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In Health Care, It's David Versus Goliath

|Includes:ACN, ANTM, IHF, Walgreens Boots Alliance, Inc. (WBA)

"You can't teach an old dog new tricks," so the saying goes. And for incumbent business models in health care, nothing could be more true.

If anything, federal health reform is a catalyst for industry consolidation, where increased regulation will force payers and providers to seek scale advantages as profits decline.

While government subsidies might target alternative payment models such as bundled fees and care delivery platforms such as accountable care organizations ("ACOs"), business leaders will have to utilize external—non-government tethered—strategies for sustained organic growth.

Writing in the Lyceum newsletter Perspectives, health care consultant Erik Swanson notes:

    In order to survive, existing participants in the health care system need to change how they make money. Smart new entrants stand to capture substantial profits if they can achieve disruptive change.
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The biggest opportunity is in customer experience. Make it better, and your product or service will do just fine, thank you.

Swanson, who cut his teeth running corporate strategy for WellPoint (WLP) and advising the health care industry as a partner at Accenture (NYSE:ACN), observes:

    The introduction of insurance exchanges and a newly accessible individual market, for example, could ignite a consumer-driven revolution in how health care is financed and delivered by emphasizing retail-based models and customer experience.
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Another opportunity is in information and advice. Health care data is already plentiful, and will continue to grow exponentially. Until businesses can move beyond just selling formatted data, and turn it into interactive advice, data will only clog space in some vast server farm.

Swanson points to efforts by Walgreens (WAG) and Averde Health that target improved customer experience. He also gives the example of Blue Shield of California, CALPERS (a large employer), Hill (a physician group) and Catholic Healthcare West (a large hospital system) partnering to create an integrated system, which other participants elsewhere in the country might seek to imitate.

Read his article here.

Despite the challenges of health reform, innovators enjoy a massive advantage unlike any other industry: incumbent inertia. Whether big insurance, big pharma or big hospital, the strategic goal of existing players is to do the same thing, just in a bigger way.

Like David and Goliath, it could only take a smartly aimed slingshot to take down a lethargic leviathan.

Consumers will be there to lavish the rewards.

Disclosure: "No positions"