This is not a blog about telemedicine.

It’s not a blog about contact tracing apps, or platforms enabling antibody testing. It’s not even a blog about B2C digital health and therapeutics.

This is a blog about the thousands of other health tech companies struggling to find their place in a ravaged healthcare landscape. Because while there are many heroic health tech innovations on the upswing, the devastation of the hospital segment is forcing a radical rethinking for many B2B health tech companies that prided themselves on enabling provider innovation.

This is their story.

The Power Shift

In the four months from March through June 2020, the American Hospital Association has estimated $202.6 billion in losses for America’s hospitals and health systems.

In the meantime, health plans remain healthy with limited short-term effect from COVID-19, even as they prepare for potential downstream impact due to deferred care.

Many are wondering how hospitals will survive this. Indeed, it seems like a dramatic power shift is taking place, from providers to plans. Yet this very shift has been underway for years now. The growing clout of health plans has manifested itself behind closed doors in aggressive reimbursement pressures on hospitals, but also very publicly in broad investment and acquisition strategies.

Many health plans are themselves becoming quite the providers – Optum has more than 50,000 employed or affiliated physicians, and their recent acquisition of naviHealth and rumored interest in AbleTo are further evidence of a growing care delivery infrastructure. (Not to mention the six major acquisitions or investments that Optum made in 2019.) In the meantime, Humana is taking an adjacent route with its focus on post-acute and palliative care, as evidenced by their acquisitions of Kindred at Home and Curo Health Services.

And what are our FAANG friends doing, you might ask? They, too, are placing many of their healthcare bets in and around the insurance space. Alphabet has ponied up sizable investment dollars for insurance newbies Oscar Health and Clover Health, while Amazon’s PillPack is actively aligned with health plans such as Blue Cross Blue Shield of Massachusetts.

Notably, much of this activity is continuing while we’re in the midst of a pandemic. Optum’s naviHealth deal was announced at the end of May, and a continued spending spree wouldn’t surprise anyone. In the meantime, hospitals are going out of business.

The Impact on Hospital Innovation

We’ve talked about the domino effect in patient care — and find that there’s a similar domino effect in the B2B health tech sales cycle. When patients aren’t getting care, hospitals aren’t getting revenue – and since they operate on such razor thin margins already, the response is often cost containment and radical reduction in “optional” investments. (Yes, I hear you out there, entrepreneurs – you don’t see your solutions as optional. But when the house is burning down, priorities rapidly change from long-term solutions to short-term mitigation.)

This means a pause on certain types of innovation, extended sales cycles, and even more scrutiny on ROI. While these are short-term pains for many provider-centric health tech companies, the long-term impact could be similarly severe. We don’t know how the hospital industry overall will emerge from COVID-19’s impact, but we do know that there will be winners and losers. A rush of bankruptcies and M&A deals will likely litter the second half of 2020 and well into 2021. In the meantime, hospitals’ job #1 is to get patients back in the door through the Rapid Recovery of surgical volume.

 The Pivot Underway

In this environment, our humble prediction is that many provider-focused health tech companies may set their sights on that looming behemoth in the distance: the health plan market.

This, too, is a prediction that will see both winners and losers. Sadly, there will be many entrepreneurs who vainly attempt to force-fit their provider solution into a payor model with no real product-market fit. But of course, many other health tech companies already serve both markets, and they’ll be wise to refocus energy (at least short-term) on the segment showing the most foreseeable promise. Even better for those whose offerings hold relevance for managing the negative health impacts of delayed care, a big concern for health plans going into 2021.

A true market strategy pivot requires fundamental overhauls to software and field operations, and of course, to marketing as well. But to do it well, there’s really just one thing you have to know: your buyer.

Your New Audience

Let’s assume your health plan market research is spot on, your engineers and software architects are geniuses, and your product marketers nail that new product-market fit. Let’s also assume you know the difference between members and patients. Next up: reaching, engaging, and converting those health plan decision-makers. Yet when it comes to comparing models of hospital and health plan decision-making, there are both similarities and differences.

Same, Same

We’ll start with the easy part — areas of similarity between how hospitals and health plans make decisions.

1. Formal buying processes are still the rule. With 85% of payor respondents agreeing that they release formal RFPs to potential vendors, it becomes extremely important to be able to anticipate and prepare for when key target clients will be implementing a search for solutions like yours. Whether it’s database purchases, referral programs, historic contract cycle tracking, or just paying attention to conversations among peers, your pipeline will depend on your ability to anticipate RFPs. A strong SEM and PR program will also ensure your company rises to the top when decision-makers are doing research on potential RFP recipients.
2. Decision-making is diffuse. Both hospitals and health plans love decisions by committee. Sometimes, you’ll find health plan organizations that actually have 2-4 functional leaders who think they are the “final” decision-makers. Other times, you’ll find that in one health plan, the Finance lead is in charge of a particular buying decision, and at another plan, Risk Management & Adjustment owns the decision. We often say, “if you’ve met one health plan, you’ve met one health plan.” If you myopically focus on a single buyer persona, you may be inadvertently limiting your market penetration potential.
3. Decision-makers trust their peers and rely on channels that surface peer opinions. In our channel analysis, vendor-sponsored research, sales materials, and marketing content rank extremely low in credibility and consumption. At the top of the list, we find peer networks, which are accessed both directly and indirectly via LinkedIn, industry consultants, and trade publications. Prioritize case studies and smart channel investments to tap into this informal network of intelligence.
4. Structural variability is the norm. With hospitals, you have independents, IDNs, regional health systems, and everything in between. With health plans, you have the Blues, the national players, the regional plans, and even the startup unicorns like Oscar. So once again, you’ll need to segment thoughtfully. But remarkably, our research revealed that despite the extreme structural differences between these health plan segments, their buying decision factors mirror each other closely — with things like “positive previous experience with a vendor,” “organizational standards,” and “continuity with other vendors” consistently high on the list.

But Different

Let’s not get too smug, though. You’re going to face new curveballs with health plan decision-makers that go beyond the natural business model and language differences.

1. Meet the Driver, the Navigator, and the Toll Collector. Despite the diffusion in decision-making, the buyer ecosystem is actually fairly straightforward and consistent in health plans (as compared to hospitals). Through our research and working with payor-focused health tech companies, we’ve identified three common decision-making “characters.” The Driver is your primary target and internal quarterback, whereas the Navigator is a skeptic, and the Toll Collector requires negotiation. Read more about how to identify and reach these audiences in this blog or on this webinar.
2. Think about accountabilities, not titles. Whereas hospital targeting is often focused on very specific roles and titles, health plans are more broadly grouped in decision-making accountabilities. Our research revealed ten groupings, including Network Development & Management, Care & Disease Management, etc. Within each of these decision-making functions, we find much greater consistency in priorities, decision-factors, and pain points.

The pivot to a health plan audience is not an easy feat. Aside from the fundamental differences in business models, health tech companies will encounter an entirely new lexicon and a different lens through which investments are viewed. As the world changes around us, reinventing business strategy may seem like an insurmountable challenge. But in the words of Marcus Aurelius: “The impediment to action advances action. What stands in the way becomes the way.”