modelH update: Intermediaries

by Kevin Riley

modelH update: IntermediariesEditor’s note: The US healthcare industry is responsible for roughly 18% of US GDP, but the current consumption, delivery, and finance models for healthcare are unsustainable in the future. modelH is a dynamic co-creation forum created by Kevin Riley and Associates, Innovation Excellence, and Batterii where healthcare innovators from around the world are building a foundation for new business models in healthcare. Their goal is to co-create an open-source business model canvas that applies specifically to the US healthcare system.

Learnings On Intermediaries

We just wrapped up our business building block sprint on Intermediaries. Recall that this is our second look at Intermediaries; earlier this summer, we decided to put Intermediaries on hold and to reexamine the topic alongside the Key Influencers building block.

In summary, we completed two objectives on the Project 1.3 sprint related to Intermediaries:

  • Questions to ask on the canvas for the Intermediaries
  • Identification and activation of healthcare Intermediaries

modelH Intermediaries word cloud

1. Questions to Ask on the Canvas for the Intermediaries Block

We defined the questions that should be added to our business model canvas for helping practitioners define their Intermediaries.

  • How does an Intermediary influence the Buyer?
  • Does the Intermediary act on behalf of the Buyer, the Value Proposition owner, or themselves?
  • What Costs does the Intermediary add to the business model?
  • What Costs does the Intermediary add to the Customer Relationship?
  • What impact does the Intermediary add to the Experience?
  • Can the Intermediary be disintermediated?
  • Is your business model an Intermediary within another business model?
  • If so, can you be disintermediated?

modelH update: Intermediaries2. How to Identify and Use Healthcare Intermediaries

We also built in some assistance for practitioners regarding the identification and use of the Intermediaries that exist in their healthcare business models. We asked: do you identify and activate/disintermediate the Intermediaries you defined in the canvas questions for the Key Influencers block?

Not all intermediaries are bad. In fact, they would not exist if there were not some flaw inherent in the business model already. No one wants to pay more or spend more time than they have to, yet many healthcare business models leave the Buyer and User utterly confused, the Value Proposition unrealized, and the Jobs To Be Done (JTBD) incomplete.

Many successful business models started as some type of intermediaries. Those that are successful now dispute their intermediary origins. The problem lies when the Intermediary becomes locked into a static model and actually works to prevent better models from surfacing. In healthcare, this has lead to runaway costs that now amount close to 18% of the US GDP.

But healthcare is complex, and most Buyers and Users have poor situational fluency. In this way, many great healthcare business models require a helping hand from an Intermediary to make sure a Value Proposition is understood. In these markets, Intermediaries bridge that gap and assist and improve the Customer Relationship, and as such are essential.

Furthermore, healthcare is large, containing distinct markets where only giant players can survive. This creates a natural resistance to change and usually yields profits for the company and a poor Experience for the Customer Segment. In these markets, Intermediaries force the legacy players to act on behalf of the Customer Segment, and as such are essential.

Intermediaries can also be seen as the translator of complex purchasing decisions for the Buyer; whether that’s the self-insured employer, the government as a health plan manager (Medicare, Medicaid), or a full-insured and now private exchange. The question of influence and outcomes can perhaps be best understood by asking, first, who benefits with the information? If the Intermediary benefits before the User (consumer, patient, etc.) or Buyer (health plan, risk holder, etc.), then the Intermediary is at odds with the Value Proposition. All too often, this is the case, whether the Intermediary is a data-manager, claims payer, broker, or consultant. When the value to the Intermediary supersedes the benefit to their clients, the Intermediary either must adapt or be disrupted.

So given all of this, how do you identify and activate Intermediaries when they are needed and good, and disintermediate them when they are not?

We suggest you try to first isolate the Intermediaries by defining a canvas specific to their business model and then re-insert them back into yours based on their Key Activities, Value Proposition and Customer Relationship. We believe that this is a valid approach and can actually lead legacy businesses to rethink how they approach their own intermediaries – and possibly even seek to disrupt them.

Conclusion

We know that Intermediaries are an embedded part of the healthcare system. But not all intermediaries are bad. Case in point: the evolution of the retail clinic, sometimes called convenient care clinics. In 2004, these clinics were seen by the American Medical Association as an unnecessary intermediary to the structure of the existing primary care doctor. Many complaints were leveled against them ranging from their lack of qualified medical practitioners to creating a gap between the patient and their primary care physician. Ten years later, we have seen almost every general practice office staffed with NPs and PAs to create fewer and shorter visits with the doctor. Furthermore, the retail clinics were the first practices to adopt the electric medical record en masse. This is now seen as a standard requirement for any practice. Finally, many regional hospitals have begun experimenting with opening their own retail clinics to augment their coverage and provide a smarter triage for their patients.

As part of your business model you should work to identify and activate Intermediaries when they are needed and good, and disintermediate them when they are not!

Take time to incorporate these approaches into the Intermediaries block in your business model canvas. Regardless if your business model is aimed at Patients, Providers, Payers, and or Purveyors, defining the Intermediaries between your Customer Segment and your Value Proposition is important to creating your best business model.

What is Next?

Look for our summary of the concurrent Key Influencers building block soon. Over on the modelH platform, we’re ready to look at defining Channels in healthcare business models.

Interested in what we are doing?

Step up to the plate an get involved. We’ve still got a ways to go!

image credit: Kevin Riley & Associates, modelH Business Model Canvas for Healthcare, drawings by Mike Werner

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modelH – Health Model Co-Creation Forum (part 1)Kevin Riley is an entrepreneur, healthcare executive, and business model innovator who works with start-ups and legacy companies across the healthcare industry. He founded and was CEO of a national health care retail company, has played leadership roles for national retail health start-ups, and served as the first Chief Innovation Officer of a major insurance plan. In 2006 he started Kevin Riley & Associates Health Model Innovation to help companies with the convergence of health care and the consumer.

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