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A new measure of market share: How healthcare providers can get ready to assume more risk

April 6, 2016 Article 5 min read
In the coming value-driven healthcare world, providers need an index to measure the “adhesion” of consumers to their healthcare organizations. These five steps will help you build your adhesion index to increase customer intimacy.

Here’s a riddle for you: In the value-driven future—when healthcare providers will profit and grow based on their ability to keep people out of their offices and facilities—how will calculating share of knee replacements or other medical procedures benefit those providers?

Traditional measures of market share are becoming increasingly irrelevant for healthcare providers, in large part because the day is fast coming when they will no longer be paid based on the number of procedures performed, argues Tony Colarossi, partner and co-leader of Plante Moran’s healthcare consulting group.

“We need to redefine what market share is. Instead of ‘I did 40 percent of the total knees, and therefore I own 40 percent of the market,’ we need to change our mindset,” Colarossi suggests. “Can I somehow construct a measurement to say how much of the market I have in managing and directing the healthcare component of lives?”

Not only is such a measure possible, but it as an essential prerequisite for success in the value-based healthcare economy, he believes. Healthcare organizations must shift from being providers of sick care to enablers of health and wellness. To make that transition, they need to start tracking the intimacy of their relationships with individuals rather than simply measuring their share of procedures.

New market entrants, from retail stores to vendors of at-home diagnostic kits, are eroding traditional healthcare providers’ revenues. Consumers indicate that they are willing to consider these new players for many routine medical services, such as immunizations and diagnosis of skin problems. “We have these nontraditional healthcare companies trying to figure out, ‘How do I get into this rapidly evolving, $3 trillion economy?’” says Colarossi. “We’re going to see all kinds of interesting players come out.”

The blurring of the lines between these disruptors and traditional healthcare providers means that these services are at risk of being seen by consumers as commodities. Whether viewed through a fee-for-service lens or a value-based one, these market forces ultimately will lead to lower revenue.

New market entrants also possess the marketing savvy and consumer insights that most traditional healthcare providers lack. Even traditional organizations, such as the major insurance companies, are leveraging consumer data to transform their business models. “You have payers that want to take on the health manager role with data analytics,” says Colarossi. “Health plans don’t see paying claims as their future business, but they do see themselves as a data analytics provider. They want to be the single source for connecting you, the consumer, with what’s best for you.”

Healthcare providers are even better positioned to take on this health manager role. Indeed, it will increasingly be required in the value-driven healthcare world.“

As a successful organization, we’re going to be about how to help people not use healthcare, or how to use it wisely; and we’re going to help them understand the consequences to their bank balance; and we’re going to help them make behavioral changes,” states Colarossi.

As healthcare marches inexorably toward a value-based business model, executives are struggling with the decision of whether, when, and how to take on additional financial risk for the populations they serve.

What these executives need is a metric that indicates their organizations’ preparedness to assume that risk—and Colarossi has just the metric: an index that measures the “adhesion” of consumers to the healthcare organization. Instead of a percentage of overall procedures performed in a market area, this “adhesion index” measures the frequency and intimacy of individuals’ interactions with the organization. It also enables providers to track over time the impact of certain interactions on consumers’ behavior and test strategies for increasing that intimacy.

Measuring consumer adhesion

Healthcare providers can begin to build an adhesion index using tools they already have at their disposal, advises Colarossi, by following a series of suggested action steps.

  1. Quantify unique patients to inventory existing customer interactions across all venues.
    First, healthcare providers should aggregate the data that exists in their disparate IT systems to create an inventory of unique patients.

    This step requires isolating a unique patient who may be accessing your health system from multiple points of entry—from the hospital to the physician’s office to ambulatory surgery centers and any other venues. This work, which can be labor-intensive, yields valuable fruit: a clearer picture of your consumer.
  2. Segment individuals by demographic data.   
    Census data is starting to be released at the neighborhood level, which means that healthcare providers (and, indeed, businesses of all types) have the opportunity to analyze their patient base using more and more granular definitions. “Now I know how many of my patients are living in a particular neighborhood, so I can attribute certain demographic characteristics to those individuals,” says Colarossi.

    Colarossi urges providers to start parsing their data now, imperfect though it may be. “You don't always have to have perfectly clean data in order to come up with some information that you can act on.”   
  3. Weight interactions.
    Based on the organization’s business plan, providers can begin to weight different types of interactions. For example, a one-time visit to the ER would likely have a low weight (such as 0.1), whereas participation in a chronic care program would be given a much higher weight (such as 2.0). Healthcare providers also might weight contacts based on whether they were initiated by the consumer, by a physician, or by a payer.   

    When determining how to weight certain interactions, executives should take into account the organization’s requirements for assuming additional revenue risk. In other words, what are the criteria or thresholds your organization must achieve before deciding to join an accountable care organization or participate in a bundled payment pilot project?
  4. Ask strategic questions.
    Data analytics is only as useful as its ability to answer important questions. A consumer adhesion index can help organizations answer such questions as:
    • What interactions are helping to create stronger relationships with individuals?
    • Why do we have a low adhesion index for a particular target population?
    • What can we do to improve adhesion with that population?
    • Are we ready to absorb more risk for that population?
  5. Identify potential interactions that should be tested to improve adhesion.
    This is where the rubber meets the road. The goal of this analytic exercise is to begin to paint a picture of the organization’s target consumers and test interventions (such as chronic care programs) that improve those individuals’ adhesion to the organization. “You want to track these individuals while you are still under fee-for-service,” advises Colarossi. After those interventions have been proven to work, then market to those target populations to build up the critical mass that will be needed for success in risk-based models of payment.

Don’t wait for patients to show up

Healthcare providers that are still waiting for patients to show up at their door will soon find themselves at the back of the pack. Instead, providers should begin interacting with individuals in the community long before they have a need for expensive medical procedures — procedures, by the way, for which the healthcare organization will ultimately assume financial risk.

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