Tag: healthcare

Amazon, Berkshire Hathaway & JPMorgan Chase, Team Up to Tackle the Messy Business of Healthcare | Sherpas in Blue Shirts

On January 30, 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co.  announced a partnership to address healthcare for their U.S. employees. The goal is simple – provide their employees and their families with simplified, high-quality, and transparent healthcare at a reasonable cost, through technology solutions. They intend to pursue this opportunity through an independent company that is free from profit-making constraints.

The rationale behind this move

While this might not be the big Amazon-disrupts-healthcare reveal the market had been hoping for, it is still a meaningful move. Employer-sponsored health insurance currently covers around 157 million people in the United States, and people are not satisfied with the present state of affairs:

  • Insurers and employers are shifting the burden of increasing healthcare costs to the employees. Employees are now facing much higher deductibles and insurance contributions.HC PremiumsEmployers are moving towards programs with narrower networks. And if employees choose to visit a doctor outside the network, they have to spend more out of their own pocket.

HC Deductible_1

  • Health insurance premiums are growing faster than employee wages for both private and public workers. On average, premium as a ratio of wages has increased by four percentage points in the last five years.

The new healthcare normal calls for a fresh approach

Amidst rising costs, evolving consumer preferences, changing operating models, and an uncertain regulatory environment, stakeholders in the healthcare ecosystem are trying to create innovative partnerships and business models. For example:

  • CVS is buying Aetna for US$69 billion, creating a mini healthcare ecosystem
  • Anthem broke up with Express Scripts, its long-term pharmacy benefit management (PBM) partner, and is building its own PBM capabilities with some help from CVS
  • Intermountain Healthcare is leading a collaboration with Ascension, SSM Health, and Trinity Health, in consultation with the U.S. Department of Veterans Affairs, to form a new, not-for-profit generic drug company. The goal is to make essential generic medications more available and more affordable, bringing competition to the market for generic drugs
  • At last count in 2017, there were 923 accountable care organizations (ACO) covering approximately 32 million lives.

The Amazon-Berkshire Hathaway-JPMC trio could well lay down a marker on how employers shape and drive their own healthcare mandates. Consider the firms’ complementary skill sets:

  • Amazon has the deep technology expertise and experience-first approach crucial to addressing needs of an evolving workforce and consumer base. And from a data standpoint, AWS has already stated interest in leveraging longitudinal health records for population health and analysis efforts. E.g., it could use expertise in logistics to rethink warehousing and distribution to make drugs more cost efficient.
  • Berkshire Hathaway and JPMC can help improve the financial engineering that underpins the new endeavor, provide scale, and improve collective bargaining power.

 How might the mega-alliance play out?

This alliance can potentially have a huge impact on all the healthcare stakeholders.

HC Impact_1

The road ahead

The mega-healthcare company will currently focus on its combined employee base of approximately 1 million employees – plus their families – in the U.S. If it’s successful, it can take the model to other employer groups to help them address inefficiencies in their current healthcare setup.

However, it’s critical to keep in mind that healthcare differs from other areas disrupted by tech. It is often messy, fragmented, and lacks interoperable/standard data. Strikingly similar initiatives have faced hurdles and shut down (…remember Dossia?) Many initiatives to reimagine healthcare from outside have failed to move the needle meaningfully.

Given the lack of clarity around specifics of this partnership, some amount of skepticism is warranted. But for now, everybody’s looking at what the future holds.

What is your take on this mega-alliance? We would love to hear from you at [email protected] and [email protected]

IT Services Opportunities with the NHS: Patient Care and Advanced Technologies | Sherpas in Blue Shirts

It should come as no surprise that global services activity in the U.K. has dropped significantly in all sectors in the aftermath of the Brexit referendum. Indeed, according to our Transaction Intelligence database of sourcing deals, in the healthcare space, the U.K.’s National Health Service (NHS) awarded 13 outsourcing deals in 2015, 11 in 2016, but only four in the first half of 2017.

However, our research indicates that the policy of patient-centric care introduced by the National Institute for Health and Care Excellence in 2012 is likely to drive ample long-term opportunities for innovative IT service providers that offer technology enablers.

EG KTFor example, under the NHS’s RightCare initiative, the NHS may look to accelerate the adoption of value-based care. Funding is focused on allocative value (how well assets are distributed to different areas of healthcare), technical value (how well resources are used to achieve valid outcomes), and personalized value (determined by how well an outcome matches patient expectation). Additionally, with increasing demand for telemedicine, NHS trusts will be on the lookout for providers that develop mobile applications aimed at remote healthcare management to support the growing importance of care at home for chronic conditions.

A robust cybersecurity network is equally imperative in the wake of recent instances of data breaches such as the March 2017 WannaCry attack, in which the medical records of 26 million NHS patients were hacked. Service providers can help the NHS protect its IT infrastructure from malicious cyber attacks by offering threat intelligence solutions, threat detection and mitigation applications, Blockchain-powered Electronic Health Records (EHRs), and persona-based security platforms.

While third-party providers can profit from these long-term opportunities, they need to be cognizant of the changing competitor landscape, particularly from tech start-ups that are testing the waters to realize potential demand in the U.K. healthcare sector. For instance, DeepMind, a London-based artificial intelligence start-up, worked with the NHS in 2016 on technology to improve care coordination.

To take advantage of growing consumerism in the U.K. healthcare space – e.g., e-Referral and e-Consult services – we recommend that IT service providers increase their investments in growing technological areas such as security, mobility, analytics, and IoT. But first and foremost, they must offer services that focus on patient care. Doing so would help the NHS avoid a repeat of its failed National Programme for IT, which was aimed at cost savings and efficiency, but was abandoned after nine years at a cost of £10 billion in 2011.

We will continue to watch this space and actively share our thoughts and perspectives. In the meantime, you can stay up-to-date on our latest insights in the healthcare domain through our dedicated research on the Healthcare & Life Sciences sector.

Obamacare enrollment begins, but no major gain for Wipro, Cognizant | In the News

IT services companies, which were betting on the enrollment for Obamacare to revive faster growth in healthcare services business in the US, may be disappointed as the Trump administration has cut budgets and time for enrollment of the landmark healthcare programme.

Global analysts largely say “nothing much has changed” despite efforts by the current administration to replace the healthcare legislation and this could mean no major change in business for IT services companies, both Indian and global, at least this year.

“…the shorter enrollment period, discontinuing of some subsidies, and reduced funding for advertising also illustrate that the uncertainty is far from over. Consequently, we do not expect the payer segment of the healthcare market to change a great deal with demand for IT services stable but not driving increased growth,” said Peter Bendor-Samuel, chief executive, Everest Group, a global IT research firm.

Read more in Business Standard

What Pain will You Experience if the AHCA Bill Becomes Law? | Sherpas in Blue Shirts

  • Health insurance lost for 24 million U.S. consumers
  • Billions of dollars of care investment marginalized
  • Providers’ margins eroded by payers
  • And a five-year setback to the healthcare system

These are potential side effects if the U.S. House of Representatives- approved American Health Care Act (AHCA) bill becomes a law. Let’s look at the impact the law would have on the key constituencies.

Healthcare providers

With the most needy (the sick and the elderly) portion of the population left uninsured, the healthcare providers will once again be expected to foot a large part of their healthcare bills due to lack of coverage, non-payments, use of ER services, etc.

Healthcare consumers

With premium increases, credits/subsidies being based on age instead of income level, and states’ ability to change or waive pre-existing health condition coverage, a large percentage of older, lower income, and infirmed consumers would likely opt out of having coverage altogether. Young and healthy people would have less incentive to get insurance coverage.

Healthcare payers

The overall theme of the bill would result in a significant decline in volume of work managed by payers. That said, there would be numerous key operational implications for both private and government payers including:

  • Product development: Payers would end up having state specific plans, leading to increased administrative work around plan design and development activities. This would likely have a cascading effect on downstream processes (policy servicing, network and care management, and claims management) which are expected to become more complex and specialized.
  • Claims: Claims volume would likely dwindle, particularly among the old and ill, as a large percentage would have opted out of coverage.
  • Policy servicing: Payers would likely experience a significant uptick in queries from patients and providers, as uncertainty around topics such as eligibility, verification, and premium collection amplifies. However, demand for certain processes, such as HIX support, would likely be sluggish.
  • Care and network management: Care management programs would likely take a backseat, given their significant cost to enrollees and providers. Additionally, companies that had invested heavily in such programs could see decline in their ROI. Lower patient volumes might drive payers to tighten their provider network, leading to less work around network management activities.
  • Government (Medicaid): Reduced federal spend on Medicaid would likely push states towards a modular approach, and maybe even a shift towards a managed care construct.

With a decline in volume of work, it might not be surprising to see some of the larger payers insource certain processes.

The Healthcare IT and BPO service providers

A lesser volume of work across various value-chain segments would translate into lower revenue for third-party vendors. In fact, even though a law hasn’t yet been enacted, the healthcare business in some of the key players, such as Accenture and Cognizant, is already growing at a slower rate than their overall company growth rate. This impact could extend to the overall outsourcing industry. On the other hand, if states decided to exercise the power granted to them differently, service providers could also expect to see increase in the complexity of work around certain functions such as policy servicing and claims management.

Additionally, the ratified law might just be the impetus that mid-to-large buyers without GICs need to opt for bundled IT and BPO deals, which were traditionally a feature of mid-sized buyers.

Of course, the above-mentioned implications are for the bill in its current form. However, moderate Republican senators might well make massive changes to it, especially after the public outrage over certain parts of the bill.

It is going to be tough time of uncertainty for all stakeholders until a law – in whatever shape and form – is passed. In the meantime, payers and healthcare providers need to work closely with their respective service providers to ensure they stay afloat and come out on the right side of fence when the dust settles.
For a detailed analysis comparing the AHCA and ACA, please see our report titled: Acing Uncertainties in the Payer Market: The Trump Cards.

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