This is Greg Licholai. In this segment, I'd like to talk about the changing business models in healthcare. Now throughout this series, we've talked about different aspects of the healthcare system, different aspects of technology, and the digital transformation of healthcare. What are some of the drivers of healthcare and importantly, how does this all come together in the changing models of healthcare delivery, in the changing business models, in the complicated landscape that is the business of healthcare, as illustrated by this well-known Escher drawing. There are well-described barriers to healthcare innovation. Some of these are around the lack of consumer focus which is changing. Some of these are around legacy technologies which is changing and some of these are around the business models and those incumbents which had previously been in power that are reluctant to give up their power from an economic point of view to allow change. As these changes occur, they create different cycles of innovation, technology that the entrepreneur and observers of healthcare can take advantage of as they're thinking about the way to introduce new and better technology and specifically new and better software for patient benefits. Why is the revenue model changing in healthcare? Well, some of the things that we've talked about that hospital systems payers face significant challenges. We've talked about the increased costs that are affecting healthcare, so hospitals are under increasing pressure to change the way they think about revenue and treating patients and how did they do this? How do they think differently about delivering high-quality services and improving their reimbursements for the delivery of the best possible care? There are some models that we'll go over in some specific examples next. For example, the value-based healthcare model has been described as one of the ways to really improve the aim of healthcare in terms of better quality at a lower cost. Some of the fundamental principle of value-based healthcare is that entities are reimbursed on the basis of delivering better outcomes as opposed to just better procedures. It really takes a more holistic approach, bringing together patients, providers, payers as well as suppliers, and society. For a more comprehensive look of what can be done to improve the patient experience and healthcare outcomes at a relatively lower cost. There are some examples of well-known healthcare systems that have applied value-based systems. Here are two specific examples. One coming from Intermountain Health, where the system integrated mental health into primary care as a default practice. They wound up reducing costs per patient, as well as importantly reducing the number of emergency room visits, which are very expensive use of the healthcare system by incorporating a more holistic approach to patients and their mental health issues. In another example at Mayo Clinic, surgeons worked more effectively with their pathology lab during certain surgical procedures so that they could complete the entire procedure and get a diagnosis during one surgery. What this did was eliminate the need for repeat surgeries for about 96 percent of patients, which also reduce their overall costs and reduce their overall reoperation rate. In considering another type of way that healthcare systems used to reduce costs and improve outcomes. Another model is described as the Learning Healthcare System. Now, in Learning Healthcare System, a virtuous cycle is created between the practice, the data, and the evidence collected that gives information back to clinicians and managers of the healthcare system for continuous improvement. Now the way this works is that clinicians consider different techniques that could improve patients. Experience in outcomes in health care, but then they also record the data associated with those patients. That data can be in the form of wearables, it can be electronic, it could be information, and that data then is put into intelligence systems using things like artificial intelligence to analyze what is the actual evidence-based results that more accurately describe which techniques actually cause an improvement and provide better outcomes. This then gets fed back to the providers who hone their practice, yet another step will take the best in class and do further improvements in health care, continue to collect the data, continue to analyze that data to get evidence so that they continue to improve. The basis of these health care learning systems is, of course, the use of software, data collection, artificial intelligence in order to process all of the data that needs to be collected so that the accurate results are put into the hands of the decision-makers and the clinicians. Business models are continuing change for various health care systems and here are some examples that have been described just as rules of thumb for different hospital systems and provider systems as they're looking to compete and provide better care. I'll go over each one of them as described as the leader, the experience, the integrator, and the manager. Now, under the example of the leader, these are health systems which practice best-in-class quality, and they have the reputation for delivering the highest quality care and they prioritize clinical models and a culture of excellence over cost reductions and over consumer experience. These types of systems often rely on outsourcing and temporary staffing, but their goal is to show the world and show consumers that they're offering the best care, and some examples here would be the Mayo Health Clinic or the Cleveland Clinic. Now, alternatively, there are health systems that pursue patient experience and patient satisfaction as their way of competing. These would be looking for premier customer experiences when compared to other hospitals that are in their competitive area. They prioritize patient satisfaction, understanding preferences, consistent experiences across all health care systems. In an order to do this, they rely on social media, health IT, mobile platforms, digital platforms, which of course relies heavily on investment in information technology, as well as having the appropriate culture and attitudes around data-sharing and using data analytics and informatics in order to provide the best patient satisfaction experience. An example here would be the Texas Health Resources system. Another example of a health system strategy would be the integrator, which works towards increasing scale and scope. This would be a system that looks across multi-regional areas and possibly has national reach. Basically their strategy is to grow as large as possible to provide broad access across many different geographies. They achieve value through broad networks of providers, especially looking at lower cost providers, and they prioritize cost-cutting as a differentiator to their competition. They grow through mergers and acquisitions, cost reduction, using health information technology, and creating back-office synergies. An example here would be Intermountain Healthcare. Finally, an example of a different type of strategy would be the manager or use of population health. This is systems that enhance the health across entire populations. They focus on serving complex populations that address social determinants of care. They work with employers, they use risk-based management systems as well as value-based care models, and they frequently have integrated community organizations to provide care beyond the traditional walls of a hospital or delivery network. Examples here would be the Geisinger Health System as well as Kaiser Permanente. I'll shift over and talk about patient-driven technologies and the on-demand health care model. Another example of the way the business models of health care have been changing to empower patients and put more decision-making as well as authority and autonomy into the hands of patients. Some of these would be the use of personalized health solutions, information on request in order to level the information asymmetries and level the playing field, use of patient experience benchmarks through digital recording of outcomes data, care anywhere networks, and the use of telemedicine to improve access. Some examples of patient-driven technology and on-demand health care models would be scheduling apps, the use of telemedicine, and on-demand patient transport that literally brings patients from the hospital to home in a easier and less expensive way. Another example of patient-driven technology would be the creation of marketplaces. The examples here would be doctors and clinicians using apps to have a marketplace for diagnostic products, radiology centers, and other types of products, similar to the way that Amazon creates marketplaces for consumer products. Medical devices is another area that other types of companies are focused on creating marketplaces, as well as crowdsourcing help to create safety nets for patients who need care. Now, I'd like to conclude by offering this model of how to think about healthcare innovation. Now at Yale, we use this framework called the RAPID framework to consider what elements are necessary in order to create sustainable innovation in healthcare. Now RAPID is an acronym that stands for regulatory alternatives patients innovation and data. The goal here is to create a virtuous cycle of sustainable improvement based on sustainable innovation so that health entrepreneurs and health companies can continue to grow and improve and provide the best services for patients. Going around the circle, the patient or consumer needs to be brought into this technology. There are frequently costs associated with this. The entity needs to understand what are the acquisition costs to bring consumers in to use their service or their products. Data needs to be used for validation. In healthcare in particular, data is extremely important because that is the evidence generation that's needed to validate whether different types of products or services are effective. Regulatory is especially important in health care because these barriers exist and those barriers can also be benefits for those products that are improved and become first in class or best in class that create natural barriers for other competitors to come. Entrepreneurs need to consider alternatives. The other aspects might be addressed, but if there are simpler alternatives, easier alternatives, lower-cost alternatives, patients or payers might select those. This is a framework that we use in order to analyze different specific healthcare entities and companies to think about have they achieved a balance among all these forces in order to achieve sustainable innovation? In conclusion, we've reviewed the different challenges that face healthcare and the ways that technology is driving a transformation and an improvement in access as well as quality and helping to reduce costs. Entrepreneurs, particularly those who are interested in technology and software, should consider all of these things really as opportunities to help create value and create benefits for themselves and for society.
