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Drive Innovation June 17, 2020

Is It Time for a Digital-Only Health System?

Principal, Health & Life Sciences, Oliver Wyman
Partner, Health & Life Sciences, Oliver Wyman
Partner, Health & Life Sciences, Oliver Wyman
Key Takeaway
It’s not out of the realm of possibility to deliver robust comprehensive care without owning physical assets if one owns the clinical talent, and through it, the patient relationship. #OWHealth

In 1989, a new type of bank called First Direct launched in the United Kingdom, having no branches, tellers, or any customer-facing physical presence. While Automatic Teller Machines have been in wide use since the early 80s, and it was once common to call a bank’s call center for some everyday banking needs, the idea of never setting foot in a physical branch was revolutionary for most consumers. At the time, most banks used the term "telebanking" to indicate a special way to interact with them, outside the normal flow of physical interaction in the local branch. In fact, one of the first fully functional direct banks in the US was named TeleBank.

Fast forward to 2020 and the line between conventional and direct banks has blurred and the term telebanking has fallen out of use. Today, a non-physical access mode, be it phone, mobile or web is the first choice for most consumers when it comes to their banking needs. We don’t need to "telebank" because it's now the default.

What Does This All Mean for Healthcare Providers?

Will care delivery follow financial services’ footsteps with more volume moving to a virtual mode over time? How should incumbents prepare for the future?

Two years ago, we envisioned six future health system archetypes. These models were tied to six key concepts: scale (like Walmart or Costco), experience (like Delta or Starbucks), portfolios (like Unilever or Proctor & Gamble), leaders (like Tesla or Apple), population health, (like GE or Siemens), and the non-hospital system (like Charles Schwab or Bonobos). The last concept – “the non-hospital system” – was one it’s safe to say we considered at that time as least likely of the bunch to come true. Yet, as industries around the world from renowned coffee chains to major airlines lay off workers, file for bankruptcy, and essentially collapse under COVID-19’s weight, we’re now realizing that the “Non-Hospital System” model is perhaps the last one of these six standing.

As we continue this reflection onward, the greater industry is wondering to what extent the digital-first health system is likely to become commonplace. There are two main reasons for this interest.

The first reason is the rapid acceleration COVID-19 provided to virtual care adoption in recent months. In a period of three to four months, we’ve seen digital care adoption increases mirror a decade’s worth of innovation. (For example, private-insured medical claims volume jumped from 0.2 percent to 7.5 percent in March 2020, compared to 2019.) The coming months may see some re-balancing back towards physical care as providers re-open their physical sites. Yet, it has become evident digital modalities will continue to assume a large, meaningful part in the care delivery portfolio, for example through the Centers for Medicare & Medicaid Services’ (CMS’) recent indications of making some regulatory changes permanent.

The second reason (and less visible than the above but equally important) is payers’ increased demand for full-service, integrated digital care solutions. Even pre-COVID-19, certain payers announced digital-first or digital-only products offering low-cost and nimble coverage options. Post-COVID-19, more payers are looking into this space to address an expected surge in demand for low-cost health coverage options by employers tightening their belts or new unemployed consumers. So far though, there is a dearth of comprehensive digital care solutions that payers can use to create a robust delivery network.

Current solutions are focused on urgent and primary care at best, leaving a gap in digital access and coordination of downstream care such as specialists, diagnostics, and acute care. We believe there is a gap in the market now for a new type of care delivery entity to emerge and meet this need.

Current solutions are focused on urgent and primary care at best, leaving a gap in digital access and coordination of downstream care such as specialists, diagnostics, and acute care. We believe there is a gap in the market now for a new type of care delivery entity to emerge and meet this need.

Is Digital Health the Leading Future Modality? 

Below, we put everyday constraints such as existing physical assets, regulatory limitations, and legacy operating models aside and imagine what a full-service healthcare provider looks like if it is to employ a digital-first approach while still providing high-quality care for patients. In other words, can a health system provide integrated, end-to-end medical care across the care continuum while employing a digital-first (or even a digital-only) approach? And what are the implications of such models on the nature of competition, consumer preferences, and insurance product design?

To test the feasibility of such care models, we will consider the common use cases for patients across the care continuum and how a digital-first strategy may transform their health. We will then take a step back and consider what the implications of such an organization are on the broader healthcare ecosystem. Let’s begin:

1. Urgent care. This is perhaps the best-known use case for digital care today, popularized by innovators such as Amwell, Teladoc, and others. Urgent care includes the basic, often transactional care designed to solve a low-level acute need. With traditional challenges of remote diagnostics falling away with new connected devices, a digital modality for this use case is becoming more prevalent. Putting it all together, it's easy to see how most, if not almost all care (aside from bleeding, orthopedic injury, and the like) can be delivered digitally.

2. Primary care. In contrast to urgent care’s transactional nature, primary care is about longitudinal provider-patient relationships and holistic health management. These are critical elements that would likely retain their importance, particularly for the subset of older, sicker patient populations. Still, as recent experience has shown, the vast majority of visits can be performed digitally in various synchronous (phone, video) or asynchronous (email, text) modes even for these high-need populations. For the minority of services requiring in-person interaction – whether for clinical or relationship-building reasons – a highly focused physical infrastructure can be used. In fact, a flexible care team working from home or a centralized back-office center who visits patients at home when needed can be used, thus negating the need for a physical practice altogether. Finally, we recognize some populations such as the elderly may opt for a physical-centered care model. Still, as digital literacy grows across all society segments, we expect this digital-first model to solve for most populations.

3. Diagnostics and pharmacy (like labs and imaging). While this use case generates significant economic value for health systems today, there is a limited need for a digital-oriented health system to own these assets. Patients can be referred to and scheduled with local operators for imaging studies. Specimen collections can be performed either at home, at the local pharmacy, or another site and prescriptions can be delivered directly to patients’ homes. Many other measurements can be done at home such as electrocardiogram (ECG) measurements, forced expiratory volumes, and grip strength.

4. Specialty care. The office-based portion of non-procedural (surgical) specialty care is another case where most services can be (and often have been) delivered digitally. A direct physical examination is needed prior to a decision for a surgical procedure and therefore a small physical footprint will be needed. However, the pre-screening of patients for elective surgery, especially those cases such as back surgery where substantial numbers of patients may not wish to have surgery, can be done remotely. This should be thought of more for diagnostic purposes versus on-going treatment, as innovators are now proving even non-surgical therapies can be primarily delivered virtually.

5. Procedures and surgeries. On the surface, this use case is the most challenging to deliver digitally. While the care needs to be delivered physically, many services are technical/procedural in nature and thus lend themselves well to sub-contracting with local operators, in the same vein as imaging studies. This includes services where the specialist’s presence is not required such as infusion or even those where the procedure is becoming a commodity and given a satisfactory level of quality and safety. Or, where the physician relationship doesn’t matter such as colonoscopies. Furthermore, the downshift in care settings from inpatient to outpatient and ambulatory care settings, driven by clinical advancements and reimbursement pressures, has been recently accelerated by COVID-19 infection concerns. As this trend continues, we can expect our future digital health system to own only a very focused set of ambulatory procedural centers for outpatient use. It may even be possible to forego any physical assets ownership completely, instead of contracting with ambulatory operators that can provide an efficient and safe environment.

6. Acute and post-acute care. Despite the above, there will be times when acute care settings, whether emergent or post-surgical need, will be required. However, as large, multi-specialty physician groups have been demonstrating for years, it is possible to nurture long-term patient relationships, including the occasional hospital stay, without operating one. Instead, the task of operating the facilities can be left to large-scale, ultra-efficient players providing the lowest-cost, highest-quality environment while the digital-first system continues to own the clinical talent and subsequently, patient relationships. With the advent of Hospital at Home programs, the frequency and length of acute stays can be reduced and shortened, thereby having patients spend more time cared for at home versus at the hospital.

7. Navigation and guidance. A health system not spending mindshare and capital in managing vast (and depreciating) physical assets can devote attention to building a sophisticated and consumer-friendly care experience and actively support the patient along their health journey. Not only can patients be actively guided throughout their care episode, say, to schedule the required specialist referral, but a truly patient-centric experience will find ways to engage people in their daily lives, when they are not actively seeking care, by encouraging healthier lifestyles and anticipating their needs.

In summary, a digital-oriented health system can meet the needs of its patients with limited to no owned physical assets. When physical care is required, it can be sourced locally from operators. The key deciding factor whether to own any local talent in a market will be whether the system wants to own physically intense episodes of care where specialists are forming strong patient relationships over a period of time with patients – for example, orthopedic episodes. 

Digital-First is Still Reliant on the People Behind the Tech

Overall, it’s become apparent evolving clinical practices, consumer preferences, and communication technologies make going digital a feasible modality. To be clear, we are not implying patients can be cared for without ever setting foot in a healthcare facility. Nor are we arguing the role of human clinicians can be replaced by artificial intelligence and similar tools anytime soon. In fact, we strongly believe human-driven medical knowledge and decision-making, coupled with patient-doctor relationships are, and will, continue to be the cornerstones of healthcare delivery. But these are exactly the reasons why a digital-first approach is possible.

Integrating clinical knowledge across specialties and creating long-term relationships with patients no longer requires a large physical footprint. Instead, these needs can be met virtually. The key to providing low-cost, high-quality, and consumer-centric care is about great clinicians earning consumers’ trust while working in an integrated manner to care for and guide patients through their health journey. Physical assets are necessary but must be available intermittently and for specific purposes.

Beyond clinical care delivery, it’s worth noting the impact COVID-19 had on office environments and work-from-home dynamics. A future digital-first health system should be able to use a pared-down corporate center (pared-down versus today’s standards, that is) to house its back-office functions and to provide a central location for clinicians to operate from while providing flexibility for employees wishing to work full- or part-time from home.

Will Healthcare Mirror Banking?

In this article, we’ve explored the feasibility of establishing a digital-first, full-service health delivery model. We’ve reviewed the drivers for such a model to emerge and identified a gap in current models to meet plan sponsors’ needs for more efficient health delivery. We then evaluated the impact on major clinical use cases. We concluded it’s not out of the realm of possibility to deliver robust comprehensive care without owning physical assets if one owns the clinical talent, and through it, the patient relationship. We also stressed the continued importance of human clinicians and doctor-patient relationships. 

Nearly 30 years ago, the first direct bank was started and since then, the way we used the financial system radically transformed. Still, most of us own accounts in traditional brick and mortar banks – although we rarely visit them in person anymore! Will healthcare follow the same path? And which players will evolve and rise to the opportunity? Only time will tell. What is becoming evident in the meantime is the possibility to deliver robust comprehensive care without owning physical assets if one owns the clinical talent and through it the patient relationship. How far and how fast the industry evolves in this direction remains to be seen. 

Stay tuned for Part 2 of this series where we will detail three archetypes for a digital-led health system, ranging from digital-only to a hybrid digital/physical one.

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