Healthcare Industry Trends & Opportunities for MBAs: Technology, Marketing, Big Data & Patient Experience

Healthcare Industry covers a broad range of functions, and expertise. The impact of the industry is evident with the rise in average life expectancy in OECD countries in 2011, exceeding 80 years. This is an increase of 10 years, compared to 1970. Switzerland, Japan, & Italy have the best life expectancy, giving hints on the impact that efficient healthcare systems can have.

Unfortunately, the life expectancy cannot be correlated with the expenditure per capita in these countries. For example, Switzerland was third ($5643 per year) in terms of Health expenditure per capita, while Japan was 19th ($3213) and Italy was at 22nd ($3012). This proves that the system has large inefficiencies, and perhaps genetics, climate, behavior (sexual & non-sexual), and timely & efficient delivery of healthcare services is much more important than expenditure for improving life expectancy & quality of life.

Affordable Care Act (ACA) – Opportunities in US

Although the manner in which the first phase of Affordable Care Act (US) was implemented is questionable, the reform is here to stay, and will redefine the $2.8 trillion US health sector. The Act has created a level field for smaller players. With increased competition, and innovation, the prices are expected to come down for consumers. In 2013, the spend is projected to be at $8,920 per capita, which would well rise to $14,000 per capita in 2019. This is a dangerous trend, even if you consider inflation. The ACA was designed to reduce the per capita spend on healthcare.

Post ACA Market

With the ACA gaining nationwide attention, consumers understand the difference between high-quality care & high-cost care. Three trends that have emerged in the market are:

1) Mobile healthcare technologies

Traditional approaches to communication & care have been replaced by Mobile healthcare technologies. In some case, Doctors have prescribed wellness apps instead of prescription drugs. Start-ups will leverage mobile technologies to compete with traditional players, while the latter is reorganizing, and changing the marketing messages to convey the value that their services offer.

2) More Health plan Options

The immediate impact of ACA is the 3-5 healthcare options that employers will provide for each employee. The healthcare providers have no other option but to focus on the benefits, and pursue the customers with the right price. With a centralized online marketplace, it has become easier for consumers to compare prices, and this would mean, the benefit and implementation of the plan would decide market share in the healthcare industry.

3) Risk Sharing Model

Earlier physicians were compensated based on a fee for service model. With the ACA, market will reward providers who are accountable, and offer personalized services at an affordable market rate. The ability of the healthcare service providers to increase cost and stay competitive will depend on their ability to offer outcome-based services. The risk-sharing model will give the onus of accountability to all stakeholders – pharmaceutical companies, physicians & healthcare support staff. Pharmaceutical companies have to offer evidence on their ability to improve health of the patient.

Implication for Entrepreneurs

With the market opening up for new entrants, the rise in start-up is inevitable. Healthcare sector requires large funds, and the Venture Capitalist investment trends in 2012 are signs that the Corporate – Venture Capital partnership will fuel the rise in funding for healthcare startups. For example, in 2012, almost 300 corporate venture arms have invested over $2 billion in life science startups, several folds higher than $108 million investments that 86 corporate venture arms invested in 1993. This would mean that startups, in addition to gaining capital support would also be able to leverage the managerial expertise, connections, and marketing expertise of the corporate partners.

Opportunities for MBAs

1) Technology

One opportunity that has already emerged for MBAs is in technology management, especially for larger corporates with huge data set. Unlike retail, and banking, the collection of data for healthcare services should consider one more factor – the sensitivity of consumers towards public & private health data. This can be especially challenging for professional who are used to analyzing data in retail and banking sector. The design of software, mobile applications, and processes for technology management should be based on this fundamental need to protect sensitive data.

2) Marketing

The entry of startups and new healthcare providers in the market has increased the need for focusing on marketing messages that convey the benefits of the plan in the most efficient manner. As we had seen in Pharmaceutical Management trends, over 1/3rd of the annual revenue is spent on marketing vs. 1/6th for Research & Development. Marketing has always been a key differentiator in the healthcare sector. What is interesting is the shift in the budget for Consumer Marketing.

Social Media & Mobile Marketing has taken precedence in 2013 with majority of marketing heads predicting that the increase in marketing spend would continue in these two channels. Although the total marketing budget in 2013 fell from $17.6M to $16.8M compared to 2012, the median average budget rose from $2.4M to $3.2M. The industry needs marketing professionals who can develop strategies based on the ever-changing business models, communication channels, and resource optimization techniques.

3) Big Data

The need for analysts in the healthcare sector is set to rise, as more information would be collected to offer personalized services & timely care. As we had shared in our earlier article about the rising demand for Big Data Managers, the same trend is set to continue for Healthcare sector as well. One factor that has driven this change is the Risk Sharing Model that requires physicians and pharmaceutical companies to offer evidence on their performance. Based on the evidence, consumers can select one health plan over the other. To offer evidence, large data will be collected, compiled, and offered to patients. Big Data Managers will have to develop strategies based on the performance of physicians and pharmaceutical companies.

4) Patient Experience

Another sector that is set to emerge in this competitive market place is customer experience - starting from appointment, diagnosis, treatment, and post-treatment services. Each touch point requires processes and feedbacks that would offer a seamless experience for the patient.

The Four Sectors offer several opportunities for Management professionals. We will go into details of Business Schools that are offering MBA in Healthcare in our next article. Bookmark the category page for more updates or you can follow us on Twitter.

Reference

Health at a Glance: OECD 2013 Report
PWC Healthcare Industry Report
Healthcare marketing trends Report
Big Data Revolution