In 2000, Reed Hastings pitched to the board members of Blockbuster the idea of a subscription-based video delivery service. A fixed monthly fee for all access and no late fees. He was literally laughed out of the boardroom. While it may seem like a distant memory now, Blockbuster monopolized the video rental industry in the 90s. Like Starbucks, there was a Blockbuster at every corner. They had no incentive to change their business model because they were actually profiting from the asymmetry of the rental market (i.e. late fees, fee per selection, etc.). And as we’ve all discovered today, Blockbuster filed for bankruptcy in 2010. In parallel, Hastings founded Netflix which is currently valued at more than $32 billion dollars today. Not too bad.
The Digital Economy
With the advent of the internet and mobile computers, the digital economy has exploded. This dramatically changed the way we move information, services, and products. You no longer have to wait in line at the bank to deposit your checks. There’s no need to waive down a cab on the street if you’re in a hurry. Amazon can even set up a recurring grocery and supply delivery service right to your door. We are undergoing an Information Revolution and healthcare is not immune from this movement.
Constrained by Space and Time
In the business of healthcare, hospitals have traditionally served as an entity where patients and providers are brought together. In return for providing physical space, staffing and infrastructure to the patients and providers, the hospital receives a technical payment from the payers. Over the past few decades, as we see U.S. healthcare expenses ballooned to more than 3 trillion dollars per year, the government is scrambling to curb expenses. This creates pressure to reduce hospital days for patients at a time when the patient population is increasing. And here lies the focal issue for the modern hospitals: a finite number of beds, a finite number of hours where providers are available, and a pressure to see more patients with less resources.
As we’re discovering, a sizable portion of the care that we receive is just information and recommendation. Most of the time the orders are carried out by the technicians and the “deciders” don’t necessary need to be physically present. In other words, do we really need a 7 figure-salary doctor to drive 2 hours to spend 3 minutes on each of the patients? In fact, there’s evidence to suggest that patients may even heal faster with the the right titration of in-person care at their own home.
The Gig Economy
Healthcare frontline providers are some of the most dedicated people I’ve met. but the turnover in the industry is incredibly high. In an economy that pushes our providers to do more and more with less and less, the healthcare industry needs to embrace a smarter work environment. The next generation of healthcare professionals value flexibility and independence over rigid old-school healthcare standards. They’re no longer spending hours memorizing symptoms and obscured names because Google does a much better job with that. They don’t want to have to drive 2 hours to come to a crowded, often estranged place (as most hospitals are) to simply talk with their patients.
Telehealth or a virtual platform creates that opportunity for the next generation of healthcare professionals to integrate their passion into their lives and break loose of this industrial/hierarchical culture of top down medicine. This is the essence of the gig economy and it’s better for the patient as well. Physicians can easily share their resources with other providers and stay in touch with their patients as they travel. In fact, this helps to eliminate the transactive nature of healthcare and brings back the element of attention and care that we know our patients value the most.
A Virtual Healthcare Experience
For decades, hospitals have served as a physical entity, a broker of sort, that allows for the transaction of care between the patients and the providers. Hospitals have been able to maintain that monopoly because of the asymmetry involved with healthcare delivery. But with the advent of the internet, and social media, information is readily available which means your patients are better informed. Digital consumerism and ease of use will help drive the informed patient towards the most efficient healthcare system, not necessarily the institutions with the best toys.
Hospitals are also seeing pressures from non-traditional entities such as insurance companies (BCBS, AETNA) partnering with digital platforms (AmWell, Teladoc, DrOnDemand) to disrupt the process of care delivery. The reality is that patients and providers NO LONGER NEED PHYSICAL HOSPITALS to deliver care anymore just like customers don’t need physical banks to deposit checks. Every year, we see billions of dollars being spent on standing up new hospitals but very few have actually invested in a virtual extension of their entity. Instead of putting up greater barriers such as reimbursement restrictions, cross-state licensing barriers, healthcare leaders and legislators should embrace the new virtual healthcare economy or… they can expect the same fate as Blockbuster did.