If healthcare providers are to remain resilient when faced with curveballs like the current pandemic, they must adapt and operate with more advanced and robust business models to thrive. John Phillips, EMEA GM and SVP of Sales at Zuora, says healthtech companies and healthcare providers need to ensure they have sustainable business models in place to support developing technologies moving forward.
Over the last year, the healthcare industry has been propelled into the spotlight like never before, as medical professionals around the world became our first line of defence against the COVID-19 pandemic. In order to ensure that patients were still able to access potentially lifesaving treatment, the industry had no choice but to adapt at scale and use modern technologies to transform the delivery of healthcare services. As a result, investment in the healthtech market has boomed, with McKinsey reporting record levels of US$5.4 billion in the first six months of 2020 alone.
As we enter the next chapter in the delivery of healthcare services, many of these new technologies and working practices – such as telehealth and remote appointments, for example – are here to stay. The door to innovation has been unlocked and as a result, the expectations of those delivering and receiving medical services has changed forever. Healthtech companies and healthcare providers need to ensure that they have the sustainable business models in place to support these technologies moving forward, no matter what is around the corner.
One such business model is based on subscription services.
Subscribing to a healthier population
Increasingly, individuals desire the freedom to access services and use them anytime, anywhere. They also want choice in terms of how they pay, alongside the ability to pause and resume services. As a result, subscribing has become the new norm, with 78% of international adults using subscription services today. It’s the End of Ownership as we know it.
The subscription business model is not just for increasing access to software and entertainment services. At its core, it’s all about increasing access and improving outcomes and if there’s one outcome that we are all striving for these days, it’s a healthy population. A pricing model focused only on selling units at the highest price possible – which is the current healthcare model in a lot of countries – does not successfully support this outcome. Instead, subscription-based pricing models focused on providing wider and more affordable access to disease-curing medicines could be the answer.
When used effectively, subscription models could help to drastically improve outcomes and boost the patient experience. They could even enable healthcare providers to personalise their services, whether an appointment takes place virtually or in a physical setting. This is because subscriptions enable companies to securely collect a substantial amount of usage data on each individual. By analysing this data over time, subscription companies can learn who their customers are and what they want. As a result, they can adjust their services to meet demand, encouraging longer term commitment and ensuring that their patients are receiving the best treatment possible.
Boosting resilience in the toughest times
It’s not just patients that are benefitting from subscription models, either. The healthtech providers that implement them are also reaping the rewards directly. Despite the challenges faced by the healthcare industry over the last year, subscription growth has remained stable.
In fact, the latest Subscription Economy Index (SEI) – a bi-annual report published by the Subscribed Institute – discovered that healthcare companies with recurring revenue saw some of the lowest churn rates of any industry. In other words, customer retention was strong. This underscores how vital relationships, customer-centric models and flexible access are to this sector in particular. Subscriptions enable healthcare companies to establish and maintain these relationships by gathering valuable insights from minute-by-minute service data, enabling them to better understand and serve patients in a way that wouldn’t be possible within a traditional healthcare environment.
According to this report, healthcare companies utilising subscription services also see higher levels of usage-based billing than any other sector. Usage-based pricing is a way of quantifying the value of the product or service provided. The goal is to let customers pay only for the services they need. Incorporating usage-based pricing makes it easier for healthcare providers to align and grow with customer needs – making them both more appealing and more profitable. For the healthcare industry specifically, the SEI suggests that subscription models are empowering providers to continue to be resilient and adapt in the face of change.
Siemens puts subscriptions into action
One example of a company in the healthcare space already seeing the benefits of a subscription-based business model is Siemens Healthineers. Physicians around the world use equipment manufactured by Siemens Healthineers to produce millions of medical images every year. Medical images contribute to a continuously growing pool of multidimensional health data ranging from electronic medical records, image databases and other multi-layered health IT systems.
Historically, Siemens Healthineers operated via a transactional business model with one-off sales, selling both hardware and on-premise software. But with advances in cloud computing and AI, along with a shift in their customer’s preferences, the company saw a new opportunity emerging. In order to capitalise on this, the team introduced several digital health offerings such as a teamplay digital health platform which enables healthcare providers’ Digital Transformation through AI RAD Companion – an AI-supported, cloud-based image interpretation tool – and AI-Pathway Companion – an AI-based software facilitating personalised and standardised diagnosis and treatment decisions.
However, the existing IT infrastructure (built for one-time transactions) didn’t have the capabilities to support a subscription business model with multiple customer touchpoints. Therefore, the company was unable to fully monetise these new products and unlock the true patient value. In order to solve this, Zuora Billing and Zuora Revenue was added to the IT stack, enabling the team to automate previously manual processes and institute new key performance indicators (KPIs) to power their subscription recurring revenue business model. For Siemens Healthineers, subscriptions mean new revenue streams, increased productivity and significantly less processing time – for example bill run time was reduced by about 75%.
Subscription models allow healthcare providers to re-imagine their businesses as a recurring service, as opposed to an accumulation of transactions. They can act as an enabler for more personalised patient experiences than ever before. Ultimately, if subscriptions are delivered with the right blend of flexibility, convenience and customisation, they could prove to be a sustainable solution, enabling the healthcare industry to survive the current climate of uncertainty and thrive in the future.Click below to share this article