Who’s Eating Your Lunch? Healthcare Incumbents Take Note!

Healthcare market data

Healthcare organizations absolutely must reinvent themselves and be quick about it. If they don’t, each day is one day closer to becoming irrelevant.

And that goes for all the incumbents including providers, health plans, suppliers, and vendors, as well as the investors who are keeping them stocked with capital.

Fail to keep up with the new health economy — which pays little homage to healthcare’s ridiculously opaque and complicated system of the past — and you could be quickly beat by nontraditional players entering the space. Anyone with a commonsense solution for healthcare’s notorious failings is going to eat your lunch.

Here’s a short list of suspects to watch. Reach out and let us know your thoughts on who else is certain to feast at this $4 trillion smorgasbord.

1. New companies backed by private equity investors

Over the last decade, private equity (PE) firms have ramped up investment in healthcare from $41 billion to almost $120 billion, and funding has continued to endure throughout the pandemic months. PE firms overall are looking to deploy some $920 billion in dry powder.

“Private equity is investing in healthcare because they believe today’s system is wildly ineffective. There is such an obvious opportunity to build a better mousetrap — many, many better mousetraps, in fact — that can offer better outcomes, lower costs, and noticeable value,” says Canton & Company CEO Don McDaniel. “Plus, there’s a massive arbitrage opportunity because so much of healthcare spend is recognizable waste.”

Tech innovators with recent PE backing have the advantage of a digital-first strategy with a more inclusive outlook. They might start with — or keep the door open for — a direct-to-consumer play, for example, or a novel workaround that doesn’t rely on the clunky processes of the past. And be assured that not one of them will own a fax machine.

They can move fast and are willing to take on development risk. That’s why established healthcare businesses need to move even faster to identify where they can win and transform in big leaps rather than short hops. Market data is essential to understanding where you fit in and where your credible threats reside.

“Healthcare’s road is littered with insurgents who assumed they could fix this seriously broken system but ultimately failed,” McDaniel says.

2. Retailers and other nontraditional players

Some healthcare leaders may make the mistake of assuming traditional primary care engagement will continue to steer the majority of patients. It’s time to challenge that mental model.

“All bets are off,” says McDaniel. “The up-and-coming generations are thinking differently. It’s not near and dear to consumers that they have a formal relationship with an individual primary care physician. Not anymore.”

At least one study shows a downward trend of consumers who have a regular source of primary care. We believe this trend will continue to accelerate. The convenience of an available provider seems to trump the familiarity of a preselected provider.

The shift in engagement preference has opened the opportunity for retail giants like Walmart, CVS, and others to leverage their consumer connections and get deeper into healthcare. When you have the attention of 230 million consumers every single week as Walmart does, you already have the engagement part of the healthcare puzzle solved. 

Incumbents also need to understand the difference between “healthcare engagement” and authentic consumer engagement. Retailers have figured it out and are already meshed deep within the family’s personal workflow.  Just as one example, Walmart is offering on-demand primary care and some specialty services both through telehealth and at its in-person clinics located in many of its retail store locations.

Don’t discount the impact retailers can have on incumbents. New threats to market share are around every corner, and you need to reassess your position and your strength of opportunity frequently.

3. Any business that can make aging more agreeable

We know that 2030 will mark a demographic turning point in America. Beginning that year, all baby boomers will be age 65 or older, and within four years, seniors will outnumber children for the first time in U.S. history.

The economics are staggering.

“People are sick and tired of watching all of their money go down the drain when they’re placed in an institution,” McDaniel says. “I think it’s why people are choosing Medicare Advantage plans — because it’s a much better economic option short- and long-term. They want their family to have more money when they’re gone, and they want to reduce the economic burden on them while they are aging. And it’s well established that people prefer, overwhelmingly, to age in their homes and communities.”

He also points to the estimated 48 million individuals who are providing unpaid care to an adult family member and who spend $7,242 per year out of pocket on expenses to care for their loved one. All of this is happening outside of the healthcare system. That unfunded care is quickly adding up to $500 billion, he says.

“I don’t think anybody in healthcare is really ready for the order of magnitude of this demographic shift,” McDaniel says.

Growth potential in the senior market is huge, especially among the emerging health-at-home offerings. Any care model or tech innovation that can allow seniors to age in place and save on their healthcare expenses will gain traction as baby boomers use their enormous economic power to influence the market.

Stakeholders who believe they’re ready for this shift might be surprised by how abruptly they’ll need to scale up. McDaniel recommends studying market data and creating new competencies long before the aging of America reaches its tipping point.

If you want to outfox anyone who has a mind to eat your lunch, contact our team of healthcare experts and devise your unique strategy. Come sit at our table, and we’ll deliver the market data, experienced insights, strategy, and hands-on execution you need to accelerate growth in the new health economy. Contact us today!

The payoff of value-based care is more than just cost savings. Here are 7 things you need to know.