Truly understanding your core business is a tenet for any company—but especially for healthcare payers. Health is central to their name and business, but that can take on several meanings.
That said, it is possible to diversify markets and revenue streams without compromising the successful core business. We tackled this topic in our fall Relevant Health Roundtable.
Representing decades of payer and healthcare data experience, our esteemed panelists included:
Keeping Health at the Heart of Operations
To kick off the event, moderator Rajat Relan, Client Partner at Concord, asked each panelist to describe strategies they have used to enhance a core business model. Paul Crowley at Medica explained managing healthcare financial risk was at the center of its objectives. "Diversification of placements, provider relationships, and contracts are the key to managing that core business cost," Crowley explains.
But for Chuck Martel and ConcertAI, the conversation around the core business is more nuanced. "The way I would characterize our business is a real-world evidence-generating system for oncology," Martel says. "So, from a core business standpoint, it's really about how we generate more evidence for that."
Paul Olson explained another way to expand the core business through geographic and member growth. "What we found in that process is that geographies are very different, and you can't always have the same approach. I imagine all of you have found that as well. Healthcare is local; you need to be able to customize that," Olson says.
Panelists also discussed how data is essential for their core business. Olson explained that he's a supporter of operational transparency, meaning to share as much information with customers as possible so that they understand how they factor into the system. Democratization of data also applies to internal operations, with departments able to spin up machine learning models on demand, thereby gathering deeper insights from their data that would take months or years by traditional means.
ConcertAI's business is data, but Martel emphasized the importance of the other two "technology levers" – elasticity and talent. "There's a lot of capability now that didn't exist before in computing from an elasticity standpoint," he says.
To wrap up the discussion on data, Crowley said, "I think technology and data is top of mind and part of every discussion we have regarding investment and how we balance creating a stronger foundation of data and technology with our growth metrics and growth strategies."
Diversification for a New Normal in the Marketplace
Payers are looking for new ways to diversify their revenue streams as the dust settles from the pandemic. Healthcare has changed, and payers are looking to change their models as patients change how, where, and when they receive care.
At its essence, diversification is a business strategy. And according to Crowley, payers and adjacent businesses seek to diversify for two main reasons: to limit risk and to bring about sustainable growth.
Diversification for healthcare payers can envelope several different areas. For example, it can mean expanding to new, previously unserved geographies. It can also mean offering new products, such as Medicare Advantage, in markets where individual healthcare insurance is already available. Or diversification can mean expanding into new market segments like ancillary insurance products.
Crowley pointed out that, like clockwork, executives and board members would discuss ancillary product expansion every two years. It was suggested as an attractive option because ancillary care can use the same distribution channels as healthcare products, but leaders feared that it would be detrimental to the overall progress of the organization. Every time, it has taken discipline to focus on Medica's charter to serve the healthcare discipline as its core business.
Closing Thoughts on Core Business
To conclude the panel, Crowley, Martel, and Olson shared the trends they anticipate in healthcare diversification in the coming years.
Olson noted two trends – a shift to more social platform capabilities as Millennials consume more healthcare and acquisitions that diversify core business offerings. In addition, he observed that many healthcare offerings could be classified as commodity utilities and fall into a different category altogether.
For Crowley, the key trend is value-based care. "I think that will play into how we think about the next leg of diversification over the next 3-5 years," noting that Medica has not ventured into owning clinical care sites in the past, but that may change.
Martel echoed that emphasis on value-based care. "I think we're going to see a lot of hopes and dreams dashed on the rocks of unrealistic expectations and aspirations, with many smaller firms taking a very optimistic view of their prospects. Well-funded payers will be able to bring those assets to bear and roll up where it makes sense."