For the last 25+ years, Jon Kaplan, a Senior Partner and Managing Director at the Boston Consulting Group, has been advising clients on the key trends and transitions in healthcare. As the North and South American lead for the healthcare payers and services team, Jon has worked for a wide variety of health care clients on six of the seven continents. His primary experience is in understanding market forces and demand and has testified to the U.S. Congress about patient outcomes of those enrolled in Medicare Advantage. The Pulse sat down with Jon to hear his perspective on some of the top trends in healthcare.

Jon Kaplan, Senior Partner and Managing Director at the Boston Consulting Group

The Pulse: For background, what are the types of clients you work with today? How has this changed over the last few years?

JK: Historically, we’ve worked with large payers and provider systems. Today, I support payers and innovative providers. Over the last few years, we’ve seen an uptick in the number of retail health clinics coming into the market, such as Iora and OakStreet, that are blending the relationship with the provider. In addition to these, I spend my time supporting providers and payers that have a complex patient population- Medicare/Medicaid dual eligible patients or chronic patients. These patients tend to be the highest touch for many of our clients.

The Pulse: Most professionals say healthcare is local. Have you found this to be the case? If so, why is this true?

JK: Healthcare is local because care delivery is local. In other words, providers and health systems are all locally based. For large companies, payers tend to cover cross-state treatments. In reality, the local-nature of healthcare is due to the providers and their referral networks. For instance, an orthopedic surgeon that you’d see in Chicago isn’t much different than one you’d see in Philadelphia; but your access to the two providers is largely limited by the referral networks in each system. Your primary care doctor has relationships with the Penn network and will tend to refer within the system. In my opinion, it is these large networks that force healthcare to be local. Many of the innovative players I mentioned earlier are trying to create a more national view and rely less on the local network-based approach.

More generally speaking, the issue with healthcare being localized is that it doesn’t really meet the consumers’ needs—and healthcare is the last industry that still doesn’t put the consumer first. Think of airlines, for instance. Can you imagine if the airlines industry flew routes that were easiest for them, and not for the consumers? If it was more convenient and cost effective for an airline to have a connecting flight from New York to Boston, through Dallas, consumers would be up in arms or shop around for an alternative. Because of healthcare’s local nature, consumers don’t have the ability to shop around and are forced to adopt the system, even if it is not convenient for the patient.

The Pulse: Do you think the consumer-centricity in healthcare is reserved for the more innovative players, like the OakStreets of the world, or can larger systems also address consumer needs more effectively?

JK: With the large number of physical assets that existing healthcare systems have, it’s tougher to address consumer needs to the extent that the innovative providers may be able to. That is the single dilemma. Healthcare is defined by the healthcare system, and a system that is so large and so complex that it is naturally hard to navigate and cannot meet consumers’ needs. From our research, we’ve understood that consumers care about three things: cost, convenience, and quality (brand). What makes the new provider models more apt to meet consumers is they can be nimble enough to deliver across these dimensions. It’s a significant lift and may not be financially easy for larger provider systems to address these needs.

The Pulse: On the cost dimension, have you seen a transition to value-based care? How has concierge medicine changed access?

JK: We live in a fee-for-service (FFS) world. It’s hard to see the entire American population have access to a value-based care system because frankly, it doesn’t make sense. The average healthy American under the age of 50 will see their physician maybe once or twice a year. To share risk and manage that person’s life doesn’t make sense for the payer or provider. For more chronic populations, such as dual-eligibles or Medicaid/Medicare patients, who see their physician much more often, value-based care is enticing.

I don’t believe cost will be the driving factor that will change healthcare. Cost has been a problem for years; in the 90’s, we said we couldn’t afford healthcare. That was 30 years ago, and healthcare is now more expensive! Focusing on healthcare costs is analogous to boiling the frog. Yet, consumers are still fundamentally scared of healthcare costs. The idea that you would pay out-of-pocket for healthcare is challenging for consumers, largely because our health is not predictable. One day you may feel completely fine, the next you’re in a serious accident. When given the option of taking a 15% pay raise versus having healthcare benefits, I would bet most individuals would take the benefits. Consumers like employer-sponsored plans, I find it challenging to picture a world where employer-sponsored and government-sponsored healthcare is non-existent.

The Pulse: What do you believe will be the driving factor to change healthcare?

JK: Customer centricity will change healthcare. The reason that Uber has been so successful is because it meets the consumer exactly where they are. Uber disrupted a giant, taxi industry by beating them on consumerism. I believe healthcare will be disrupted by a need to put the consumer first. There are smaller companies that are making benefits or services more consumer-centric. I think the impact of these upstarts will be forcing the giants to also make their value proposition more consumer oriented. A good example of this is in car insurance. A few years ago, no one had a program called “safe driving” that rewarded the individual for driving well. This idea didn’t originate from the Progressives of the world. Today, most big players have adopted these technologies and made it a part of their business. Innovative companies will force existing players to adapt. Of course, there is always the challenge of legacy business and this challenge is real for large healthcare provider systems.

The Pulse: You’ve testified in-front of congress on the benefits of Medicare Advantage. Can you share your thoughts?

Medicare Advantage aligns incentives among the patient, provider, and payer. It’s a system that truly cares for the patient. In a research study BCG commissioned in 2013 (looking at over 3 million healthcare claims records), we found that patients enrolled in Medicare Advantage plans typically had better health outcomes than those participating in traditional Medicare. These programs involve all the different touch points in a persons’ life: the primary care doctor is now a care manager, supplementary caregivers are in the home, and the patient’s specialty doctor is informed care. There is a fundamental desire to coordinate care to help the patient. Again, Medicare Advantage seems to work because the target patient population sees their doctor (and caregiver) frequently and that population has a high prevalence of chronic ailments.

The Pulse: What is the top issue on most healthcare CEOs minds today?

For payers, it’s still providing services at the lowest cost possible and increasing their membership. For providers, their focus is often on filling their beds, developing strong population health capabilities, and looking at the economics of their current business.

Interviewed by Mosum Shah, January 2020