The healthcare industry is on the verge of a disruptive change that will significantly reshape our experiences and reorient our expectations across the provider and payer value chain.

1. A Vision for U.S. Healthcare’s
Radical Makeover
Just as the publishing and music industries were disrupted
and rebuilt by powerful transformative levers, the healthcare
industry is on the verge of a similar disruptive change that
will significantly reshape our experiences and reorient our
expectations across the provider and payer value chain.

2. The U.S. healthcare model is unsustainable. This is not news. What is new, however,
is the very tangible evidence of an industry being reinvented, from how care is
managed, to how it is paid for, to how it is delivered.
Healthcare’s unsustainable cost equation can be highlighted in numerous ways:
healthcare as a percentage of gross domestic product (17.9% in 2011);1 healthcare
expenditures as a percentage of the federal budget (23% in 2011);2 and the transfer
of rising healthcare costs to employers and consumers (since 2008, the annual cost
of insurance coverage for a family of four has risen nearly 25%, from $15,609 to
more than $20,728).3 These factors have led to additional concerns: a lack of clarity
and transparency about prices, dissatisfaction among patients and physicians with
how care is delivered and growing questions about how to pay for care.
The industry, as well as state and federal agencies, have been responding to these
issues, generating these strong market currents:
• Redistributed accountability and risk, as lines between payers and providers
blur. Large healthcare plans are acquiring hospital systems and home care com-
panies; hospital systems create and sell health plans. We see payer and provider
clients working more closely together to improve quality while finding ways to
reduce the costs of therapies and procedures.
• Rise of integrated health management. The industry is experimenting with
Accountable Care Organizations (ACOs) and Patient-Centered Medical Homes
(PCMHs). These entities coordinate a comprehensive range of care for patients
and consumers under a single, often virtual, roof. ACOs and PCMHs hope to
streamline the healthcare value chain for consumers and patients, eliminating
the need for them to find their own specialists and coordinate their own care.
• Increasing vertical/horizontal integration and diversification. Merger and ac-
quisition activity is brisk across the industry. Among our client base, we see sig-
nificant interest in broadening from local to regional and even national customer
bases through mergers and acquisitions. Healthcare players are also expanding
their expertise, with health plans purchasing caregivers (e.g., WellPoint intro-
duced a patient-centered primary care program) and providers launching their
own health plans to consumers, such as that administered by the University of
Pittsburgh Medical Center.
• The “retailization” of healthcare. Healthcare clinics are now available in phar-
macies, big box retail outlets and grocery stores, and such outlets will grow.
More marketing of services and health plans will be direct to consumers, with
the industry offering more individualized products and a greater emphasis on
customer service.
Despite the momentum behind these market forces, they cannot transform health-
care’s business model. These initiatives – the M&A activity, ACOs, redistributed
financial risk, etc. — generate only incremental improvements in cost reduction,
quality and efficiency. Conversely, creating a truly sustainable foundation for
healthcare will require the industry to eliminate substantial costs, embrace new
ways of delivering care and improve the quality of that care.
Achieving those goals means the industry must combine incremental improve-
ments with the power of truly disruptive transformative forces, from new
technology, to radically different diagnostic tools, to virtualized means of caring for
patients. In other industries, similar disruptive forces have dramatically changed
cost and service delivery equations. Think along the lines of how Apple transformed
the music business with the iPod, how Amazon is reshaping publishing with its
electronic delivery model and how Netflix reimagined the home video market.
2 FUTURE OF WORK September 2012

3. Disruption and reinvention of the same order is required in healthcare. And it is
already occurring. Signs of radical transformation are emerging, driven by powerful
levers that are enabling the reinvention of the industry’s business model.
Transforming Healthcare’s Business Model
Rethinking healthcare to create a new, sustainable business model requires
existing players, as well as newcomers to the industry, to disrupt current models
by harnessing the following transformative forces — some of
which already are reshaping the industry.
Creating a truly sustainable
• Technology: Portions of the healthcare value chain will be
radically transformed as segments of the industry are dis- foundation for healthcare
intermediated through new business models, new software
and new diagnostic capabilities. Some examples: The U.S. will require the industry to
Food and Drug Administration is evaluating whether certain
prescription drugs could be dispensed through self-serve eliminate substantial costs,
kiosks that ask patients about their symptoms and make
drug selection suggestions.4 Tiny robots tethered to physi- embrace new ways of
cians assist in a variety of surgeries, and researchers say
these are precursors to self-guided nanobots that will revo- delivering care and improve
lutionize surgery.5 Researchers at the University of Geor-
gia have developed a quick, inexpensive way to test for flu
the quality of that care.
viruses using nanoparticles that can be used in any clinic.6
Innovations like these shake up healthcare’s traditional structures, making it
possible to eliminate costs while maintaining and even improving access to and
the quality of care.
The Emerging Healthcare Ecosystem
Call Center
Coaching
Family Health
Pharma • Disease Management Manager
Drug Info Coaching
• Disease Management
Education
• Wellness Education
• Disease Management
Rx Registries Services
Disease Management
Rx Behavioral Data • Wellness Incentives
Coaching
Rx Generic Profiles Dependent Monitoring Alerts
Rx Education
Interventions Periodic Reports
Wellne
ss Outcom
es/Beh
avior U
Rx (Refills) pdates
EHR/PHR Allergies
Concomitant Rx’s Child Health
Adverse Events Drugs Monitoring
Co-Pays Alerts
Consumers School Nurse
Rx Vitals Updates Treatments Rx’s Case Manager
Rx Medical Conditions Benefits Eligibility Wellness Programs
Rx Treatments ePrescriptions Formularies Wellness Incentives
Rx Medical Outcomes Replenishment Claims Payments
Rx Compliance Wellness Incentives
Treatments Benefits Eligibility
Rxs Formularies
Rx Registries Payments
Rx Medical Outcomes
Premium
Benefits Eligibility Discounts
Formularies Employers
Payments
Healthcare
Providers Employee
Outcomes Payers Enrollment Data
Figure 1
COGNIZANTI THOUGHT LEADERSHIP 3

4. • Virtualization: Technology innovation will create new business models capable
of providing care anywhere and allowing new entrants to leapfrog bricks and
mortar and go directly to virtualized, integrated healthcare models. All health-
care will not be local.
This is already becoming true: Web sites such as Consult A Doctor (consultadr.
com) and Virtuwell (virtuwell.com) let anyone register and receive an e-consult
from a physician or other caregiver. Partners Healthcare offers e-mail-based
second opinions to patients and their physicians. Patients in remote villages
Quick Take
Mobilizing via M-Health
Helping consumers and patients fill an active manage their health plans from a variety of
role in healthcare is an essential component computing platforms, including smartphones
of the new healthcare business model. The and tablets. The app enables them to search
explosion of mobile devices and apps dovetails for providers, receive immediate explanation of
with this requirement. Mobile health, or benefits notices, get messages about coverage
“m-health,” fulfills two key needs: enabling changes, obtain a secure ID card for use at
consumers to manage their health service rela- physician offices and emergency departments,
tionships more easily and giving individuals and use a variety of ease-of-use features, such
powerful portable tools for managing chronic as click-to-call.
conditions and staying well.
Another app offers personalized wellness
One application we have developed at our management via smartphone or tablet (see
clients’ request will allow consumers to easily below). This app enables patients and members
to easily enter or automatically download
health information, such as blood pressure,
blood sugar, cholesterol levels, weight, body
measurements, etc. Then, in easy-to-read
charts, the app shows them how their current
results relate to their goals and offers a variety
of tips and information to help them achieve
those goals.
Authorized physicians may access data from
the app to monitor patient progress more
frequently, without the time or expense of
office visits. Plans and physicians may also
customize the app to be alerted to changes in
a patient’s condition that require intervention.
Employers may even use the app in wellness
campaigns, with games and graphics encour-
aging participation. The objective of these
features is to prevent minor conditions from
escalating to more serious problems that cost
more to treat and manage.
Apps like these will put health management
tools literally at the fingertips of consumers
and patients, giving them the more active role
in their health choices they are demanding —
and that will help reshape healthcare.
4 FUTURE OF WORK September 2012

5. throughout the world are accessing high-quality healthcare through mobile and
telepresence applications.7
• Globalization: Due to technology advances and process virtualization, the in-
dustry will have access to the highest-quality/lowest-cost services anywhere,
creating a unique opportunity to transform care delivery in the U.S. and around
the world. Sustainability will require leveraging global supply chains and oper-
ating systems for quality and talent (e.g., offshore reading of radiology images
and coding medical charts), thus eliminating major portions of cost. Similarly,
U.S. health providers can offer their expertise to expanding global markets, as
Children’s Mercy Hospitals & Clinics in Kansas City has done
in creating a telemedicine partnership with a large hospital
in Guangzhou, China.8 A logical next step is making
• Disruptive innovation: Sophisticated medical diagnostic
procedures will continue to move to less expensive set-
gene-sequencing part of a
tings, from hospitals, to physician offices, to retail clinics, typical checkup so that a
to homes. Researchers and entrepreneurs can draw on the
200 terabytes of human gene sequence data generated by person’s care can be truly
the 1000 Genomes Project, which is available free and on-
line.9 Small labs can already use more affordable genome personalized for the ultimate
sequencing tools from companies such as Roche and Illu-
mina, Inc. A logical next step is making gene-sequencing in preventive care and
part of a typical checkup so that a person’s care can be
truly personalized for the ultimate in preventive care and disease management.
disease management.
• Next-generation analytics: Clinical decision support systems that leverage
artificial intelligence and big data will revolutionize diagnostic practices, per-
sonalized care planning and actual patient care. Blue Health Intelligence, the
analytics arm owned by Blue Cross Blue Shield Association, has launched a pilot
program using predictive analytics to improve the care of Arkansas diabetes
patients while reducing costs.10
Similarly, our clients increasingly are using the “big data” stores generated by the
explosion of cloud-powered mobile and social computing with advanced analytics
to enable fact-based decision-making. Doing so moves companies from historical
reporting on transactional data to more proactive planning, enabled by the rich
insights contained within the terabytes of data generated by clinical systems.
• Demographic shifts: Consumers want their healthcare accurate, fast and reli-
able, and are prepared to be more involved in it. We are seeing an explosion in
self-care fueled by mobility, technology and diagnostic innovation. More than 44
million healthcare apps will be downloaded this year, and the number of U.S. pa-
tients remotely monitored will rise to 3 million.11 Evidence is growing that mobile
health, or “m-health” helps individuals take better care of themselves. Mobile
remote coaching and financial incentives improved diet and wellness activities
among patients managing chronic conditions, according to a study backed by
the National Institutes of Health.12 Our clients are working with us to develop
apps to make care more convenient and personal for consumers, patients and
physicians (see sidebar, next page).
A healthcare model incorporating these forces would necessarily be a dynamic one.
Just as consumers first experience the convenience and lower cost of e-books from
Amazon or buying music one tune at a time from Apple and then come to expect
similar benefits from all their suppliers of books and music, the new healthcare
business model similarly will shift expectations with new healthcare experiences.
Further, transformative processes are already under way. Trends such as techno-
logical innovation and virtualization will continue to reshape healthcare, regardless
COGNIZANTI THOUGHT LEADERSHIP 5

6. of regulatory shifts. The question is how much of the transformation will be driven
by entrepreneurial new entrants to the industry and how much by established
players reinventing themselves. It may be easier for the new entrants to envision,
and establish, new models.
How to Embrace Reinvention
It is vitally important to understand that radically transforming healthcare will not
be accomplished through an incremental, piecemeal approach, such as deploying
a mobile technology here or a new self-care option there. Reinventing today’s
healthcare model requires visionary thinking and strong champions to overcome
embedded practices and the common belief that a series of small improvements
will add up to radical change. Instead, the model must reimagine how healthcare
can be delivered, how its quality can be measured, how it will be priced and who will
pay for it.
Prospering — perhaps even surviving — in this rapidly changing world will depend on
how well your organization understands where it will fit in the new health ecosystem
and how it will achieve that position. Consequently, organizations need to devote
time and resources to visioning and planning to provide the necessary foundation
for solid execution. Our experience tells us that without this preparation, organiza-
tions can quickly lose their customer base to new entrants or competitors that have
been more adept at reinventing themselves. We, therefore, recommend taking the
following steps to get started on participating in the new era of healthcare:
• Develop a broader strategic vision of how the industry could change. Un-
derstand the trends and other forces reshaping the industry and consider vari-
ous “end state” scenarios. End states might range from all primary care being
delivered virtually and/or at retail clinics, to a steady increase in individuals and
employers paying for a wider range of care directly instead of through health
insurance plans, to a dozen healthcare super entities offering comprehensive
cradle-to-grave services under a single banner.
• Determine your company or organization’s role in the new healthcare value
chain, as well as where other entities will fit. Who are your current competi-
tors? Where might new competitors arise? What parts of your business are grow-
ing?
• What are the implications for your company or organization depending on its
role in a particular scenario? A health plan might see that trends such as direct
contracting with employers and hospital system-driven ACOs are on the rise in
its market area and determine its best fit is to offer information processing and
risk management to those ACOs.
• How will customer behavior or buying patterns change? Will social networks
be a strong influence on your customer base? This is likely to be the case among
the millennial population. Similarly, digitally connected consumers tend to want
mobile transactions and be accustomed to smaller-dollar transactions.
• What customers will you want to attract/win in the future? And a corollary:
What will be a best-in-class experience for those customers? Defining your tar-
get population is critical to understanding the types of reinvented processes
and rewiring you’ll require. Serving a younger, healthier population will require
a strong, customer-centric mobility strategy. If long-term care patients are your
target, it’s caregivers that will require mobile devices to deliver clinical intelli-
gence at the point of care.
6 COGNIZANTI THOUGHT LEADERSHIP September 2012

7. Toward the New Sustainable Model: A Roadmap
With your vision and strategic plan in place, your organization is better equipped to
understand or create a role for itself in the reinvented healthcare value chain and
how its business model must change to support that role.
To create the roadmap to your future, you must understand how to use transforma-
tive levers – new technologies, virtualization, globalization and diagnostic innovation
— to achieve the position you want in the transformed industry. If you have many
multinational employers in your region with highly mobile employees, and your goal
is to provide “anytime, anywhere” care to them, you will need to investigate global,
virtual resources, as well as mobile and telepresence technologies.
Containing the costs of reinvention is critical, so consider identifying potential
partners and allies that have the skill sets you require. Look outside the healthcare
industry; telecommunications and other high-tech companies may have more of the
capabilities you need.
As you define the necessary transformation activities, create and implement a
governance model to guide and monitor these activities.
Reinventing healthcare delivery undoubtedly will be challenging, requiring shifts in
thinking, training and attitude — from consumers, as well as caregivers and industry
players. Paradigm shifts often seem unlikely, even impossible, before they occur.
But when they do, we can hardly imagine how we lived without our e-books, smart-
phones and streamed video.
In the near future, as we text our nurse-coordinators with questions, use our apps
to monitor resting heart rates, transmit home test data and write smaller checks for
healthcare procedures, we’ll marvel at how long we managed with our outmoded
current system.
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8. Footnotes
1
National Health Expenditure Projections 2011-2021, Centers for Medicare &
Medicaid Services, http://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/
Proj2011PDF.pdf.
2
Historical Tables, Office of Management and Budget,
http://www.whitehouse.gov/omb/budget/Historicals.
3
“2012 Milliman Medical Index,” Milliman Research Report, May 2012,
http://insight.milliman.com/article.php?cntid=8078.
4
“FDA Considers Expanding Definition of Nonprescription Drugs,”
U.S. Food and Drug Administration, March 23, 2012,
http://www.fda.gov/Drugs/ResourcesForYou/SpecialFeatures/ucm297128.htm.
5
“Snakebots Aid Docs in Surgery,” Associated Press, May 29, 2012,
http://www.modernhealthcare.com/article/20120529/INFO/305299965/
snakebots-aid-docs-in-surgery.
6
“New Flu Test from UGA,” Athens Patch, Oct. 27, 2011,
http://athens.patch.com/articles/new-flu-test-from-uga.
7
Stephanie Novak, “Exploring the Role of Mobile Technology as a Health Care
Helper,” The New York Times, May 13, 2012, http://www.nytimes.com/2012/05/14/
world/africa/exploring-the-role-of-mobile-technology-as-a-health-care-helper.
html?_r=1.
8
David Twiddy, “Children’s Mercy Starts Telemedicine Partnership with Chinese
Hospital,” Kansas City Business Journal, May 25, 2012, http://www.bizjournals.com/
kansascity/print-edition/2012/05/25/childrens-mercy-starts-telemedicine.html.
9
“1000 Genomes Project Data Available on Amazon Cloud,” NIH News, March 29,
2012, http://www.nih.gov/news/health/mar2012/nhgri-29.htm.
10
Blue Health news release, March 30, 2012.
11
“Mobile Healthcare Opportunities: Smartphone Apps, Monitoring
& mHealth Strategies, 2011-2016,” Juniper Research, Dec.1, 2011,
http://www.juniperresearch.com/reports/mobile_healthcare_opportunities.
12
“NIH-Funded Study Examines Use of Mobile Technology to Improve Diet and
Activity Behavior,” NIH News, May 30, 2012, http://www.nih.gov/news/health/
may2012/nhlbi-30.htm.
About the Authors
Patricia (Trish) Birch is a Cognizant Vice President and leads the company’s
Healthcare Consulting Practice within Cognizant Business Consulting. She has
25 years of experience in healthcare operations and management consulting and
serves on the board of directors of Sylvania Franciscan Health, which provides
healthcare services in the midwest and south-central U.S. Trish is also a published
author and speaker on issues facing the healthcare industry. She earned a BSBA in
Finance from Boston University and an MBA from Jacksonville University. Trish can
be reached at Patricia.Birch@cognizant.com.
Bill Shea is an Assistant Vice President within Cognizant Business Consulting’s
Healthcare Practice. He can be reached at William.Shea@cognizant.com.
The authors acknowledge the contributions of Jagan Ramachandran and Dr. Keerthi
Kumar, consultants with Cognizant Business Consulting’s Healthcare Practice.
8 COGNIZANTI THOUGHT LEADERSHIP September 2012

9. usiness
Model
Rx
COGNIZANTI THOUGHT LEADERSHIP 9

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