As the healthcare system in the U.S. evolves in response to the changing technology and regulatory landscape, patients are being recast as health consumers. Better informed and more conscious of costs, patients are expected to be smarter shoppers when it comes to deciding their healthcare options and spending their dollars.
The potential impact is immense. In 2017, McKinsey reported that “consumers now directly control $330 billion annually in out-of-pocket healthcare expenses, and the choices they make have the potential to affect 61% of all healthcare spending.”
Will being better-informed truly give patients more and better-suited choices? Will cost-conscious patients be successful at best allocating their healthcare dollars? Let’s take a look.
Patients Adopting Consumer Behaviors
The journey of the healthcare and retail consumer are very similar – Source
With the growth of the internet, patients have more and easier access to healthcare information. This is shifting the patient’s role. No longer the passive recipient of their physician’s knowledge and wisdom, patients’ eyes have been opened to new possibilities.
Most significantly, patients are taking action based on what they’re discovering online. They are asking more questions and demanding answers. Doctors and hospitals are responding with more and better communication. Some of this is happening in the examining room, and some is happening via content marketing aimed at building consumer awareness.
Patients seek out and use reviews and ratings they find online to compare and choose their medical providers. These ratings, whether provided by the government or by patient peers, provide patients with another source of data for consumer-driven decisions.
Conventional wisdom says that when spending their own hard-earned money, consumers will choose the most cost-effective option. Because of this, health consumers are expected to rein in overall healthcare spending.
With more information about their health, treatment options, and providers to choose among, patients are seen as empowered to make smarter decisions about their healthcare. They are expected to act as engaged consumers do in every other marketplace: Choosing the providers and products they use and determining who gets their healthcare dollars. And as with any other marketplace, these choices are expected to be informed by the consumer’s own values and aspirations.
McKinsey, reporting on its 2017 Consumer Health Insights (CHI) Survey, notes that many people would like to be better healthcare consumers, better able to make decisions that address their own healthcare needs. But notably, the survey found that “most of the respondents said that they do not believe they can do that today.”
Patients Adopting Healthful Behaviors
Choosing healthy behaviors provide patients the largest lever for improving their state of health – Source
The choices made by patients contribute significantly (as much as 40%) to their overall health. We typically think of these behavioral choices in simple terms, like exercising more or smoking less. But when a patient adopts the consumer role and begins to look beyond the traditional healthcare system, the choices available expand greatly.
Examples include choosing between alternative or traditional treatments, such as acupuncture instead of medication for pain relief. Or working with a fitness coach instead of a dietician to lose weight.
These options entail out-of-pocket costs that are borne by the patient. And any choice made reflects the consumer’s individual values and behavioral choices.
Uncertainty About Health Insurance Undermines Patient Choice
Most patients don’t understand how their health insurance benefits work – Source
Unlike most other consumer-driven transactions, there is a significant outside influence driving patients’ decisions: Health insurance.
Health insurance introduces cost uncertainty into virtually every patient-driven decision. As reported in the 2018 Alegeus Consumer Health & Financial Fluency Report, consumers don’t understand the basics of health insurance. Nearly half (42%) said they “aren’t confident they understand how health insurance works.” Half (50%) said they “don’t know what counts toward their deductible.” And nearly half (45%) “don’t know how to validate whether a procedure is covered by their plan.”
Alegeus also found that more than half (51%) of respondents couldn’t figure out what they would likely pay out-of-pocket during their plan year, which is a considerable source of financial stress.
This survey indicates that a sizable number of consumers don’t understand the basic language of health insurance and are unsure of their potential costs for treatments, products, and services. This makes it difficult for patients to know up front how much they will have to pay out-of-pocket, which in turns adds stress and hesitancy to their buying decisions.
More than half of patients say they can’t predict their out-of-pocket healthcare costs – Source
Major Pain Points for Health Consumers
Issues related to healthcare affordability represent major pain points for health consumers – Source
In a 2018 consumer study, Experian Health found that the biggest pain points in the healthcare consumer’s journey center on financial and administrative aspects of care. The cost of healthcare provided by doctors and hospitals remains a mystery to health consumers.
Between providers (generally) not publishing their prices, and patients’ limited understanding of their health insurance benefits, it is very difficult for patients to determine the cost they’ll incur upfront. This lack of transparency makes it more difficult for health consumers to make cost-based decisions.
Perhaps most disconcerting among Experian’s findings is that nine-out-of-ten consumers reported “vastly underestimating” the costs of a major medical procedure. With 62% of all bankruptcies in the U.S. attributed to medical debt, it’s easy to understand why consumers don’t feel confident making cost-based healthcare decisions.
Low healthcare system literacy gets in the way of health consumers making key buying decisions – Source
In a report entitled The Hidden Cost of Healthcare System Complexity, Accenture found that 52% of Americans have low healthcare system literacy. Nearly all of those surveyed had at least a high school education; half had completed college. So, low healthcare literacy rates can’t be solely attributed to lack of education.
Accenture found that those with lower literacy rates incurred health-related administrative costs at a rate three times greater than for those with high literacy.
Health economist Jane Sarasohn-Kahn, in her blog HealthPopuli, commented that the opportunity in Accenture’s findings is to “look beyond Old School health literacy education programs into how to leverage media, channels and platforms that everyday people use for other life-flows: personal banking, travel planning, or entertainment come to mind.”
McKinsey, in discussing its 2017 CHI Survey, observed that consumers are demonstrating an “increasing willingness to use less traditional healthcare providers” and this “is creating opportunities for innovators/disruptors, as well as more challenges for incumbents.”
The need for care isn’t going away. And if health consumers can’t shop easily for the care they need using the established healthcare system, they will look to less-traditional providers. The most obvious candidate is the wellness industry, which seems to be positioning itself as a disruptive force in healthcare.
Wellness Industry Provides Consumer-friendly Health Options
Nearly half of the global wellness industry provides treatments, products, and services that overlap with traditional healthcare – Source
The wellness industry offers a growing range of products and services aimed at improving a person’s physical, mental, and social well-being. Embracing a holistic, proactive definition of health, the industry provides an alternative to traditional medicine, which tends to focus on treatments for illness and disease management.
Wellness is big business. The Global Wellness Institute (GWI) reports that wellness is a $4.2 trillion global industry. More than half of the dollars it generates are for treatments, products, and services in categories that overlap with traditional healthcare, including:
- Healthy eating, nutrition, and weight loss
- Fitness and mind-body wellness
- Preventive and personalized medicine
- Complementary and alternative medicine
- Workplace wellness
These categories directly address the behaviors that improve overall health and are sought out by consumers. While there are some health issues that wellness products and services can’t address, there are many others they can. Stress management, nutrition, and fitness are among the most common.
The wellness industry has embraced technology. The internet provides a platform for health education, service delivery, and sales. Some wellness providers use telehealth technology to provide service remotely. Others gather health data using wearables. And many use the internet to deliver educational content and drive direct-to-consumer sales.
In contrast to traditional healthcare delivery, the wellness industry makes the customer’s journey far more frictionless. It’s comparatively easy for a health consumer to:
- Research their health concern
- Find a wellness practitioner, service, or product
- See how much it costs
- Make a purchase
With cost transparency, health insurance is less of a driving force in the wellness purchasing decision. Consumers can see up front exactly how much they will pay and make their buying decision. There is no need to get prior approval from a health insurer to have the cost covered.
Consumers Will Continue to Blur the Line Between Healthcare and Wellness
In identifying the requirements for enabling healthcare consumerism, McKinsey made the following observation:
“On average, Americans spend only a small proportion of each day explicitly focused on their health and healthcare. Yet at multiple points in each day—whether shopping at the grocery store, going to school, or interacting with colleagues—they are making decisions that affect their health. And they are seeking support for their healthcare goals from increasingly diverse sources.”
GWI has declared that a “blurring [of] the boundaries between wellness and healthcare” services has begun. Much of the technology that is reshaping the traditional healthcare system is also now embedded in the wellness industry. By providing price transparency and removing the friction from the purchasing process, the wellness industry makes it easy for patient consumers to choose its offerings.
How each system responds to, and engages with, the emerging healthcare consumer is likely to determine where their healthcare dollars ultimately go.