The Digital Health Guy Gets The Expert Opinion:
Dr. Mike Lovdal, Adjunct Professor at the Columbia Business School

What has changed in American health care, and what will change in the coming years? If anyone knows, it is Mike Lovdal.

Mike obtained his MBA and doctorate at Harvard Business School, then joined its faculty teaching corporate strategy.  He later moved to the Sloan School at MIT.   Mike then began his consulting career at Oliver Wyman, where over a 35-year career, he undertook projects for clients in consumer products, media and technology.  During his final years at Oliver Wyman, Mike concentrated solely on health care serving providers, payers, pharma companies and public health organizations.  Today, he serves as an Adjunct Professor at the Columbia Business School co-teaching a course on “Innovative Models in Global Healthcare.”

I am delighted and honored that Mike agreed to offer his perspectives and opinions, rooted in deep experience, for this book.

Chances are you realized the following trends were happening. Yet the statistics that Mike offers on the phenomenon are somewhat staggering . . .

In 1960, U.S. expenditures on health care equaled 5% of the GDP.  By 2016, that percentage had ballooned to 17.5%, and growth will continue. That means Americans are now spending $3.2 trillion on health care.

In 2004, only 30% of Americans accessed health information online. By 2015, that percentage had surged to 72%.

But interestingly, that doesn’t mean that U.S. health care consumers are relying less on their physicians for information. Back in 2004, 67% of them relied on their physicians for information; in 2015, that had risen to 70%.

Six Major Trends Mike Lovdal is Watching   

1. State initiatives will trump federal impact on U.S. health care. Even without changes in the Affordable Care Act (ACA), Section 1332 and 1115 waivers currently authorized within the ACA give states considerable leeway in designing their own health care policies.  Many states are currently filing for waivers.  And every legislative change proposed for the ACA has moved away from a one-size-fits-all federal model to state-based flexibility (e.g., block grants for Medicaid).
2. $2 trillion will migrate to value-based health care. The move from fee-for service (FFS) to fee-for value (FFV) has already started – and is irreversible.  CMS has led the way with Medicare initiatives, but the private sector is quickly becoming the main arena for this shift.  In many cases, employers are leading the way with innovations such as medical tourism and direct contracting with providers.  Payers are also firmly committed to match their cost models with their revenue models.  Value-based health care will ultimately become the dominant payment system with major implications for every sector.
3. Health care will become a consumer business. The consumer revolution is underway.   High-deductible health plans now offered by most employers have become commonplace, driving heightened awareness among individuals and families of personal spending, cost options and outcomes.  As employers move away from Defined Benefit (DB) health plans to Defined Contribution (DC) health plans, this awareness will grow quickly.  And possible changes to Medicaid (e.g., block grants) and Medicare (e.g., vouchers for buying private insurance) will add millions of health care consumers.Succeeding in this new health care world will require consumer-centric business models for providers and payers with superior expertise in listening and responding to the voice of the health care consumer.  Research conducted by Mike while at Oliver Wyman identified ten consumer demands – the first eight for all Americans and the last two for specific segments:

• “I want to understand how to improve my health and live longer and better.”
• “I want to manage my health conditions.”
• “I want to make informed decisions about health services and spending.”
• “I want coordinated, seamless health care.”
• “I want personal health information that I control.”
• “I want to connect with people and patients like me.”
• “I want anytime, anywhere access to convenient care.”
• “I want health care tailored to me and my family.”
• “I want help with caregiving.”
• “I want to live independently.”

4. Health care will become an information technology business. We have already seen the proliferation and penetration of Electronic Health Records (EHRs) among acute and ambulatory providers with mixed success.  While the major EHR vendors focus on protecting their B2B models and proprietary systems, consumer health technologies are emerging for each of the needs identified above:

• “I want to understand how to improve my health and live longer and better” will be addressed by wellness apps, tools and biometric wearables.
• “I want to manage my health conditions” will be addressed by condition and disease-monitoring apps and tools.
• “I want to make informed decisions about health services and spending” will be addressed by navigation and transparency apps and tools.
• “I want coordinated, seamless health care” will be addressed by smart care teams with interoperable electronic health records.
• “I want personal health information that I control” will be addressed by personal health records/electronic medical portals.
• “I want to connect with people and patients like me” will be addressed by health crowdsourcing and social media.
• “I want anytime, anywhere access to convenient care“ will be addressed by virtual/remote diagnosis and treatment.
• “I want health care tailored to me and my family” will be addressed by genetic testing and precision/personalized medicine.

5. Precision medicine will become commonplace. The science of medicine is exploding with new pharmaceutical, diagnostic and device breakthroughs happening weekly.  One of the most impactful examples is the adoption of genetic testing as costs decline ($1,000-2,000 today to $100 sooner than we expect) and the related move to precision medicine (aka personalized medicine).   The combination of trend #2, the volume-to-value revolution, and the personalized medicine trend will set the stage for a major transformation in U.S health care:
   • Today: Reactive, Transactional Individual Sick Care
   • Future: Preventive, Interventionist Population Health Management

6. The structure of the health care industry will radically change. The above five trends in combination will drive major changes in the U.S. health care industry with clear winners and losers.  Hospitals, the largest single expenditure category, will need to reinvent their businesses and brands as “reform” initiatives and the major trends migrate revenues to new provider models such as national specialty chains and retail clinics.  Physicians will continue to consolidate and integrate to protect their independence.  Public health organizations will enjoy new appreciation (and hopefully funding) as population health and prevention become the norm.  Payers will need to move from simply managing financial risk to becoming health managers and even health care providers.  And finally, new models will emerge from private equity and venture capital backed tech start-ups, and unique health initiatives will come from the “frightful five” (Amazon, Google, Apple, Microsoft, Facebook) and their partners (e.g., Amazon with Berkshire Hathaway and Chase).

To Summarize Mike Lovdal’s Opinions . . .

Stay tuned for the new U.S. health care reality.   We are in the midst of a $3+ trillion “jump ball” where the largest and most personal and political sector of the U.S economy is up for grabs.  While the transition will be painful for some, the end result will be a health care system that better controls costs while delivering higher quality, better access, and an enhanced consumer experience.

Dr. Mike Lovdal is a leading health care analyst who earned his MBA and Doctorate at Harvard Business School, then joined its faculty teaching corporate strategy. Today, he serves as an Adjunct Professor at the Columbia Business School, co-teaching a course on Innovative Models in Global Healthcare.