The Move to Retail and Why

When looking at the steps required to move to a Value or Population Health model, adopting a retail strategy is one of the most important yet least understood by the industry. The current Volume model is completely anchored in a hospital or wholesale-dominated mindset. Since that is where the most money is made, it is understandable that healthcare providers, especially hospitals, have been reluctant to move to a retail model. In order to truly understand what this means we need to understand Merriam Webster’s definition of “retail.”

“The sale of goods or commodities in small quantities directly to consumers.”

The key words in this definition are directly to consumers. In the current Volume model health care services are really sold to a third party payer, not the consumer. They are also paid for on a negotiated fee-for-service basis.

In the Value Model, the healthcare services are provided under a fixed or bundled payment and, for those providers willing to take on risk, those payments, go directly to the provider. Risk in this case is when the cost of providing healthcare services to populations of individuals is greater than the total fixed payments paid to provide healthcare coverage for those individuals. So there is every incentive for the provider to control costs and keep the consumers they cover healthy.

So like most large businesses providing services to individuals the ability to market and provide cost competitive, quality services to individuals becomes essential to an organization’s survival.

Retail transactions when successful are usually characterized by being:

  • Personalized (1:1)
  • Direct
  • Relevant
  • Timely
  • Comfortable
  • Convenient
  • Choices offered
  • Cost (priced attractively)

Two essential business requirements for the new retail pay-for-performance, Value healthcare environment are:

  • Ability to implement personalized marketing and communications targeted directly to individual consumers
  • Consistently delivering an outstanding customer and patient experience when they respond

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