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Maximize Value March 24, 2016

New Front Door to Healthcare: Payers Are the Hinge of Emerging Market

Partner, Health & Life Sciences, Oliver Wyman
Key Takeaway
With their strategic control of data & money flow, #healthplans can serve as connector in new #retailhealth market

Oliver Wyman's “The New Front Door to Healthcare is Here” report finds that consumer use of alternative sites of care, such as retail health clinics, is on the rise. More than that, the majority of consumers who have used “new front door” sites found the experience the same or better than a traditional doctor’s office. People like the new front door, and they likely are going to use it more and more. This has tremendous implications for all industry segments, and especially payers. According to Oliver Wyman Partner Howard Lapsley, payers shouldn’t be debating whether they need a new front door strategy; they do. The real questions for payers are what will that strategy be and how quickly can it be executed? Here, he presents five considerations of the new front door for payers:

1) Providers have consumer trust and credibility; retailers have brand familiarity, weekly-to-daily consumer touch-points, consumer insight, and broader health and wellness services. Payers must define their role in the new front door environment.

Market meaning: Payers need to play catch-up. Industry competitors and partners are better positioned and won’t wait for payers to define their role; they will just carve out share. With their strategic control of data and money flow, payers have an opportunity to be the connective tissue for this new ecosystem. They also could play a significant role in care management for people with chronic disease, partnering with new front door players to encourage preventive care that is enabled by convenient, 24-hour access, and further encouraged by retail discounts and incentives for things like prescription adherence programs. But first, payers must fully embrace the new front door.

2) Payers already have consumer-driven products in the Medicare Advantage, and individual market and exchange lines of business. This is a natural place to initiate front door strategies.

Market meaning: Payers need to rethink and redesign their exchange and individual-market products to create a better product that incorporates the new front door, among other innovations and differentiators. That means thinking beyond just a new network to incorporate additional consumer-centric elements such as discounts at participating pharmacies or obesity management programs available at partnering retailers. This adds value and convenience for consumers without material economic impact on premiums. It also forges new bonds with the consumer that can create “stickiness” and drive retention.     

3) Providers are the hub of today’s networks; but times are changing. Network structure and provider relationships in the new front door could get messy.

Market meaning: Structuring for the new front door likely means disrupting some long-standing provider relationships, particularly those with providers who are embedded in the current fee-for-service model and committed to the status quo. The ability to help physicians manage that turbulence is going to be incredibly important. Also, a payer could disrupt the market through a new front door relationship with a retailer (or tele-physician, or online partner) that changes where basic primary care is delivered. That, in turn, would change the nature of payer-provider contract negotiations, as well as the strength of each side’s relative position. Providers may not be happy, putting the onus on payers to prove the value proposition and demonstrate the “win-win” economics to all members of the ecosystem.

4) Payers will struggle to succeed in the new front door on their own. Strategic alliances can help payers bolster their market reputation and position.

Market meaning: The playing field is limited and the partnership ecosystem is small. Plans need to shore up their alliances now or be left out of the equation. No single entity possesses the core competencies to “own” the new ecosystem of access and convenient care; capability to form alliances and joint ventures is a critical competency for payers to have. At the same time, payers should be cautious about thinking of the new front door too narrowly and should not optimize individual components of the new ecosystem (Emphasizing retail clinics, for example, at the exclusion of other new front door options.) Instead, they should think about the individual components working in concert to increase consumer access, convenience, and engagement.

5) The new front door creates a new set of quality and performance-management issues.

Marketing meaning: Credentialing, routing, quality, safety, and fraud and abuse are all issues that payers will have to prepare for and manage in this new world. 

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