Plenty has been written and said about how health care in the United States is too convoluted to be disrupted by new entrants. Dan Munro, health care author, and Forbes contributor compiles most of the rationales provided by thought leaders in his 2018 article titled “10 Reasons Healthcare Won’t Be Disrupted.” While traditional health care systems carried on with some air of certainty, would-be disruptors continued to make advances, and five years later, they have solidly taken over health care’s low-end market. They are coming for the upmarket, and traditional health care systems must set up their command centers now.
Clayton Christensen, professor of business administration at Harvard Business School, laid out the tenets of disruptive innovation: First, the entrants would enter the low end of the market, claim the least profitable portion of the market as its own, and because the incumbent owns the most profitable market segments, they most likely won’t fight the entrants for that market share. Second, the entrants will improve their offerings and move upmarket with increasing profitability. Finally, disruption will occur once the incumbents’ customers have widely adopted the entrants’ offerings in the mainstream market.
So, how have these tenets unfolded in health care in the last five years? And how should health system executives and business leaders prepare for the next ten years?
The would-be disruptors have entered the low end of the market, where they’ve begun to revolutionize preventive care, primary care, prescription benefits management, and medication dispensing. Upon transforming it, they will march upmarket for the profits of high acuity specialty, subspecialty, and surgical care.
In March 2023, Amazon officially closed on its $3.9 billion acquisition of primary care provider One Medical to establish a nationwide brick-and-mortar presence and deliver fully integrated primary care in the comfort of people’s homes. With annual memberships starting at under $200, patients are promised access to on-demand virtual care and in-app messaging, same and next-day in-office and remote medical appointments, walk-in laboratory services, and prompt prescription requests and renewals. And with access to One Medical’s network of more than 180 offices across the United States, consumers will also have increased options for community-based retail care. Amazon is making health care more accessible, faster, personal, and convenient by integrating pharmacy, telehealth, and primary care into a comprehensive and attractive model.
CVS Health purchased Oak Street Health to expand its primary care footprint. Walmart, which operates 32 health centers delivering primary and urgent care, plans to double that number by 2024. Best Buy struck a deal with Atrium Health to bring certain aspects of hospital care to people’s homes with wearable devices that enable care teams to monitor patient’s vital signs remotely.
In June 2023, Uber launched same-day, over-the-counter medication delivery directly to patient homes, adding to its transportation of enrolled patients to their doctor’s offices and other medical appointments through Uber Health. Uber’s platform streamlines coordination across multiple benefits- non-emergency medical transportation, prescription delivery, food, and over-the-counter medication delivery.
Google has assembled the blocks to build the next-generation clinic. With Onduo, Google has created a virtual diabetes clinic to control insulin performance backed by data from its Fitbit wearable technology. OneFifteen is Google’s data-driven physical campus dedicated to all facets of opioid misuse, treatment, and recovery. Calico is Google’s biotechnology company, which develops therapies for health and longevity. With Apigee, Google reduces risks during care transitions and empowers collaboration between patients, physicians, and health care providers. Google’s G-Suite provides clinical workflow tools and patient data storage in a HIPAA-compliant repository. Google for Retail offers accurate pharmaceutical product information, price, and availability. This array of health care services assembled through in-house start-ups, acquisitions, and strategic partnerships will operate seamlessly across Google’s integrated platforms.
What Google, Amazon, CVS, Walmart, Uber, and Best Buy (hereafter referred to as the Big Six) bring to the market is equivalent to fiber-optic internet, ultra high-definition television, or 5G coverage on a mobile network carrier. Consumers ultimately accede to these game-changing features. Once health care consumers assent to the offerings of the Big Six, the upmarket path into high-acuity specialty, subspecialty, and surgical care becomes inevitable.
Google, for example, has its sights on health care’s upmarket already. The tech giant now has specialty and surgical care infrastructures in the works. Through OneBraveIdea, Google uses genomics and phenotyping in clinical care to solve coronary heart disease. With its Verb Surgical platform, Google combines robotics, advanced visualization and instrumentation, data analytics, and connectivity for digital surgery. Google’s DeepMind and Google Ventures focus on developing tools and devices to collect, organize, and activate health data.
Google is determined to get the health care business model of the future right. When Google and other powerful entrants like Amazon succeed, and customers and patients become accustomed to their health brands, traditional health systems will see their market share and profitability erode quickly.
A survey by Wolters Kluwer shows that American health care consumers are eager to see the health care landscape and structures dramatically transformed. There’ll be no more barriers to the data and information we need to coordinate care and access services on time. With novel technology and business models, these would-be disruptors will ensure we no longer need to test more, treat more, and make patients consume more health services.
The wind of change is blowing, and while not every disruptive path leads to success, and not every successful entrant follows one, health system executives must accelerate innovations to align with the trajectory of health care delivery. The Big Six and other entrants promise better patient health, convenience and ease of care navigation, more fulfilling work for doctors, healthier communities, and less financial strain on health care consumers and taxpayers. So, how should health system executives approach the next ten years?
While traditional health systems entrench their teams in routine internal processes to cut expenses and grow revenue, system executives must also, for the next five years or more, stand up an operational apparatus designed solely to explore models, processes, partnerships, people, and tools that allow traditional health systems to evolve or symbiotically coexist with the Big Six and other entrants: (a) Set up a situation room at the V- and D-suite to closely monitor the Big Six and other entrants in the market to inform, interpret, and recommend actions for formulating and implementing operational responses that defend market shares for traditional health systems. (b) Create an innovation lab at the B-Suite for stakeholders from across the organization to ideate, create, and develop novel ideas, models, workflows, processes, tools, and mechanisms to help traditional health systems move fast and match the Big Six and other entrants. (c) Empower clinical and administrative leaders to identify opportunities, showcase strengths, exploit weaknesses, and address threats up and down the market under the command center’s knowledge, coordination, and decision-making authority.
In 10 years, our traditional health systems could become obsolete when health care consumers have widely adopted the offerings of the Big Six and other entrants in the mainstream health care market. Borders, Blockbuster, and Sears were defenseless when Amazon, Netflix, and e-commerce disrupted them. Taking our chances and hoping to fare better than Borders, Blockbuster, or Sears is no longer a safe bet. Health system chief executives must now set up their command centers and prioritize their defenses. As the adage goes, the best defense is a good offense.
Konye Ori is a health care finance professional.