Care delivery of the future

1. WORKING DRAFT
Last Modified 6/1/2015 12:05 PM Eastern Standard Time
Printed 24/05/2013 16:16 GMT Standard Time
Care delivery of the future
Eight Annual McKinsey Healthcare Conference
June 3
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2. 2 | McKinsey & Company
Care delivery of the future is being shaped by the non-linear
convergence of disruptive, digital technologies
3D printing
Advanced
materials
Cloud
technology
The “Internet of
Things”
Big data and
predictive analytics
Mobile and
social web
Next-generation
genomics
Interactive, gesture-
based computing

3. 3 | McKinsey & Company
Likely scenarios for digital disruption of healthcare?
Transformation
Evolution
Revolution
Highly inter-connected
and transparent
ecosystems enabling
increased consumer
choice and empowerment,
smarter utilization, risk
socialization and virtual
delivery models
Significant disruption to
linear payor-provider value
chains through emergence
of new B2C models, growth
in multi-market
ecosystems (e.g. bundle
exchanges), increased
benefits/services
fragmentation and new
entrants (e.g., Apple)
Fundamental role changes
as consumers become
primary owners of data,
payors become risk advisors
vs. risk selectors, and
providers become “patient
health concierges” that
coordinate complex webs of
care

4. 4 | McKinsey & Company
Capital investment in digital solutions is continuing to grow
2011
2014 Q1
2013
2012
+86
+16
+136
+755
+53
+154
+73
+79
CAGR1
%
Healthcare technology investments by category, 2011-2014 Q1
$ Millions, N = $4.6B
SOURCE: Rock Health 2011-2014Q1 Digital Health Funding Data
178
200Population health management
Care coordination 231
Digital medical devices 236
Wearables / biosensing
182
278
Analytics / big data 439
EHR / clinical workflow 449
Remote patient monitoring
Telemedicine

5. 5 | McKinsey & Company
Several solution archetypes are emerging, targeting specific value
pools…
Cross-cutting
enablers
Innovative platforms
Referral management
Appointment scheduling
Clinical decision support
Physician training
Operational transparency
Workflow efficiency
Cheaper diagnostics
Personalized health
management
Alternative channels
Automation
and efficiency
1
Developing
patient loyalty4
Information
transparency and
performance
management
2
Coordinated,
personalized care
and access
3

6. 6 | McKinsey & Company
For providers, digital technologies represent significant
potential for impact
1 250-bed hospital, with ~$1M revenue per bed; 5.5% margin | 2 50% of hospital spend assumed labor, 30% of that in nursing, 46% other caregivers, the rest in non-clinical staff. 4.5% opportunity in nursing spend assumed, 9% in other caregivers, 25% in
non-clinical staff | 3 Based on bottom-up assessment of individual technologies | 4 Based on assessment of impact of integrated care on chronic populations (7% cost reduction applied to 75% of spend, attributed to chronic condition spend),
with 20% contribution margin, 50% revenue loss assumed reclaimed from payor in gain sharing + 30% reduction in length of remote consultations compared to face to face appts, with 25% follow-ups assumed amenable to remote interaction,
one third of appts are assumed follow-up, savings applied to 14% of total labor spend attributable to physicians | 5 60% of revenue considered addressable, 30% leakage assumed, 25-50% potential to reduce, 20% contribution margin
11-13
33-40
3-5
15-17
3-5
$250M costs are assumed for a typical hospital1
13-16%
~5%2
1-2%5
6-7%3
1-2%4
Total
Savings as %
of cost base, % EBITDA impact, $M
Automation and efficiency1
Developing patient loyalty4
Information transparency
and performance mgmt.
2
Coordinated, personalized
care and access
3
Assuming 50%
gain share
(from reduced
utilization) with
payor; under
FFS, this
becomes $2-
4M loss
Reduced to
$27-31M
under FFS

7. 7 | McKinsey & Company
Guidelines to manage healthcare technology in the digital era
Focus on digital transformation vs. IT strategies
Reorient IT to manage demand, not supply
Systems of engagement > systems of record
Architect for multiple speeds and maximum flexibility
The answer is likely outside your walls
Manage digital innovation as a portfolio

8. 8 | McKinsey & Company
Around the room, we have several examples of technology with
potential to disrupt today’s healthcare landscape
Brief description
 Patient-flow automation and real-time asset-tracking
 Electronic health records and population health management tools
 iPhone-based otoscopes for at-home and clinician use
 Video access to physicians and psychologists via smart-phone or computer
 Telehealth-enabled “Care Traffic Control” capability to coordinate care in the Hospital, in the
Home and in transitions from Hospital to Home
 Solutions for multi-channel patient access and referral management
 Tools for real-time clinician communication and patient experience management
 Health and wellness personal coaching linked to an app

9. 9 | McKinsey & Company
As you experience the solutions at each station, keep a few critical
questions in mind
What operational changes will I need to make
to integrate this technology into my delivery
model and effectively capture its value?
Who will reap the rewards of potential value
created?
Is my current environment ready for it?
Could this drive a true revolution in care
delivery and a step-change in my cost curve,
or a minor improvement to the status quo?