Retail Health: The Future in Healthcare

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week's article.

Death and taxes are certain. Add a third: increasing out of pocket costs for healthcare.

According to the Bureau of Labor Statistics, for the period of 2012-2014 (the latest for which data is available), income before taxes increased 1.9% and overall consumer spending increased 4.0%. But in the same period, total spending for healthcare increased 20.6%, and for the 65% with private health insurance, premiums increased 39.1%. The combination of the economic recovery and deflated gas prices (-11%) helped to offset the impact, but the fact remains that healthcare cost increases hit household budgets harder than anything else, with no end in sight. Little wonder, retail health is getting more attention from entrepreneurs and investors, as consumers become activists in purchasing our goods and services.1

Getting arms around the scale of scope of retail health is tough. There appear to be nine major zones of activity that capture the full range of retail health activity:

  • Two of these zones involve household financing of their own healthcare (examples: 20 million who purchase individual insurance plans; bank loans that cover much of the 10.7 million cosmetic procedures annually; and payment services that finance medical debt for the 43 million households that have problems paying their medical bills).
  • Two zones involve conventional healthcare products and services that circumvent traditional physician-driven treatment recommendations (examples: the 2015 retail clinics; the 15 million who see chiropractors annually; and preference-driven tests and procedures that consumers increasingly demand).
  • Four zones that involve lifestyle and wellness programs and products (examples: the $24 billion fitness industry that employs 279,000 trainers; the $9 billion spent on probiotics and $34 billion spent on organic foods; and the 76 million adults who use some form of complementary/alternative medicine (examples: yoga, and herbal medications and vitamins).
  • And one zone that involves diagnostic exams funded directly by individuals such as EPT tests and self-paid body scans accessible in retail pharmacies.

The connective tissue that fuels these activities is digital—the social networks, online shopping services, smart phones and other devices that empower individuals to compare and purchase the products and services they prefer. More than two-thirds of the population are regular users of digital health offerings to assist in their decision-making.

Arguably, in traditional healthcare, retail health does not get its share of attention. It is rare that hospital boards include the full scope of retail health in their strategic planning. Data about retail clinics and the individual insurance market is usually considered, but the competitive landscape is usually defined as hospital vs. hospital, and “patients” are referenced rather than “consumers.”

Insurers know the distinction between the two: they serve members who pay hefty premiums for services they hope they’ll not need. Drug manufacturers spend $5 billion annually on advertising to encourage consumers to “tell your doctor” and even medical device companies are promoting their brands to consumers via ads. Industry analysis says 19% of total healthcare spending is out of pocket, and it’s growing. (3) Meanwhile, consumers are engaging more directly and readily accepting new models and modalities shunned, in many cases, by traditional providers.

The most significant challenge facing healthcare is its runaway costs. Increasingly, consumers are bearing the brunt of these, and they’re using their purchasing power to transform how care is defined, delivered and financed to address costs. They’re fueling the growth of retail health and rewarding organizations that seize on these opportunities. Traditionalists in healthcare must heed the warning “we never did it that way before” and take a fresh look at retail health.

Paul

PS: Beginning in March, Pulse Weekly will transition to a monthly blog. Much appreciation to the team that made it possible — Rebecca, Stacey, Shari, Elliot, Danny, Maureen, Melanie and others who got it out the door. To Joan, who is the soul of our efforts as a team. To John who provided news items for the Government Pulse. To Marina, who reviewed each issue giving it focus while also writing Industry Pulse. To Karmen, Jing, Brian and Sydney, our capable interns, who provided solid support. I am honored to have worked with them. And thanks for being our readers: that’s what makes this worthwhile!!

Note: Navigant would like to thank Paul Keckley for his commitment to the healthcare industry and the thought leadership he has provided over the last two years through Pulse Weekly. Beginning in mid-March, Pulse will express Navigant’s point of view through a variety of voices, featuring deep and broad expertise from across the practice.

Quotable:

“The hardest thing is not to get people to accept the new ideas, it is to get them to forget the old ones.”  – John Maynard Keynes

Or, as Max Planck, a pioneering 20th Century physicist once remarked, “Scientific progress moves forward, one funeral at a time.”

Sources:

1-Bureau of Labor Statistics Consumer Expenditures for 2014
2-Issue Brief: Retail Health, Navigant Center for Healthcare Research and Policy Analysis
3-“Dig deep: Impacts and implications of rising out-of-pocket health care costs
4-Mark Farrah Associates, “Health Enrollment Trends and Market Outlook,” andAmerican Society for Aesthetic Plastic Surgery “ASAPS Quick Facts,” and Consumer Financial Protection Bureau, “CFPB Takes Action Against Medical Debt Collector
5-Accenture, “Number of U.S. Retail Health Clinics Will Surpass 2,800 by 2017, Accenture Forecasts,” and Centers for Disease Control and Prevention, “National Health Statistic Reports
6-Statistia, “U.S. fitness center / health club industry revenue from 2000 to 2014,” and Bureau of Labor Statistics, “Occupational Outlook Handbook,” and Health Products Association, and Organic Trade Association, “State of the Industry,” and National Institutes of Health, “2012 National Health Interview Survey
7-Pew Research Center, “U.S. Smartphone Use in 2015
8-C. Lee Ventola, “Direct-to-Consumer Pharmaceutical Advertising

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

©2016 Navigant Consulting, Inc.