Digital disruption in the US healthcare industry could put almost $300 billion — primarily, of incumbents’ revenue — into play, according to a new report from McKinsey & Company.
The report examines the impact of engaged, tech-enabled healthcare consumers and the impact digital/mobile healthcare technologies may have on the healthcare landscape in the US.
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The authors note over 1000 companies are developing new digital/mobile technologies that should allow consumers to take greater control over their healthcare choices.
“Consumers may increasingly resist incumbent-imposed restrictions precluding them from deciding where, when, how, and from whom to seek care,” the report states.
Shaking up the incumbents are technologies such as pricing transparency applications and online scheduling tools, and apps that give consumers the ability to own and control access to their health data.
If the changes become widespread, up to about $270 billion of incumbents’ current revenue and another $13 billion to $24 billion in new revenues could be contested due to price compression and shifting demand and supply dynamics, the report states.
To come up with those numbers, McKinsey examined demand for and pricing of existing healthcare services; new revenues the technologies might bring in; and operational efficiencies they might create.
The findings come with a big caveat; the effectiveness of these technologies is yet to be proven. “The healthcare sector has confounded many prior predictions of technological evolution (in part because of the typically inverse relationship between age and need—younger people tend to adopt new technologies more rapidly, but older people usually have greater health- care needs).”
Despite disruption likely being five to 10 years down the track, McKinsey urges incumbent healthcare providers and insurers to evolve their business and operational models.
“The rise of financially accountable, technology-enabled consumers could splinter today’s healthcare value chain . Incumbents must decide how they want to respond.”
Insurers and providers largely control the healthcare experience for consumers. McKinsey is predicting that control will shift more and more into the hands of consumers.
“Winners will be defined by their ability to ‘know their customers’ on a more intimate level than standard market segmentation models allow. Understanding context is critical for understanding how consumers may behave in a particular health scenario. For example, a physically active consumer who strongly values her ability to exercise may behave as a price seeker when shopping for primary care services but could be completely price indifferent, and highly attuned to care quality and outcomes, when looking for an orthopedic surgeon,” the report states.