The Impact Advisor 4Q20

The Impact Advisor 4Q20

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The Impact Advisor - Impact Advisors' Quarterly eNewsletter

The Impact Advisor is a digital newsletter focused on healthcare IT news topics, trends, and disruptors. We hope you find this quarterly publication valuable to the work at your own organization. Please engage with us (by subscribing), so we may continue to share our industry insights and thought leadership with you. 

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October 2020

THE CONTINUED EVOLUTION OF NONTRADITIONAL COMPETITORS

A number of stories over the last few months underscore how nontraditional competitors are aggressively trying to expand their footprint in health delivery. In mid-September, Walmart announced details of the company’s planned expansion of Walmart Health, roughly one year after the first Walmart Health location opened in Georgia. CVS revealed during its Q2 earnings call in August that there are now 205 CVS HealthHUB locations across 22 states, with a total of roughly 1,500 CVS HealthHUBs expected nationwide by the end of 2021. Meanwhile, in July, Walgreens announced a partnership with VillageMD that – according to Walgreens – will make it “the first national pharmacy chain to offer full-service doctor offices co-located at its stores at a large scale.”

Image source: Walmart, CVS, Walgreens

Why It Matters:

Over the last few years, the “retail clinic” model has steadily evolved, due in part to traditional pharmacy chains needing to look for additional revenue streams, but also because major pharmacies and retail stores are trying to capitalize on an unmet need in health delivery. In particular, there is an increasing focus on health and wellness, as well as care coordination and disease management. The dynamics in each market or region will obviously be inherently different, and there is certainly no guarantee that every nontraditional competitor will be successful in efforts to expand their footprint in health delivery. However, the bottom line is that companies like Walmart, CVS, and Walgreens – which have deep pockets and strong brand name recognition with consumers – have shown a willingness to quickly adapt, whether responding to pressures in their own market or aggressively trying to capitalize on opportunities identified in health delivery. Providers should fully expect that trend to continue, regardless of the success or failure of any individual near-term offering from one of these firms.


AMAZON’S HEALTH CLINICS FOR EMPLOYEES – WHAT DOES IT MEAN?

Back in July, Amazon announced a pilot program to establish worksite health clinics for Amazon employees and their families. Per the press release, the centers will be “near Amazon fulfillment centers and operations facilities” and will “provide full-spectrum acute, chronic, and preventive primary care, prescription medications, vaccinations, behavioral health services, physical therapy, chiropractic care, health coaching, and care navigation to specialty referral services.” The Neighborhood Health Centers for Amazon employees and their families will be fully operated and staffed by Crossover Health.

Amazon’s Worksite Health Clinic Pilot

Image source: Business Wire, 7/14/20

Why It Matters:

Amazon is hardly the first big tech company to launch a worksite health clinic for employees – let alone the first large employer to do so. There is bound to be talk about how this announcement may or may not relate to longstanding theories about Amazon’s broader plans in health delivery, but we think that speculation is premature (at least for now). To us, Amazon’s announcement is more a reflection that large employers are continuing to take action to try to control rising employee healthcare costs – and one increasingly common strategy is to establish a worksite health clinic for employees. The actual services provided at a worksite health clinic can range widely from employer to employer depending on the specific needs and medical spending of the employee population – but many worksite clinics (like Amazon’s) are now expanding into traditional primary care, chronic condition management, and other disease-specific services. For many providers, it will be difficult to compete directly with employer health clinics on convenience and access (even in a more “virtual” work environment). It will be even more challenging – if not impossible in some cases – to compete for patients on costs given that employees usually do not have to pay much (if anything) for worksite clinic services. As large employers expand the focus of their worksite health clinics in some markets – and as employees become more comfortable with the concept – it will be important to monitor the implications for local health systems in the area.

 


MANY DIGITAL HEALTH PARTNERSHIP OPPORTUNITIES FOR PROVIDERS

Two quick items of note on the digital health front:

  • A report from Mercom Capital Group finds that “telemedicine” was by far the top venture capital-funded digital health category in Q2 of 2020, the first full quarter since the pandemic began. (It is worth noting that “telemedicine” was also the highest-funded category in Q2 of 2019 – just not by such a wide margin.) Although total digital health funding in Q2 of 2020 was down 11% compared to Q2 of last year, Mercom reports that overall, digital health funding for the first half of 2020 still “shattered all previous [first half] funding records, bringing in $6.3 billion.”

Note: click here for a high-res version of the graphic above
Image source: Mercom Capital Group, July 2020

  • Meanwhile, CB Insights published their annual list of the “Digital Health 150” – which CB Insights bills as “the digital health startups transforming the future of healthcare.” Combined, the 150 companies – which “have raised over $20B in total funding across 600+ deals from 900+ unique investors” – span 12 “core categories.” The two categories with the most companies selected were “clinical intelligence & enablement” (26 companies), followed by “screening & diagnostics” (24 companies). Notably, CB Insights reports that “a number of startups [on the list] have formed partnerships with key industry players.”

Why It Matters:

Given that COVID-19 has already had a significant impact on the paradigm of where care is delivered, it certainly isn’t a surprise that “telemedicine” was the top-funded “digital health” category in Q2 of 2020 – the first full quarter of the pandemic. It also isn’t a surprise that CB Insights reported that more than 40% of the companies they selected for their “Digital Health 150” this year offer some type of remote care service. However, when thinking about digital health companies and/or products, we urge caution not to be constrained by traditional classifications or groupings, since emerging solutions (whether from startups, established HIT companies, or tech giants) are increasingly complex and difficult to accurately “categorize.” For example, even just the terms “telehealth” and “artificial intelligence” alone can each encompass a vast range of capabilities in healthcare – and some products (e.g., certain online screening/triage tools, patient-facing chatbots, etc.) can’t even be accurately described by just one of those two broad terms. The point is that digital health tools are rapidly evolving, and with analysts expecting a record amount of digital health funding in Q3, there continues to be no shortage of opportunities for forward-thinking provider organizations to establish strategic partnerships on a variety of different fronts with innovative vendors.


UNDERSTANDING AND ADAPTING TO NEW CONCERNS FROM PATIENTS

While recent studies suggest that there has been a rebound in inpatient and outpatient volumes since the pandemic began, Healthcare Dive reports that “some patients still need convincing” to return for care. According to a separate article in Modern Healthcare, “given the strained finances, marketing departments are creating campaigns focused on encouraging patients to seek care, attempting to convince a scared public that a clinic and hospital isn’t a hotbed for the coronavirus.” In fact, Modern Healthcare adds that “several health systems said they anticipate COVID-19 messaging will be baked into their marketing for the foreseeable future.”

Inpatient Admissions Daily Rate of Change

Note: click here for a high-res version of the graphic above
Source: “National Patient and Procedure Volume Tracker,” Strata Decision Technology, 9/23/20

Why It Matters:

Even as patient volume is starting to rebound, we think the Modern Healthcare article serves as a good reminder that patient expectations – and the way they think about their care – have shifted dramatically since the pandemic began. Keeping patients safe from the virus is obviously paramount. However, it is important to remember that patients also need to feel safe in order to return for in-person care. This means that many hospitals and health systems may need to invest more in marketing-related initiatives that may not have been high priorities in the past. For example, conducting market research to better understand specific expectations and concerns among the local patient population – and then tailoring digital marketing campaigns, social media posts, traditional TV and radio ads, and direct patient outreach efforts (phone calls, emails, etc.) accordingly.

 


FREE CONSULTING

Q: With the emergence of a new generation of healthcare ERP systems delivered in the cloud or software as a service (SaaS), what factors need to be considered when exploring the replacement of our current legacy, on-premise ERP systems(?)

A:

Our market has already begun reviewing and reassessing their current ERP systems and is recognizing that the primary suppliers of ERP applications are promoting a move to their cloud versions. This has created increased demand for information and insight on whether it makes sense to look anew at the ERP market and the key requirements and/or pain points that need to be considered.

Further, what are the implications for cloud versions of these applications, both in terms of what value or benefit will be achieved and how our customers will experience and implement these new SaaS products? As important, change management and business transformation will be essential in any move to these new generation of ERP systems, as they will require adoption of cloud versions that eliminate customization and require greater acceptance of delivered functionality and workflows.

As a result, ERP assessments are taking on greater importance with broad participation by such key business areas as human capital, supply chain, and finance, as well as executive involvement, especially when considering strategic objectives for the enterprise.

Key decision-making criteria should include system capabilities (including functionality and better-performing workflows), vendor partnership characteristics, and, of course, the total costs of ownership over at least a five-year period. And remember that the treatment of the investment is likely to be different for SaaS solutions, such as a move from capital to operating expense.

Response provided by Lydon Neumann, Vice President at Impact Advisors