To survive in the digital health era, payers must put the consumer first

By Heather Mack
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In today’s healthcare environment, insurers may see the value of digital health, but decades-old infrastructure, workflows and IT departments may be holding them back from fully embracing the technological innovations that doctors and patients want and need. And breaking through those roasblocks starts with asking the patients what they want.

During the Healthcare Innovation Summit at Stanford MedX, payers, providers, investors, entrepreneurs and patients gathered to discuss the future of digital healthcare that prizes the consumer experience above all. The biggest hurdle to embracing digital, it seems, is accepting the fact that legacy systems must be knocked down to clear the way for operating methods that will embody the value-based care everyone is striving for.

“Insurers are actually ahead of the game compared to IT; they’re seeing the value of digital,” Basel Kayyali, senior partner at business consulting firm McKinsey & Company said during the Summit. “Digital is not a technology, but a way of doing things, that has massive potential to transform healthcare, but you have to rethink things.”

Going digital could have a $300 billion impact on the healthcare industry, and that all starts with the consumer, Kayyali said, outlining two tipping points it takes to transform an industry: consumer behavior change and scaled-up digital platforms. But the challenge with health insurance, Kayyali said, is that they are not set up to work in a digital way – they have spent the past 20 or 30 years focusing on driving efficiency and getting silos of functionality, while the true innovation comes from transforming the consumer experience. He referenced a well-known industry shake-up in the late 1990s as a teachable moment.

“Think about the music industry,” Kayyali said. “They were convinced they had moats around their businesses. When Napster came along, it was a major shift. It didn’t topple the industry, but it changed it. When I talk to health insurers today, the skeptical ones will make the same arguments – we have privileged provider-payer relationships. So it’s hard to manage risk. But that’s what they have to do. As a CEO of a health insurer, how do you innovate?”

Well, he said, you do something like health insurance startup Oscar Health, a small, new insurer that endeavors to differentiate itself with a positive user experience, proactive customer engagement, and an inclination to move beyond the traditional role of the health insurer -- which often means incorporating digital health technology. Digitally native firms will be the disruptors.

“Oscar is the Napster of the health insurance industry,” Kayyali said.

Kayyali’s co-presenter and fellow partner at McKinsey, Sri Velamoor, said consumers are ready to engage with health systems in new ways, citing the numerous apps, websites and digital patient engagement tools that they have embraced.

“First and foremost, healthcare has just not been focused on productivity,” he said. “They lose 16 cents on every dollar, compared with 1 to 2 cents in every other industry. What does that mean?”

It means payers must leverage what the consumer wants to overhaul their systems, he said. 

“Think about the experience of opening a platform that is easy to use,” Velamoor said. “Rather than relegating the efforts to IT departments or outside firms, health systems must rebuild the digital systems from the ground up. Oscar is a great example of the first thing you should see on a consumer website – it’s not 15 pages of legal information; it’s just two buttons that say ‘I want to buy insurance,’ or ‘I want to talk to someone.’”

Kayyali outlined steps insurers must take to create consumer-focused digital experience, starting with the consumers’ preference. Next, build a cross-functional team that can build a health insurance platform that feels like opening a bank account. Following that, have real targets for each team and give them the appropriate resources, make the most out of legacy IT by infusing it with new, entrepreneurial talent.

“The CEO and IT need to drive these shifts and be massive change agents,” Kayyali said. “Digital transformations are hard to execute. If the CEO and developer are not worried about this, they are probably not the people you want to be talking to.”