EHealth, Wealth, and Happiness

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E-Health, Wealth, and Happiness

• Ian Morrison

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Key Driving Forces

• The New Economy
• Public Discontent with Healthcare
• Reluctantly Empowered Consumers
• Rubble of the Managed Care Revolution
• The Fruits of Innovation
• The Promise of the Web but the lack of IT
  Infrastructure

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The Long Boom

• Openness in technology, trade and communication
• New technology
• Internet and E-commerce
• Genetics and genomics
• Nanotechnology
• Markets and networks over government and
  hierearchies

4
Americas Technology Boom

• Demographics of the Baby Boom
• The 401 (K)ing of America
• The NASDAQ Wealthy betting with the houses
  money
• Day trading by individuals and institutions
• The Who wants to be a Millionaire? Effect
• Until recently, Dot.Commers had free money to buy
  servers, ad space, brands and people

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So Where Does it End?

• The Internet is the engine of change and
  productivity
• The hydraulics of IPOs
• Forced the Establishment into Dot.com
• If it ends it will end badly, but.
• This is not 1929 yet
• Leverage is less
• Markets are more regulated
• Instruments are more diverse

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The Second Curve
First Curve
Second Curve
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The Curves

• First Curve
• The established way of doing business
• Most of the current Profit and Revenue
• Slowing in the long run
• Second Curve
• New business or new way of doing business
• Radically different from the first
• Source of future growth

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Knowledge as Value
Product Price per
Pound Pentium III 800 Mhz 42,893.00 Viagra
11,766.00 Gold 4,827.20 Hermes
Scarf 1,964.29 Palm V
1,726.92 Saving Private Ryan on DVD
874.75 Cigarettes
100.00 Mercedes-Benz E-Class Sedan
18.98 Chevrolet Cavalier Sedan
6.76 Hot-Rolled Steel 0.19
Source Fortune, March 20, 2000 p. 68
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Drivers of the Second Curve

• New Technologies
• Faster, better, cheaper
• New Consumers
• Anything, any time, any place
• New Emerging Geographic markets
• Asia, Latin America, Eastern Europe

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Morrisons Five Laws of the Internet

• Law 1 The Mother of all Commoditizers
• Law 2 The margin is captured by the consumer
  not the innovator
• Law 3 It is a 1 to 1 medium but the race is
  on to build mass brands
• Law 4 The Alberta Tar Sands Model of internet
  advertising
• Law 5 There is a lot of physical
  fulfillment in e-commerce

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Internet Advertising
Source Nielsen Netratings, July 1999
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Business to Business Infrastructure Players

• Hard Infrastructure Nortel, JDS Uniphase
• Soft Infrastructure Ariba, Oracle, I 2
• New Plumbers Exodus, Sapient
• Market Makers Commerce One, FreeMarkets
• Vertical Markets Healtheon, Metalsite
• Toolmakers Kana, Siebel

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Market Capitalization of Emerging Players
Selected Market Capitalizations (Billions of
Dollars) March 17 April 6 April
25 I-2 26.7 16.5 12.9 Exodus 25.7
22.3 13.7 Ariba 25.6 9.3
12.9 Commerce One 15.7 8.1 7.6 Kana
Communications 7.2 3.1
3.1 FreeMarkets 6.6 3.4
1.9 (Xerox) (17.1) (16.9) (17.7)
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Managed Care Definition

• An organized system of healthcare financing and
  delivery that takes the excess profits of
  hospitals, specialists, and drug companies and
  gives them to consultants

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Publics Satisfaction with Health Care Industry
Decreases
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Public Perceptions of Whether Managed Care
Improves Quality
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Physicians Are Markedly Less Satisfied
Physician satisfaction with practice
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Who Helps Physicians?
What or who has helped or hurt physicians ability
to provide quality patient care?
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Consumerization in Healthcare

• Rising Education Levels
• Tiering of benefits
• Relentless Media Coverage
• Direct to Consumer (DTC) Advertising
• Disease Group Advocacy
• Complementary and alternative medicine
• Cyberchondria

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CyberChondriacs Are Real

• 60 million adults searched the Web for health
  care information in 1998, rising to 70 million in
  1999
• Thats 68 of the 44 of Americans who were
  online (1998)
• 91 found what they needed

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Harris Interactive 10,000 Chronically Ill
Patients
Internet Sources used by Chronically Ill
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Rising Numbers of Uninsured
Employee Benefits Research Institute, Trends in
Health Care Coverage, Issue Brief, 1997
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The Erosion of Employer Sponsored Coverage
(The Future of Health Care, Baylor College of
Medicine, 1998)
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Managed Care in Turmoil

• HMOs almost as unpopular as tobacco companies
• Uninspired offerings
• Premium Increases.passed on to employees
• Rx costs killing managed care generally
• Tiering of Formularies Let consumers trade up

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Pharmaceutical Costs Are Rising

• New Innovative Products
• Formularies are manageable
• DTC Advertising
• Product and Brand Awareness
• Detail Force is Back

For our commercial lives, on a PMPM
basis, pharmaceutical costs will exceed inpatient
hospital costs by the year 2000. HMO CEO in
California
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Pharmaceuticals Cost Container or Cost Exploder?
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Information Technology

• Doctors are cheap and technophobic
• Lack of clinical usage
• Massive investment required
• Who will pay and for what?
• Interoperability is coming

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Doctors using Computers
Old Paradigm
New Paradigm
Non Practice Uses
Non Practice Uses
Practice Management
Practice Management
Financial Transactions
Financial Transactions
Clinical Transactions
Clinical Transactions
EMR
EMR
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E-Health Business Models

• Advertising
• Subscriptions Paid and Sponsored (WebMD has 11
  million free months)
• Soft E-Commerce (Services)
• Hard E-Commerce (Goods)
• Transactions (Claims, Reports)
• Pharmaceutical Sales and Marketing
• Data Mining

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Seven Futures for E-Health

• Limited Cyberchondria
• AOL for Doctors
• Bloomberg of Health
• Bettyware (PC Version Bobware)
• Doctors Shopping Network
• E-Practice.com
• Platform for E-Health Redesign

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Health Plan Strategies

• Vertical Integration for Value
• Virtual Single Payer
• Differentiation
• Product
• Channel
• Consumer

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Provider Strategies

• Consolidator
• Regional Cartel
• Benevolent Monopolist
• Specialty Focus
• Organs
• Offerings
• Outcomes

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Healthcare Strategies

• Health Plans
• Virtual Single Payer and Hamster Care
• Hospitals
• BBA Begging Short term
• Cartels and benevolent monopolists
• Physicians
• Hope it stops and we go back to 1975
• Pharmaceuticals
• Hope it never stops, worried it might

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Elements of a Breakout Strategy

• Start with patients and physicians
• Demonstrate value based on customer joy
• Aligned incentives Organizational capitation
  and micro fee for service
• Pay physicians for performance
• Use the internet for everything
• E-Mail, FAQs and hour long hand holding

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The Role of Journalists

• Solution seeking not just managed care bashing
• Even handed coverage of very uneven debates
• Health as a business, health as public policy,
  health as consumer story, health as a science and
  technology story, health as human interestthey
  are connected
• Especially in E-Health