Of the top 50 companies on the Fortune 500, 14 are traditional healthcare organizations that have found continued success in a rapidly changing industry.
And 24 are new entrants into healthcare; mega-corporations poised to disrupt the $2.8 trillion healthcare industry, according to a recent report from PricewaterhouseCoopers' Health Research Institute.
These two dozen new industry players come from a range of industries. They include retailers like CVS/Caremark, whose MinuteClinics and public denouncement of tobacco products have made its retail stores go-to destinations for health products and services. They include telecommunications companies like Time Warner Cable, which in 2013 announced a partnership with Cleveland Clinic for a new telemedicine program. They even include automakers like Ford, which is developing solutions to aid in chronic condition management while driving.
The currently high cost of care is "the ultimate driver" in bringing these new entrants into the healthcare industry, says Vaughn Kauffman, a principal in PwC's Health Industries practice. Consumers, increasingly insured by high-deductible plans, are becoming more price-sensitive. Additionally, traditional healthcare delivery is not efficient. "When you look at that $2.8 trillion, about 30 percent can be seen as waste," says Mr. Kauffman.
Much of the waste in the healthcare industry currently can be attributed back to consumers — patients not adhering to their medication regimens or skipping appointments with physicians, leading to worse outcomes and higher costs.
This is why the successful new entrants to the industry will do what the banking, retail and other industries have been doing for years — develop new ways to engage consumers in their own healthcare by providing alternate or at-home services or products, often at a lower cost than traditional healthcare.
Because regulations and providers' inertia has kept the healthcare industry behind other industries in terms of innovation, many of these companies already have a tested formula, that, aided by growing consumer embrace of technology and new service models, is ready to be applied to healthcare.
Many of these companies also enjoy a more positive association in consumers' minds, or at least a larger presence. "The average individual sees a doctor for 60 minutes a year, but they spend 40 minutes a day in a retail setting," says Mr. Kauffman. "They have an opportunity to engage consumers on a whole different level."
One of the most well-known new entrants into the healthcare industry is Nike, which already had a significant presence in the $267 billion fitness and wellness market. The new Nike FuelBand, a wearable activity and fitness monitor, not only gives users a comprehensive, easy-to-understand view of their activity level but also has features designed to engage them in their own fitness. Automatic reminders prompt users to exercise and the band provides an estimate of calories burned to help users meet preset fitness goals.
Right at launch, Nike's online store sold out of FuelBands in four minutes, and the product continues to remain popular with 28 million active users on the platform. The device's success has shown Nike's ability to successfully tap into a market that wasn't being served by the traditional healthcare industry. "People who use this want to be healthy," says Daniel Castro, senior IT policy analyst at the Information Technology & Innovation Foundation. "And they're not going to a doctor [for weight management help] because the Nike service is a more convenient, more affordable solution."
Apple has plans to take Nike's success one step further. In June, Apple introduced HealthKit, a mobile platform that combines data from other health-tracking apps and displays composite information in a dashboard format, both partnering with and building on Nike's success with consumers.
"With your permission, each app can use specific information from other apps to provide a more comprehensive way to manage your health and fitness," according to Apple. "For example, the Nike+ apps using NikeFuel will be able to pull in other key HealthKit metrics such as sleep and nutrition to build a custom user profile and improve athletic performance."
Similarly, Walmart is taking a popular technology — telemedicine — and bringing it into retail stores and under the Walmart brand. Through a partnership with Oakland, Calif.-based Kaiser Permanente, the megachain opened microclinics in two California stores. Equipped with basic diagnostic supplies and a secure video connection to Kaiser physicians, the clinics provide a low-cost, convenient care option for Kasier beneficiaries or Walmart employees. Similar clinics have since popped up in two San Antonio Walmarts through a Humana program.
"Each one [of these new entrants] has some common factors," says Mr. Kauffman. "They're relatively low-cost options and they certainly provide convenience and accessibility, which is something healthcare is not known for."
However, these new entrants into the industry may not come at the expense of providers. "We're seeing the new entrants be able to do things that were never really the core competency of providers," says Mr. Castro. "For example, [Nike's FuelBand] is more of a threat to Weight Watchers than to a hospital system. It just isn't what a hospital is focused on, it's not where they make their money."
The biggest opportunity, then, is for hospitals and health systems to determine the high-value services they can provide better than anyone else. "It will be a transition," says Mr. Castro. For example, a hospital may want to slim down its nutrition program if most diet and fitness services can be more efficiently rendered through an app or fitness tracker. However, the hospital might decide to keep a slimmed-down nutrition center for unusual or special-needs cases, he says.
"Focus on what you can do that no one else can," he says. "That's where the value will be."
More Articles on Disruption:
Disruption Overkill? What Healthcare Can Learn From Blockbuster, Borders
Giving the Gift of Silence: How 'Quiet Kits' are Revolutionizing the Patient Experience
"Best of Both Worlds": How an Innovative Partnership Is Re-Imagining Care at Jefferson University Health