compared to other industries.
Every year we gather input from multiple sources for our mid-year review of the on-demand medicine space: retail clinic openings and closings; urgent care openings and closings; indications from payers as our clients work on contract renewals; reports and speeches from sources we trust on urgent care deal activity; and the many articles that cover high-level topics such as the move from fee-for-service medicine to value-based care.
No business is immune to ups and downs. And countless books have been written on companies that not only survive challenging times, but come through those times stronger, more nimble and ahead of their competitors.
We predict the urgent care industry will face some fairly strong headwinds over the next five years. And by the time those headwinds die down, some players will end up on top and others will fall to the bottom, or worse, no longer exist.
With the last decade seeing dramatic growth in EMR adoption, it makes sense not only to pause and look what happened overall, but where urgent care ended up given all of this technology investment. Thanks to the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009, the government has essentially pushed the healthcare industry into electronic patient workflow and recordkeeping...
One of the most common issues facing any hospital system operator of urgent care centers is how much of the hospital-oriented compliance, regulatory, and accreditation burdens should apply to their urgent care centers. It is certainly one area that private operators have streamlined, thus making them far more nimble competitors. In many cases, hospital urgent care operators have limited choices because of how they are credentialed with Medicare. But what about centers under different tax IDs, part of joint ventures, or part of affiliated medical groups.
Each year we typically use the discussion topics from our strategy symposium as a jumping-off point for this forecast issue. It turns out this approach tends to be fairly reliable and predictive in terms of the trends to expect, not only in the coming year but for two or three years.
But this year seems to be packed with significant subjects to highlight. Among them are the CVS-Aetna merger; Optum’s acquisition of Davita’s medical group; the Amazon-JPMorgan-Berkshire Hathaway announcement; and a few other topics that seemed to be hot discussion points throughout the meeting.
If you are reading this article you are probably an active participant in the on-demand healthcare industry. You probably also think 2017 turned out to be a ho-hum year: no blockbuster urgent care acquisitions like MedExpress; no major hiccups in urgent care patient volume or deal flow; just another year of moderate growth and stability in an industry that seems to be meeting the day-to-day healthcare needs of consumers.
There are a wide range of opinions on whether a hospital-owned urgent care should be profitable. And over the past year it seems we are asked this question with greater and greater frequency. To be honest, the answer to the question is becoming a little less fuzzy. In fact, within five years there will be no debate. The answer will be a definitive “yes.”
Late last month the Wall Street Journal broke the news that CVS and Aetna were in merger talks. The quick take away by many who were quoted on the subject was that this deal is all about Amazon. In other words, CVS was expanding its reach into traditional healthcare not only because more people are ordering health and beauty products online rather than making a trip to the local drug store, but also because Amazon is getting licensed in several states to begin selling prescription drugs.
While researching this article, I came across the following quotes: one from a doctor and one from a patient:
From the doctor: “The inability to control the way we practice medicine and deliver care to patients is the reason that physicians are leaving medicine in record numbers. I can tell you that on an ordinary working day, if I didn’t have a single patient to see, I would still be busy for eight or nine hours doing nothing but paperwork and phone calls that are directly related to managed-care issues.”
From the patient: “I doubt that a single doctor I have seen over the last 10 years would know me if he or she fell over me on the street, including my current ‘primary care physician’ whom I have probably seen six or seven times over the past two years. The feeling I get is that I am just another widget coming down the medical care assembly line.”
It seems like every year for the past five years, those of us watching the telemedicine industry say it’s about to take off. Indeed, we continue to see glimpses of momentum. On the technology front prices have come down and quality continues to improve. Thousands of physicians now work as independent contractors from their homes, providing care to patients hundreds or thousands of miles away. The potential mass market of electronic encounters for acute episodic illnesses, home-based care, behavioral health and disease management is almost impossible to ignore.