PNC Healthcare Consumerism

Healthcare Consumerism: How Patient Behavior
is Changing the Landscape
January 12, 2016
This presentation is the property of PNC Bank, N.A. and may not be used without PNC Bank’s prior written approval.
Agenda
• Current State of Healthcare and Consumerism
• ACA Legislation - A Catalyst for Healthcare Consumerism
• Healthcare Consumerism Impacts

o Access
o Cost
o Quality
• Effects on Providers
• Things to Consider
© 2015 The PNC Financial Services Group, Inc. All Rights Reserved.
2
Current State of Healthcare and Consumerism
3
What if we bought cars like this?
• What if we had to shop for an engine, a drive train, a body and tires, all
separately, from separate vendors, with separate billing systems?
Source: http://www.forbes.com/sites/henrydoss/2014/01/15/u-s-healthcare-innovation-demands-a-paradigm-shift/, Dr. Brad Stuart, accessed August 2014
4
What if we bought cars like this?
• Then, when you have purchased all the parts…
o It’s up to you to assemble those parts and make your own car,
o You have to pay each of the vendors separately,
o You end up with something that might or might not work,
o And, you will pay full price whether it works or not!
The average consumer simply wouldn’t do this!!

BUT, THIS IS HOW WE PURCHASE HEALTHCARE!
5
Healthcare Industry is Fragmented
• In healthcare, the “product” we are

trying to buy is our physical well-being
• We are responsible for purchasing all the
parts…
o We have to “assemble” our own
health,
o Deal with multiple, independent
specialist providers,
o Deal with different payment
systems,
o Decide among different delivery
systems,
o And, we pay full price whether it
works or not!
• Plus, the rules are constantly changing!
6
Change is Happening
• US system of employer-sponsored healthcare was built around a business-to-

business model, where patients have been incidental to the delivery of healthcare
• A hospital's primary customer has been an insurance company, and the insurance
company's primary customer has been the employer
• Or the customer has been a government program like Medicare or Medicaid, with
the bill going to taxpayers
• Costs have been increasing because patients feel entitled to whatever care their
provider recommends, at whatever cost
• ACA was signed into law March 2010
• This and other factors are affecting change
• Change is resulting in consumerism in healthcare
7
Which Came First?
Consumer Industry
Behavior Behavior
8
Healthcare Consumerism
Healthcare Consumerism is a movement giving the

participant purchasing power that promotes decision-
making in their own healthcare. It empowers the
consumer to become more educated and involved in
decisions like what physician they want to see, what
procedures they want to have done, what facility they
want to go to, and how much they are willing to pay for
services.
9
Consumer Segmentation – We’re Not All the Same
Source: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_chs_InfoGraphic_ConsumerSegmentation_012513.pdf
10
ACA Legislation - One Catalyst for
Healthcare Consumerism
11
ACA Impact and Consumer Behavior
• Increase in coverage due to the availability of insurance and the individual

mandate
• New health insurance marketplaces were created that offer a choice of plans
that meet standards for coverage and that provide information to consumers
and small employers to help them make educated choices about the policies
they are purchasing
• Group health plans and issuers are providing rewards to employees as part of
“health-contingent” wellness programs
• Consumers becoming more

sensitive to price and quality,
especially those with high
deductible health plans
• Consumers willing to pay if

they are provided with
information and options
Source: U.S. Department of Health and Human Services, PNC Healthcare Advisory Services
12
ACA Affected Entities
Pharma &
ACA Individuals Insurance Healthcare
Employers Medical
Companies Providers
Device
• ACA is one of the factors influencing healthcare entities and their interaction
with consumers
• Disruption is uncomfortable but also presents opportunities
• Intended to facilitate change in the areas of ACCESS, COST, and QUALITY
13
Healthcare Consumerism Impacts
• Access
o Access to information and to
healthcare services
o Integration of new
technologies
Access Cost o Changes in delivery options
and healthcare coverage
• Cost
o Cost of services
o Transparency of pricing and
payment models
o Changes in purchasing
behavior
• Quality
Quality
o Customer perceptions
o Customer accountability
o Customer experience
14
Access
15
Delivery Trends
• Inpatient hospital utilization will decline by 25%, then 40%, as higher-cost

treatments move to lower-cost ambulatory settings and smart care teams
mostly eliminate avoidable acute events, mastering prediction, prevention, and
early intervention
• Specialized smart care teams will displace traditional single-specialty practices
o 25% of traditional primary care services will be provided through the care
team rather than by the physician, then 60%, as care teams evolve into
ecosystems and include social, mobile, and retail options
• Most procedural services (surgeries and diagnostic procedures) will migrate to

convenient lower-cost outpatient settings
o 85% of diagnostics to move to retail settings, prices to fall by 50%, and

accuracy to improve
• Traditional diagnostic services will be massively disrupted by the next

generation of low-cost broad-spectrum and highly accurate diagnostics
Source: http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/images/insights/health-life-sciences/2014/October/The-Patient-To-Consumer-Revolution.pdf
16
Websites, Wearables, and Apps… Oh My!
• Websites: WebMD attracts 180 million

HEALTHCARE SOFTWARE AND APPS
unique visitors each month to its COMPANIES EARLY STAGE FUNDING
network of websites (#of investments > $2M)
• Wearables: Jawbone’s Up band, one of

the leaders in fitness tracking, recently
registered its trillionth step
• Apps: 50,000 – 100,000 health and

fitness apps
• Top 10 health and fitness apps

generate up to 4 million free and
300,000 paid downloads each day
• Millions of registered users to

health/fitness communities
17
Changing Delivery Options
• PWC Study: % of those surveyed, age 55+ said they were “very likely” or
“somewhat likely” to choose new healthcare-style options
Source: http://www.pwc.com/us/en/health-industries/healthcare-new-entrants/assets/pwc-hri-new-entrants-chart-pack.pdf
18
Consumer Engagement
• Healthcare needs to revolve around

patients rather than other organizations TOP 5 THINGS PATIENTS
WANT IN PORTALS
• Consumers want to make decisions and

have options
• Patients and caretakers want to be

empowered
• Convenience and flexibility are key!
• Goal: engage patients, families and

caretakers who play a crucial part in
making decisions involving care
• Example: Patient-centric portals
Source: http://www.beckershospitalreview.com/healthcare-information-technology/top-5-things-patients-want-in-a-patient-portal.html
19
Ways Millennials are Altering Healthcare Landscape
• Growing trends among the millennials (ages 21-32) that are driving change in healthcare
include:
Word-of-Mouth Marketing: Nearly 50 percent of millennials and Gen-Xers use online

reviews (e.g. Yelp, Healthgrades) when shopping the last time for a health care provider,
compared to 40 percent of baby boomers and 28 percent for seniors.
Kick the tires online before buying: Fifty percent of millennials and 52 percent of
Generation X-ers checked online information about their insurance options during their
last enrollment period compared to 25 percent of seniors.
Good faith, upfront estimates: One out of five people surveyed by PNC listed
unexpected/surprise bills as the No. 1 billing-related issue. With out-of-pocket costs on
the rise, millennials are more inclined (41 percent) to request and receive estimates
before undergoing treatment.
Kicking care down the road: All age groups agreed that medical care is too
expensive (79 percent) and health care costs are unpredictable (77 percent). But more
than half of the millennials (54 percent) and Gen-Xers (53 percent) reported delaying or
avoiding treatment due to costs.
Speedy Delivery: When it comes to the drive-thru generation, millennials prefer retail
(34 percent) and acute care clinics (25 percent) double that of boomers (17 and 14
percent respectively) and seniors (15 and 11 percent respectively).
Source: http://www.prnewswire.com/news-releases/five-ways-tech-savvy-millennials-alter-health-care-landscape-300054028.html
20
Cost
21
Employers / Payers Shifting Responsibility to
Consumers
• Ever increasing strategy is for employers to shift costs

to the consumer by offering high deductible health
plans (HDHPs) and health savings accounts (HSAs)
• In 2013, about 58% of employers offered a HDHP
• Hospital uncompensated care rose to a record $45.9

billion in 2013
• Out-of-pocket payments by insured patients are

expected to grow by 68% from 2009 to 2015
• Increasing HDHPs = Increasing patient financial

responsibility = Consumer behavior
Sources: http://www.mcrh.msu.edu/documents/grandrounds/2014_Special_Topics_GR/Jan_21/POS_Rural_Mic_final_full_slides.pdf,
https://www.jpmorgan.com/cm/BlobServer/JPM-KeyTrends-inHealthcarePatientPayments.pdf?blobkey=id&blobwhere=1320610345938&blobheader=
application/pdf&blobheadername1=Cache-Control&blobheadervalue1=private&blobcol=urldata&blobtable=MungoBlobs
22
HSA Deposits & Covered Lives
Total HSA Deposits & Covered Lives

$30.0 18.0
15.5
$25.2 16.0
$25.0
13.5
14.0
$21.1
$20.0 11.4 12.0
10.0 $17.0
10.0
$15.0 8.0 $13.7
8.0
$11.1
6.1
$10.0 $9.0 6.0
4.5
$6.8
3.2 $5.3 4.0
$5.0
$3.2
1.0 $1.6 2.0
$- -
2005 2006 2007 2008 2009 2010 2011 2012 2013 (est) 2014 (est) 2015 (est)
HSA Deposits (Billions) HSA Covered Lives (Millions)
Source: AHIP, Center for Policy and Research, (Jan 2013), http://www.ahip.org/hsa2013/, jama.ama.assn.org, Accessed August 26, 2014
23
Growth in Deductibles
• Average In-network and out-of-network deductibles for visits are increasing
$2,500
$2,000
$1,500
$1,000
$500
$-
2009 2010 2011 2012 2013
In-network Out-of-network
Source: PwC’s Health Research Institute, Medical Cost Trend: Behind the Numbers (2014), http://www.pwc.com/en_US/us/health-industries/behind-the-
numbers/assets/medical-cost-trend-behind-the-numbers-2014.pdf, Accessed August 26, 2014
24
“Cashification” of Healthcare
• With HDHPs and HSAs, consumers’ financial responsibility for their medical
treatment is increasing
• Trends are moving toward employers only offering HDHP options
• Consumers usually don’t plan on ever hitting their deductibles
• Behavior is modified to save $$$$
25
Cost Transparency
• Transparent consumer markets are shifting the basis of competition from

reputation and referrals to price, value and outcomes
• Regence Blue Cross Blue Shield in Utah surveyed 13,000 users and found
that 28% changed providers based on cost information made available online
• Healthcare Bluebook
o Kelley Blue Book for medical

services to provide a pricing guide
o Allows users to search through

thousands of common procedures
o Customized depending on your

geographic area
o Show a scale indicating where price

compares
Source: http://www.sltrib.com/sltrib/news/54217598-78/health-care-insurers-patients.html.csp
26
Cost Impact of Consumerism
• Changing participant health and healthcare purchasing behaviors

• Reducing costs for “discretionary care” through informed purchasing &
incentives
• Reducing long term costs with added incentives for “good health”
• Reducing costs of chronic conditions through improved compliance with
treatments and disease management programs
• Reducing acute care costs with incentive hospital tiering based upon
cost and quality
• Narrowing market cost and quality variations
o Giving plan participants more control over and “shared
responsibility” for managing own healthcare and related costs
o Supplying participants with the tools to act as better informed
healthcare consumers
Source: The Institute for Healthcare Consumerism
27
Quality
28
Consumer Attitude Toward Quality
Value = Quality / Cost

• Consumers are skeptical of the idea of quality and value in healthcare and
perceive healthcare as expensive and wasteful
o 62% of consumers believe that > 50% of the dollars spent on health care is
wasted
o 72% give the U.S. health care system “C”, “D”, or “F” (scale of A through F) on
healthcare value
• Consumers often assume that high quality

care = expensive care
• Or, that low cost = care that is being
withheld or is being performed by less
qualified professionals
• Consumers desire and expect a satisfying
customer experience beyond the clinical
care they receive
Source: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Center%20for%20health%20solutions/us_chs_questforvalue_040714.pdf
http://www.ncqa.org/Portals/0/Public%20Policy/CHCF%20ValueJudgmentQualityCostInformation.pdf
29
Consumer Health Accountability
• Influx of new customers into the market and ACA

mandates put increasing pressure on insurers to be
more efficient, particularly in engaging individual
consumers rather than employers
• Consumers are getting more involved

o Asking questions, talking to clinicians,
understanding their condition
• Searching for evidence-based information for

improving their health and their disease
• Changing behaviors and planning for their

healthcare needs financially and with lifestyle
changes
Source: http://i.dell.com/sites/doccontent/business/solutions/whitepapers/en/Documents/d193-dell-healthcare-consumerism-pov-whitepaper.pdf
http://www.ahrq.gov/patients-consumers/index.html
30
Effects on Providers
31
The Consumer Focus Shift
• “What do you as a patient want

• “What can I as a physician do
to realize as your health
to you?”
outcome?”
• Providers need to become more

• Consumers were less aware of
market and consumer-focused
their treatment and provider
in their efforts to grow and
options.
retain revenue.
• Providers need to drive

• Providers have focused on
exceptional patient experience
addressing gaps that exist
and help consumers manage
within their own care
their journey through the
coordination efforts.
healthcare system more freely.
• Providers need to not only

manage bad debt, but also
• Consumers were less aware of
enhance the patient’s overall
their total healthcare costs.
satisfaction with the patient
experience.
32
Effects on Hospital Providers
• Increasing patient financial responsibility = potentially increasing AR and

bad debt
o Out-of-pocket payments by insured patients are expected to grow by

68% from 2009 to 2015
o Hospital uncompensated care rose to a record $45.9 billion in 2013
• Increased pressure to update/acquire technologies and processes to help

consumers understand their out-of-pocket costs prior to service and
provide options to pay in an easy and timely manner
• Increased consumer pressure for pricing transparency
• Increased competition from less costly, more agile and easily accessible
delivery channels, potentially putting market share at risk
Sources: http://www.mcrh.msu.edu/documents/grandrounds/2014_Special_Topics_GR/Jan_21/POS_Rural_Mic_final_full_slides.pdf,
https://www.jpmorgan.com/cm/BlobServer/JPM-KeyTrends-inHealthcarePatientPayments.pdf?blobkey=id&blobwhere=1320610345938&blobheader=
application/pdf&blobheadername1=Cache-Control&blobheadervalue1=private&blobcol=urldata&blobtable=MungoBlobs
33
Other Sources of Competition And… Opportunity
• Estimated $1 trillion business opportunity
• Healthcare transformation is occurring - in order

to survive, providers need to transform
• Examples of organizational evolution:
o IBM made it from tabulating machines to

mainframes to minicomputers to PCs to
outsourcing to big data
o Apple went from computers to smart
phones to personalized streaming to active
lifestyle management (dashboards,
shopping, etc.) to dynamic social
communities
o Amazon made it from online book
distribution to the world’s “everything store”
to personalized digital media to cloud
computing for small businesses
34
Things to Consider
35
Competitive Considerations for Providers
• An organization’s relevance will depend on how well they can grow and
adapt in a consumer-centric environment
• Consumers will naturally be more discriminating in deciding where to go and

how much to pay for their healthcare
Competitive Dimensions In A Consumer-Centric Environment
Convenient Access Right product, right place, right time
A strategic approach to pricing as it relates to the mission, vision, and values of an organization that is
Competitive Pricing
driven by competitive analyses of local and global competition
Delivery options and mechanisms that include diverse options (e.g., mobile tools, telemedicine, brick-
Multichannel Offering
and-mortar)
Coordinated effort to deliver a positive customer experience including to but not limited to concierge
Customer Experience
services
Strengthening of the organization’s brand as it relates to products, services, and experiences to reflect
Brand Preference
the organization’s competitive advantage as well as strategically expanding/growing that brand
Understanding of how customers interact with the organization, how customers might be segmented in
Understanding Customer Base
the market, and what their needs, expectations, and preferences are
Products and services offered are easily and clearly understood by customer base and meet customer
Product Relevance
needs
Source: Grube, Mark, Cohen, Andrew, Clarin, Dan. “Preparing to Succeed in a Retail Healthcare Environment.” HFM Magazine. November 2014; 53-61
36
Questions to Consider for Your Organization
• What is your organization’s brand image and strategy?

• What channels do you offer to consumers to engage with your
organization?
• Is your delivery network competitive from the standpoint of a
consumer-driven mindset?
• What is your strategy for pricing of services in this more informed,
more involved, and cost-conscious consumer market?
• What factors will influence your consumer base to seek out your
services and return for services in the future?
• Do you have the necessary processes and tools in place to educate
consumers on costs thus increasing likelihood for payment and
decreasing uncompensated care?
37
Contact Information
Dan Bergantz - Director Andre Kemeny – Sr. Consultant

daniel.bergantz@pnc.com andre.kemeny@pnc.com
801-755-4628 801-857-9262
38

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Healthcare Consumerism: How Patient Behavior

is Changing the Landscape

January 12, 2016

• Current State of Healthcare and Consumerism

• ACA Legislation - A Catalyst for Healthcare Consumerism

• Healthcare Consumerism Impacts

Source: http://www.forbes.com/sites/henrydoss/2014/01/15/u-s-healthcare-innovation-demands-a-paradigm-shift/, Dr. Brad Stuart, accessed August 2014

The average consumer simply wouldn’t do this!!

• In healthcare, the “product” we are

Source: http://www.forbes.com/sites/henrydoss/2014/01/15/u-s-healthcare-innovation-demands-a-paradigm-shift/, Dr. Brad Stuart, accessed August 2014

• US system of employer-sponsored healthcare was built around a business-to-

• ACA was signed into law March 2010

• This and other factors are affecting change

• Change is resulting in consumerism in healthcare

Healthcare Consumerism is a movement giving the

• Increase in coverage due to the availability of insurance and the individual

• Consumers becoming more

• Consumers willing to pay if

• Inpatient hospital utilization will decline by 25%, then 40%, as higher-cost

• Specialized smart care teams will displace traditional single-specialty practices

• Most procedural services (surgeries and diagnostic procedures) will migrate to

o 85% of diagnostics to move to retail settings, prices to fall by 50%, and

• Traditional diagnostic services will be massively disrupted by the next

• Websites: WebMD attracts 180 million

• Wearables: Jawbone’s Up band, one of

• Apps: 50,000 – 100,000 health and

• Top 10 health and fitness apps

• Millions of registered users to

• Healthcare needs to revolve around

• Consumers want to make decisions and

• Patients and caretakers want to be

• Convenience and flexibility are key!

• Goal: engage patients, families and

• Example: Patient-centric portals

Word-of-Mouth Marketing: Nearly 50 percent of millennials and Gen-Xers use online

• Ever increasing strategy is for employers to shift costs

• In 2013, about 58% of employers offered a HDHP

• Hospital uncompensated care rose to a record $45.9

• Out-of-pocket payments by insured patients are

• Increasing HDHPs = Increasing patient financial

Total HSA Deposits & Covered Lives

HSA Deposits (Billions) HSA Covered Lives (Millions)

• Average In-network and out-of-network deductibles for visits are increasing

• Transparent consumer markets are shifting the basis of competition from

o Kelley Blue Book for medical

o Allows users to search through

o Customized depending on your

o Show a scale indicating where price

• Changing participant health and healthcare purchasing behaviors

Source: The Institute for Healthcare Consumerism

Value = Quality / Cost

• Consumers often assume that high quality

• Influx of new customers into the market and ACA

• Consumers are getting more involved

• Searching for evidence-based information for

• Changing behaviors and planning for their

• “What do you as a patient want

• Providers need to become more

• Providers need to drive

• Providers need to not only

• Increasing patient financial responsibility = potentially increasing AR and

o Out-of-pocket payments by insured patients are expected to grow by

o Hospital uncompensated care rose to a record $45.9 billion in 2013