10 Transformative Trends: Part 5 Accelerating integration of system players
By: John Doyle, DrPH, MPH | August 27, 2015
(This is the fifth in 10-part blog series on industry trends that are shaping the future of healthcare. To see a report on all ten trends click here)
The steady march of organizational change across the healthcare landscape is blurring the lines between payers and providers -- and in many ways that is a good thing. The greater interaction between these two key stakeholder groups is helping to close many gaps in the care process, enhance quality of care, and streamline the delivery of treatment to patients in need.
Healthcare providers are becoming increasingly integrated, both vertically as hospitals and occasionally some payers acquire physician practices; and horizontally as physicians implement strategic partnerships to form multi-specialty practices. We see these integrated models emerging in Accountable Care Organizations (ACOs) and Patient Centered Medical Homes (PCMHs), as well as the gold-standard Integrated Healthcare Delivery Networks (IHDNs).
Such integration is championed by many in the industry who believe consolidation leads improvements in the quality and cost of care for everyone involved. These integrated business models result in improved quality of care through streamlined care coordination, more efficient financial operating performance, and better population outcomes — the “triple aim” of health care reform. At the leading edge of this trend, organizations are also integrating a financial risk management aspect with some hospital systems starting their own insurance plans to expand their roles and prepare for market changes, including the introduction of health insurance exchanges spurred by the Patient Protection and Affordable Care Act.
Despite the many benefits, there are those who worry that such concentrated buying power could have a negative impact by creating an unbalanced power structure in the market, where only one buyer interfaces with many suppliers, which could eventually drive up costs to payers and patients.
How should biopharma respond?
In order to align with this landscape shift and new market demands, biopharmaceutical companies will have to transform their business model from a transactional organization to more of an integrated, outcomes-based approach. To do that they must first study the intricacies of this new integrated healthcare landscape to understand the organizational dynamics of the various players and how they interact with each other to provide access, care, and reimbursement across the system. Understanding these network relationships will help business leaders recognize the interdependent needs that now exist in the marketplace, and the process and outcome levers that will help them achieve their own economies of scale in this environment.
At the same time, life science companies must react to the ongoing push for increased efficiency of their own internal operations – and the need to create a more integrated business model and infrastructure to more effectively adapt to this integrated environment. Historically, the independent silos of commercial, market access, medical affairs, epidemiology and outcomes research were designed to specialize in functional areas to maximize “component” performance in their business domain. However, the integration trend shaping today’s external market warrants a more interconnected mode. Those same components must still exist inside life science companies, but they have to be more organically linked and synchronized to optimize health system performance.
The blurring of lines between healthcare stakeholders may be seen by some as an alarming shift in the fabric of the industry. But it can act as a model for biopharma companies to understand the benefits on an interconnected operation, and to offer guidance on how to create connectivity that generates value for all players. Paying attention to these connections will help biopharma companies adapt their own internal structures, and position themselves to flourish in the increasingly integrated industry of the future.