Breaking boundaries: The convergence evolution

With contributions from: Everly Petruzzelli and Alicia DiValli

Convergence in the health industry represents a transformational imperative for organizations to think and operate differently. This large-scale, systemic change has the potential to disrupt and solve for some of the health industry’s most pressing challenges.

The distinct sectors of the health industry have long existed in a matrixed, interdependent relationship with one another. Provider organizations bill for care in accordance with the health plans of the patients they see. Life Sciences companies launch medicines and therapies with approvals from public health organizations. Medical Technology companies provide technologies, devices, and tools to enable providers to deliver care. Consumers and stakeholders across the industry leverage technology to connect with one another, seek care, and keep the supply chain moving. The interconnected relationship between sectors is not new, but the degree of overlap and, in some cases, true merging, is rapidly accelerating. This trend, forecasted to transform the industry and guide the future of health, is being referred to as convergence.

The way organizations are reacting to and capitalizing on convergence varies, and the capabilities they are developing depend largely on the challenges they aim to solve. But whether they are embarking on partnerships, collaborations, or mergers and acquisitions, organizations across the health industry are embracing convergence and creating connected ecosystems to work up and down the value chain in new and different ways. The growing partnerships and mergers across the industry point to a shared desire to respond to consumer demand, capitalize on technological advancements, and address an incentive structure that is currently misaligned with the customer and stakeholder needs. And collectively these changes are expanding traditional boundaries, opening the door to new entrants with fresh perspectives, and pressuring the status quo to boldly challenge the way healthcare is delivered, experienced, and financed.

Convergence is rooted in the idea that building holistic capabilities to address broader aspects of the healthcare value chain will enable efficient and rapid improvements, modernizing the health industry and enhancing both consumer experience and patient outcomes.

The drivers of convergence

Longstanding structural inefficiencies, growing consumer expectations, increasing financial pressures, and the rapid adoption of and demand for technology have collectively acted as the catalyst for health industry convergence.

Key factors driving convergence include:

• Expansion of care delivery channels
• Advancements in technology and data
• Demand for transparency and easier navigation of the system
• Increased focus on health equity and affordability
• Ongoing challenges of the healthcare workforce shortage
• A focus on whole person health and prevention and wellbeing

1. Expansion of Care Delivery Channels

“The Home healthcare market size in the US is projected to grow up to $253 billion by 2030. In this space, we’re seeing product innovation and mergers & acquisitions to better meet the needs of patients.”¹

Over the next decade, it is projected that as much as 50% of healthcare will move from traditional settings such as hospitals and clinics, to new care delivery settings, such as homes and communities.² Not only are these alternative settings increasingly expressed as patient preference, but rapid technological advancements are enabling the safe and effective delivery of care outside of the doctor’s office and beyond the appointment. Technology such as wearables, remote patient monitoring medical devices, and telehealth are increasing the health industry’s ability to shift and meet consumer demand for healthcare anywhere, any time.

Some settings, though, are more of an expansion than an uprooting of traditional care delivery models. Urgent care clinics, for example, bring healthcare closer to consumers with locations on street corners in cities and neighborhoods across the US. And with consumer expectations shifting seismically toward convenience, proximity, and immediacy, their utilization has skyrocketed. Urgent care clinics now see approximately 89 million patient visits each year, including 29% of all primary care visits.³ Some urgent cares are trying to further expand their reach and improve patient access with mobile pop-ups and partnerships with community services. To compete in this space, retail clinics such as Walmart, CVS, and Target have also increased their presence in the urgent care space by offering accessible after-hours, transparent and fixed prices, and convenient locations.⁴

As the health industry continues to be driven by consumer demand and experience, organizations need to rethink their approach to engaging customers and provide flexible options to bring care to patients where and how they want to receive it.

2. Advancements in Technology and Data

The digital revolution has accelerated in the past decade with enormous enhancements to advanced analytics, ubiquity of mobile interfaces, rapidly evolving intelligent automation, and the ever-growing potential of machine learning and artificial intelligence (AI). The increasing use of digital health technologies is a significant driver of health industry convergence.

“The global digital health market size surpassed $233.5 billion in 2022 and is set to grow at a compound annual growth rate (CAGR) of 15.1% from 2021 to 2032, attributed to the rising adoption of smartphones, tablets, and other mobile platforms.”⁵

As discussed on the Vynamic Trending Health podcast episodes, The Evolution of Digital Health and MedTech Goes Digital, the next generation of digital-first consumers have high standards when seeking and engaging healthcare support – and the industry is responding.

Quick Facts

1. The healthcare industry accounts for 30% of the world’s data volume.⁶
2. 80% of medical students and practicing physicians are encouraging the use of patient health apps, and another 70% of medical students support the use of wearable devices.⁷
3. Consumer demand for convenience and being met where they want to be met – 66% of health systems will offer digital self-scheduling and 64% of patients will use it.⁸
4. 52% of consumers report interest in mobile apps for receiving test results, finding physicians and scheduling appointments.⁹ More consumers are also relying on wearables to manage certain health metrics with many expressing a willingness to share that information with providers.

3. Demand for Transparency and Easier Navigation of the System

There has been an erosion of consumer sentiment about the healthcare system, driven by unmet expectations and frustrating experiences,⁸ particularly as healthcare has remained a uniquely complex, challenging industry to navigate despite advances that have otherwise simplified consumers’ lives.

Today’s consumers are uniquely informed about their health. They track their steps, monitor their heart rate, and are accustomed to the information age, where anything they seek to know is at their fingertips. These consumers are seeking to prioritize their physical and mental health in ways that are convenient, transparent, accessible, and customized – and the prevailing sentiment is that the health industry of today is not yet meeting those needs.

“60% of patients reported they would switch to another provider for more trust and respect, despite 75% of these patients reporting they are currently satisfied with their care.”¹⁰

“74% of patients would prefer a single point of contact for their healthcare information, further pointing to convenience and ease of use for consumers while causing potential barriers/challenges for organizations to deliver on those expectations.”¹¹

Technology giants are investing billions to create services that are easily usable across a range of customers and for a variety of applications to accelerate innovation in care delivery. Given the shift towards technology and data utilization, heightened rigor around data quality and management and the ease of access to services are top of mind for organizations and the consumers they serve.

4. Increased Focus on Health Equity and Affordability

The vexing challenge around cost and affordability persists. About four in ten U.S. adults say they have delayed or gone without medical care in the last year due to cost, with dental services being the most common type of care adults report putting off.¹² About a quarter of adults say they or a family member in their household have not filled a prescription, cut pills in half, or skipped doses of medicine in the last year because of the cost, with larger shares of those reporting this from households with lower incomes, Black and Hispanic adults, and women.¹³ Highlighting the criticality of this issue, social drivers of health are estimated to account for 30–55% of health outcomes according to the World Health Organization (WHO).¹⁴

“Social drivers of health are estimated to account for 30–55% of health outcomes, according to the World Health Organization (WHO).”

Given the increased focus on this issue, the UK’s National Health Service (NHS) has developed a long-term plan to tackle health inequalities, focused on a few key initiatives like restoring NHS services inclusively, developing digitally enabled care pathways to increase inclusion, accelerating preventative programs, supporting those who suffer mental health conditions, and collaborating locally in planning and delivery.¹⁵ And in the US in August 2022, CMS adopted a social determinants of health measure that is required in Medicare hospital inpatient quality reporting sets.¹⁶

The public health and regulatory environment is evolving to emphasize the importance of increasing accessibility and affordability, making health equity a key emerging focus for organizations across the health industry today.

5. The Ongoing Challenge of the Healthcare Workforce Shortage

The global shortage of approximately 43 million healthcare workers, including 30.6 million nurses and midwives and 6.4 million physicians as of 2022 accelerates the urgency of convergence as organizations seek innovative approaches for addressing perhaps the greatest challenge in the industry.¹⁷ In Vynamic’s Trending Health podcast episode Healthcare Workforce Crisis we explored the workforce crisis and its impact on the need to build innovative, future-proofed capabilities that address this critical challenge.

There is opportunity for long-term cross-sector collaboration to strengthen and optimize the clinical workforce, particularly with the implementation of new technology solutions that can ease the burden of administration, increase speed and efficiency, and improve the experience of healthcare workers who seek to focus on caring for the patients they serve.

6. Whole Health Discourse Centered on Prevention and Wellbeing

The healthcare system has often and disparagingly been referred to as a “sick care” system because of its primarily reactive way of operating. And while interventions and treatment post-diagnosis are undeniably critical, there is increasing recognition that a focus on prevention and wellbeing are good for the person, good for the population, and good for the industry. After all, there is a cost associated with not catching chronic diseases and risk factors early. In 2021 alone, the total cost for chronic disease care was more than $1 trillion.¹⁸ Recent discourse suggests a reorientation toward a proactive focus on total health, encompassing prevention and wellbeing, which has the potential to improve outcomes and lighten the burden of an overworked industry that can’t keep up with the growing prevalence of disease and chronic conditions.

In 2020 the global Wellness industry was estimated to be $4.4 trillion, and it is projected to experience 10% annualized growth in upcoming years, reaching $7 trillion in 2025.¹⁹ With this forecast in mind, incumbent organizations and new entrants alike envision significant opportunity to win by engaging consumers in their own health, and doing so before conditions arise.

“The global Wellness industry was estimated to be $4.4 trillion, and it is projected to experience 10% annualized growth in upcoming years, reaching $7 trillion in 2025.”

The industry response

This pivotal moment opens the door for health organizations to create increasingly connected environments that enhance engagement in total health. And given the myriad partnership, acquisition, and transformation opportunities available to organizations, the way convergence is showing up in the industry is taking on many forms.

For example, consider CVS Health. For decades, CVS was best known as a large pharmacy chain and retail store. Need band-aids? Or some late-night cold medicine for a sick kid? CVS was a one-stop shop to help consumers easily meet their over the counter and pharmacy needs. But their identity changed in 2017 when CVS embarked on a $69B acquisition of Aetna, one of the largest payer organizations in the US. The deal was made official in 2019 and has been followed by a continued evolution of CVS with the recent acquisition of Signify Health Primary Care – a network of 10,000 doctors that focuses on delivering care to patients in their homes.²⁰ No longer only a robust pharmacy chain, CVS is now a major payer player and growing provider in the U.S.

“…this combination will strengthen our ability to expand and develop new product offerings in a multi-payer approach.”²¹ CVS Health President and CEO Karen S. Lynch.

Another recognizable example of convergence in the industry is that of the “payvider,” the growing trend of providers seeking to have a greater role in risk management¹⁷ by either becoming payers or acquiring payers. When we consider that nearly 60% of health systems are planning to enter into risk-based Medicare Advantage payment models,²² it is perhaps an unsurprising shift. Consider Humana, a national health plan, that recently announced a strategic move from an insurance company with elements of healthcare to a healthcare company with elements of insurance.²³ As noted in Health Plans: Big Bets for Convergence and Strategic Capital Diversification, these examples make it clear that payers are leveraging convergence and using horizontal and vertical integration to meet the needs of their stakeholders.

Pharmacies, payers, and providers are not the only players embracing health industry convergence. Convergence in healthcare is especially effective in the biomedical sector, where professionals from disciplines such as precision medicine, biotechnology, device development, and pharmaceuticals work to create health technologies with incredible potential. Verily’s commitment to convergence includes the company’s collaboration with glucose monitor manufacturer Dexcom to create miniaturized versions of continuous glucose monitoring systems that provide better, more accurate insulin readings for people living with Type 2 diabetes.²⁴

Non-traditional entrants too, are making their mark. Apple, world-renowned for its computing technology, has undertaken projects that are changing the way health is researched, monitored, and treated. Their integrated health-tracking technology enables users to track personal health data such as heart rate, daily step count, and sleep activity.²⁵ And Microsoft has taken steps to allocate more of its focus toward healthcare convergent initiatives through AI-based projects such as Healthcare NExT.²⁶

Across the health industry, public and private collaborations are prompting the emergence of new capabilities to address the most pressing global health needs. The question for health industry leaders is not whether to transform, but how to do so.

Capitalizing On Convergence

Health organizations seeking to strategically differentiate in this environment should consider the following as they shape their thinking and evaluate opportunities:

1. Develop an Actionable Strategy: It is imperative that organizations design strategies with clear and actionable steps for near-term activation, particularly given the rapidly evolving market landscape. Due to the pace of innovation and emerging partnerships in the health industry, organizations run the risk of over-indexing on their preparation and readiness evaluation, only to find that their resulting strategies quickly downgrade from market-leading to outdated. Organizations should consider how go-to-market approaches, partnership opportunities, and business model changes can fuel their convergence strategies, and should take swift action to activate those changes.
2. Evaluate the Operating Model: As health industry organizations develop emerging and adjacent capabilities, leaders should evaluate their existing organization design and operating model. Leaders must be willing to recognize that what has worked well historically may not be sufficient during this period of industry transformation and must identify what needs to evolve in order to successfully action on convergence-related strategies.
3. Revisit Go-To-Market Strategy: As complementary capabilities are acquired through partnerships and acquisitions, leaders across the industry should consider how their Go-to-Market approach and value proposition needs to evolve to capture new differentiators and position them for success in the market, particularly if they are redefining their value to consumers and stakeholders.

While much about the future of the health industry remains unknown, one certainty is that previously silo-ed sectors are becoming increasingly connected, and that the push for creating value for customers and consumers is largely driving this shift.

As health industry convergence continues to evolve, organizations should consider the following questions:

1. How will convergence-related strategies support the emerging focus on total health – inclusive of prevention, wellness, and mental health?
2. How can your organization benefit from the convergence happening in the industry? In what ways does it create obstacles? Opportunities?
3. How will your organization identify and assess which capabilities are core competencies and where it would be better to partner to create more vertical or horizontal integration?
4. Does your organization have the technology capabilities, operating models, and talent required to strategically position yourselves amidst ongoing and upcoming healthcare innovation?

Convergence is the future of health and presents a transformational opportunity for organizations to heighten connected environments for stakeholders, provide actionable insights, and enhance engagement in total health to include prevention and wellness. Healthcare convergence will require innovation and thoughtful approaches as organizations assess, strategize, and reconfigure for the rapidly shifting landscape.

At Vynamic, we are passionate about shaping the future of health. Our deep industry expertise integrates the convergence of healthcare into how we think about and solve problems, helping clients transform by connecting strategy to action.

Contact us to find out more about how Vynamic supports Life Sciences, Health Services, and Health Technology clients to maximize growth, culture, and performance.

Citations:

1. ResearchAndMarkets.com. (2022). United States Home Healthcare Market Trends/Analysis Report 2022: A $250+ Billion Industry by 2030. Business Wire.
2. Ibid.
3. Insider Intelligence. (2023). Urgent Care Clinics in 2023: Industry Trends & Market Stats.
4. Ibid.
5. Global Market Insights. (n.d.) Digital Health Market – Global Industry Analysis Report, Share, Size, Growth, Trends and Forecast, 2021-2027.
6. RBC Capital Markets. (n.d.) The healthcare data explosion.
7. Ormond, M., Ahluwalia, S., & Burke, T. (2014). A consumer preference experimento f a mobile health application. BMC Medical Informatics and Decision Making, 14, 1. Doi:10.1186/1472-6947-14-1.
8. Forbes. (2019). New Survey Shows Consumers Expect Better Healthcare Experiences – But Are Often Disappointed.
9. Consumer preference to utilise a mobile health app: A stated preference experiment – PMC (nih.gov).
10. American Hospital Association. (n.d.). Most Consumers Would Switch to Other Providers for More Trust and Respect.
11. Ibid.
12. Kaiser Family Foundation. (n.d.). American’s Challenges with Health Care Costs.
13. ibid.
14. World Health Organization. (n.d.). Social Determinants of Health.
15. NHS England. (n.d.). Action required to tackle health inequalities in latest phase of COVID-19 response and recovery.
16. Centers for Medicare & Medicaid Service. (n.d.). CMS Framework for Health Equity.
17. PR Newswire. (2022). Worldwide shortage of health workers threatens effective health coverage.
18. National Health Council. (n.d.). About Chronic Disease.
19. Global Wellness Institute. (n.d.). Statistics & Facts.
20. CEO Magazine North America. (20220). CVS will acquire Signify Health for about $8 billion.
21. Ibid.
22. Fierce Healthcare. (n.d.) Nearly 60% of health systems aim to become ‘payviders’.
23. Fierce Healthcare. (n.d.). Humana’s chief strategy officer: Insurance giant is shifting to be a healthcare company.
24. Varma. (n.d.). How Verily Uses Convergence to Innovate Healthcare [Blog post].
25. Apple. (n.d.). How Apple is empowering people with their health information.
26. Microsoft. (n.d.). Breaking new ground in healthcare with the next evolution of AL. The Official Microsoft Blog.