As I’ve blogged before, the healthcare space is at the cusp of a transformative change. Consumers are assuming greater ownership, control, and responsibility of health outcomes. Consequently, the decision making is shifting to the individual. Consumption patterns have undergone a significant change owing to disruptive mobile computing, rapid adoption of social media, next-generation sales/engagement channels, and ‘‘anytime-anywhere’’ information access. As individual consumers (patients and physicians) become more empowered, healthcare is transitioning to a principally patient-centric operating paradigm, with focus on cost, efficacy, and equity.

Analogous to what Uber has done to transportation, in progressive (and controversial) ways, there is a fundamental transformation in healthcare, placing patients at the center of all the action. These changes are reflected in the way reimbursements are distributed (moving from volume-based to outcome-based) and the onset of personalized medicine therapies based on real-world evidence. These gamut of changes are also aided by various cultural and socio-economic forces. The disruptive shift – from a healthcare provider-centric to a more customer-centric model – is driving significant healthcare investments in digital enablers of consumerization – social media, mobility, analytics, and cloud.

Healthcare consumerization levers

The New Kid on the Block

These winds of change have given rise to an immense opportunity to cater to this new patient-centric paradigm leveraging next-generation technology channels and enablers. Which brings us to Oscar, a New York-based health insurance start-up. Health insurance in the United States has conventionally been complex and non-transparent. With the advent of PPACA and health insurance exchanges (HIX), there has been a greater sense of accountability. Oscar aims to bring big data/analytics, design thinking, and transparency to the often-puzzling world of health insurance, making it smart, intuitive, and simple for consumers.

The idea for Oscar was born when one of its co-founders received his health insurance bill and realized that none of it made sense to him. The complexity and high entry barriers to health insurance can be gauged from the fact that Oscar was the first new health insurance provider to launch in the state of New York in more than a decade. The start-up sells coverage to individuals through insurance marketplaces in New York and New Jersey. The insurance plans offer free basic care including doctor visits, phone calls with doctors, preventative care, and generic drugs.

The company is backed by seasoned venture investors Peter Thiel and Vinod Khosla as it attempts to bring Silicon Valley mojo to health insurance. It was co-founded by venture capitalist Josh Kushner (an early stage investor in Warby Parker and Instagram), Kevin Nazemi (a Microsoft veteran), and Mario Schlosser (MIT Media Lab and hedge fund experience). The company’s strong digital health ethos is reflected in the senior leadership team – CTO Fredrik Nylander is a former Tumblr executive, Dave Henderson (ex-Cigna and EmblemHealth) is Oscar’s president of insurance, board member Charlie Baker is former CEO of Harvard Pilgrim Health Care, and senior medical executive hires from EmblemHealth, a leading health plan in New York state.

Oscar

What’s different?

Oscar’s value proposition is on being a more personalized health insurance provider, with a strong sense of convenience and personal attention, aided by marketing, design, and consumer service practices that are aligned to the needs of the millennial generation. It has a sizable emphasis on telemedicine (offering it free of charge), and lets customers speak to doctors 24×7 with a goal of 10 minute wait time or less. To help answer medical questions, the company has doctors on call to chat online or over the telephone with customers. Oscar also lets customers check prices for procedures ahead of time and offers three free in-person doctor visits and free generic drugs.

The company faced minor bumps in the beginning with poor reviews and complaints (an average Yelp rating of 2 stars), but has instituted a feedback input mechanism based on customer interactions. The company aims to productize every customer interaction by implementing feedback as soon as it receives it. It has a slew of partners and tie-ups in line with its strategic focus.

In December 2014, Oscar announced a partnership with Misfit (a wearable tech company), by offering members free fitness trackers, along with Amazon gift cards, as part of an attempt to incentivize healthy behavior and bring down employee healthcare costs. Oscar also offers services at many hospitals and retail locations such as New York CVS CareMark. It is a health insurance company that resembles a technology start-up rather than a faceless insurance behemoth, sort of a health insurance start-up for “born digital” natives.

The future

Since commencing operations in July 2013, Oscar has had a reasonable start. It had about 15,000 members and estimated revenues of U$72 million in 2014. It doubled that member base to 30,000 in January 2015, with one month of enrollment left to go. Oscar is seeking approval to enter California’s individuals exchange by 2016. The primary litmus test for Oscar is going to be the same as for any health plan – managing risk, keeping premiums reasonable, maintaining margins, handling payer-provider convergence, and improving health outcomes. Oscar is a prime example among modern companies looking to shape consumer-driven healthcare in the United States leveraging next-generation technology. As it looks at a reported valuation of significantly more than US$1 billion (implying a handsome 14x sales multiple!), the bet might just pay off.


Photo credit: Oscar

The healthcare payer market continues to experience rapid transformation as efforts to control costs, minimize waste, and root out fraud and abuse collide with the effects of an aging population, the burgeoning insured population brought on by the implementation of the Patient Protection and Affordable Care Act (PPACA), and advances in technology and medicine. Taken alone, any one of these events would have significant impact on healthcare payers; together they’re nothing short of revolutionary.

Faced with such transformation, healthcare insurers are seeking strategies that can help them to manage ever-increasing demands. Among the more impactful tools they can employ is business process outsourcing (BPO). The healthcare payer BPO market, currently estimated at about US$4 billion, is growing at a healthy 14 percent annually. And it’s no surprise, as BPO is more important than ever in helping healthcare payers to streamline their operations and reduce costs. Beyond the basics, BPO can also help providers to research, develop and launch new products; to glean value from the masses of data they capture; and, to identify and reduce cases of fraud, waste, and abuse.

And there appears to be some evidence that payers are tapping into the power of BPO to help address their most significant challenges. While claims processing remains the most commonly outsourced BPO process, other more strategic areas are driving overall growth:

  • Product development & business acquisition (PDBA) – though the smallest segment of all outsourced healthcare payer BPO market, PDBA grew the most, at about 50 percent, between 2012 and 2013. The implementation of PPACA has forced payers to come up with new plans that are comparable to others and easy for members to understand, driving significant activity in this area
  • Member management – increasing by about 35-40 percent from 2012 to 2013, member management is another fast-growth BPO trend being fueled by PPACA. The Act is driving payers’ need not only to manage more, and increasingly diverse members, but also to take advantage of the vast amounts of data generated by the growing insured population
  • Provider management – changes in the healthcare environment are compelling payers to collaborate more with healthcare providers, in turn driving a need for better provider management. The result is that outsourcing in this area grew at about 35-40 percent year-over-year
  • Care management – As payers increase their direct contact with patients, and as part of their attempts to manage costs, healthcare payers are increasingly getting involved in care management activities, driving growth in the area to about 30-35 percent in one year

The changes in the healthcare market are daunting for even the most prepared and best funded healthcare payers. In order to compete in the increasingly challenging and competitive market, payers have to take advantage of every tool available, and BPO is fast becoming the industry’s Swiss Army Knife.

For more insights on the healthcare BPO market, see our just released report, Healthcare Payer BPO – State of market with PEAK Matrix™ Assessment. Log in or register to download a complimentary preview.


Photo credit: Flickr

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