By Jim Traficant
There’s a wave of disruption driving fundamental changes to the $3.6T U.S. Healthcare market. What’s remarkable is the role the Federal sector will play in this wave of industry transformation.
There are three trends fueling the wave:
- Industry convergence: Lines are being blurred across historically distinct market segments.
- Outside – In: Big consumer brands from adjacent markets are declaring Healthcare core to their growth strategies.
- The wave starts in Federal.
First, the Health Industry is Rapidly Converging
Policy, technology, and consumer demand are driving the convergence of historically distinct market segments; payer, provider, consumer, life sciences, and Federal are converging and at an accelerated pace.
We’ve watched the integration of the provider supply chain from academic centers to physician practices. This vertical integration positioned providers to move from fee-for-service to fixed payments for care. If large academic centers were to manage episodes of care in a fixed-payment model, they had to own their clinical supply chains.
As a result of value-based reimbursement, not only is the clinical supply chain aligning but we’re witnessing regional consolidation of care across the U.S. The same forces requiring hospitals to more effectively manage costs are driving them to expand regionally to achieve economies of scale.
Just as regionalization enables providers to achieve scale, policy and financial drivers are fueling the convergence of health payers and providers. Historically the payers were large, independent, and economically powerful organizations but now regional provider networks are launching their own health plans and achieving comparable scale and clout.
Policy is a major driver in the convergence. For example, when the Affordable Care Act passed it was clear the Government was moving further into Healthcare. But just how far was less obvious. Some experts speculated we were headed for a single payer system. Others conjectured the health industry would consolidate like the auto industry into a few large players. The reality is no one knows for sure how the story ends, so payers and providers had to invest at scale to preserve their viability independent of how the future health system evolved. This reactive, policy-driven investment and broader market uncertainty opened the door to outside-in disruptors.
Second, Let’s Talk “Outside – In”
Healthcare is being disrupted by non-traditional powerhouses from adjacent markets. Outside disruptors like Amazon, JP Morgan, Apple, Google, and Walmart are prioritizing health in their growth strategies. These disruptors have massive scale, market clout, consumer impact, and are unencumbered by legacy business models or assets.
What’s interesting is these industry giants are partnering to win in this new world order of convergence. Compelling ecosystems are being created to attack legacy markets and to create demand for new health services.
For example, Apple is partnering with EHR vendors and health systems to integrate your health data on your wrist. Cerner and Amazon are exploring AI to improve data portability and interoperability. Amazon, JP Morgan, and Berkshire formed Haven Healthcare and fueled other competitive partnerships across the industry.
Even traditional health players are aligning in non-traditional ways. For example, CVS acquired Aetna to pivot their business from pharmacy to data-driven health and counter Amazon’s acquisition of PillPack which threatens to disintermediate pharmacies. Humana is partnering with Epic to lower prescription spending and improve medication adherence.
Federal is Where the Wave Starts
DoD, VA, and HHS are responsible for $1.2B of the U.S. Healthcare spend. The other interesting dynamic is disruptors and legacy innovators are partnering with Federal agencies to pilot health and benefits for our military, Veterans, and fellow citizens before scaling those solutions to broader consumer markets. The Federal and private sector are converging at speed.
The Departments of Defense and Veterans Affairs are two of the largest U.S. payer-provider networks. Sixty percent of military health occurs in the private sector. The VA MISSION Act is expanding Veteran access to private sector care with VA coordinating. Healthcare.gov is a Federally facilitated marketplace undergirded by private sector insurance companies. The Food and Drug Administration approves private sector drug applications.
The Federal and the private sector health markets are inextricably tied. Many of the disruptors are engaged in Federal Health to support agency priorities and to refine their broader consumer strategies. CVS is partnering with VA to improve Veteran access to care and refining their Minute Clinic model. Walmart is helping VA deliver telehealth services for underserved Veterans. Cigna bought Express Scripts, one of the largest pharmacy benefit providers who also supports TRICARE. Apple is working with Veterans Health Administration so veterans (and other Apple customers) can view their health record on their iPhone.
So, What Does this Mean for Federal Health IT?
For those of us serving in Federal health IT, this is an amazing time. Industry lines are blurring. Transformation is underway. Traditional models are being disrupted. Now is the time for Federal agencies and the contracting community to embrace the disruption and all it enables. We can now deliver on the promise of health, wellness, and services in ways not previously possible. The Federal Health community is in a great position to lead the disruption. Now’s the time to catch the wave.
About Jim Traficant
Jim Traficant is the Accenture Federal Services Managing Director for Federal Health. He has more than 25 years of executive and operational leadership experience in Government, commercial and international markets. He served as President of ASM Research leading the AFS acquisition and growing it fourfold in three years. His industry experience includes Aerospace & Defense, Intelligence, and Healthcare as well as M&A, product development, and IT services.
Traficant’s personal experience as a two-time liver transplant survivor drives his passion for transforming Healthcare. He was awarded Federal Computer Week’s “Federal 100” as well as G2XChange’s “FedHealthIT 100” for his leadership in Federal Health. He was also featured in Gary Shapiro’s New York Times bestselling book, “The Comeback: How Innovation Will Restore the American Dream,” for his compelling Healthcare story and innovative solutions for Healthcare transformation.