For all of Jeff Bezos’ talk about customer centricity, the disruption Amazon has brought is not based on customer demand, but on Amazon’s supply.

Customers did not demand Alexa, Amazon Prime, or 100 million products from one portal. Rather, Amazon supplied innovations that consumers didn’t know they wanted. But once they got a taste of these innovations, consumers flocked to them. The same is true for other consumer-focused giants like Apple and Google. Consumers didn’t demand a phone that doubled as a hand-held computer and digital communicator, or a search engine that returned millions of results in a second. Most of us couldn’t have dreamed of such things. But once the iPhone and Google search were supplied to us, they were so useful that they became necessities. And once Amazon shopping, the iPhone, and Google search proved their worth, the resulting demand migration disrupted the nation’s economy.

In the space of just weeks, the COVID-19 pandemic has radically changed consumer behavior. In most cases, the virus has dramatically increased the speed of adoption of behaviors that were at various stages of taking root: meal delivery rather than eating in a restaurant, grocery delivery rather than wheeling a cart through a store, streaming events rather than attending in-person, online learning a client’s place of business.

The effect of supply-side disruption has been unprecedented in the world economy. However, the short-term effect of this disruption on healthcare has been limited. Disruptors like Amazon have not yet caused a major change in any healthcare organization’s core delivery model. Demand-side disruption, on the other hand, could have a much more direct and powerful effect. If, as a result of the COVID-19 pandemic, a significant number of patients chose to receive healthcare in very different way, that could create the need for rapid and fundamental change in the healthcare delivery and care models, which in turn would create a serious potential strategic problem for healthcare organizations.

One of the best examples is telehealth.

Despite billions of dollars flowing into telehealth start-ups and product development, and the increased options for telehealth, adoption has been slow. As of 2019, only 20% of hospitals reported having video visits widely available, only 22% of physicians had used telehealth, and less than 10% of patients had used virtual visits.

With the COVID-19 pandemic have come numerous forces moving providers and patients toward telehealth options: lack of capacity for providers to handle people suspected of having the virus or to handle people with other conditions, reluctance of patients to be in a healthcare facility during the pandemic, and increase in payment for telehealth services among government and commercial payers.

Forester is predicting more than 900 million telehealth visits will occur in 2020, compared with its original estimate of 36 million. Anecdotal accounts of the rising in telehealth use have been equally startling. “We were seeing approximately 10-20 patients a day on our telehealth platform prior to the COVID-19 pandemic,” Ken Samet, President and CEO of MedStar Health told us in a recent interview. “Right now, we’re flying past 500 patients a day, and we're on our way to 1,000 patients a day.”

Providers, too, may have become more open to telemedicine. Claude Deschamps, MD, President and CEO of the University of Vermont Health Network Medical Group, told us recently, “It has been a big 'a-ha' moment for many providers that they can do a lot of their work via telemedicine.”

The question for any organization seeing these kinds of radical changes in consumer demand is whether that change will last beyond the pandemic. When it comes to telemedicine, I believe we have every reason to believe that there will be a permanent change in demand. As the pandemic winds down, a greatly increased number of consumers will have used telemedicine and appreciated its far more convenient access and agreeable experience. And consumers will have appreciated the additional safety they feel by not entering a facility populated with other sick people. Many more clinicians will have conducted virtual visits and found it a viable and effective means of care. And payers and policymakers may permanently lift constraints on telehealth reimbursement.

In the case of telehealth, the COVID-19 pandemic may have moved the healthcare industry rapidly into a state that, before the virus, seemed a point in the distance. This kind of rapid disruption could have varying and hard-to-predict consequences.

A rapid rise in telehealth demand would have implications for the healthcare workforce and training. It could mean a reduction in the number of facilities and real estate needed. It could have major economic impact if telehealth reimbursement is not commensurate with reimbursement for in-person visits. It would place new demands on hospitals for investment in technology and talent.

The rise of telemedicine could have deep implications for the competitive landscape. Healthcare’s long-held state as a cottage industry could change as digital access removes geographic boundaries. Well-known centers of excellence could draw market share from local providers by offering care digitally. Broad-based companies that currently provide many hospitals’ telehealth on a white-label basis could gain visibility as their own national brands of telehealth.

Telemedicine is only one example of how a rapid and unprecedented change in consumer behavior caused by the COVID-19 pandemic could speed the disruption of healthcare and many other industries. At a time when organizations are financially weakened by the virus’s economic damage, they could find themselves needing to make major strategic pivots to a future that only a few weeks ago seemed at least somewhat distant.

As fast and furious as supply-side disruption has been, demand-side disruption may force even faster strategic thinking and a more furious response at a time when such a response is especially difficult to model and deliver.

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Kenneth Kaufman

Managing Director, Chair
Kenneth Kaufman offers deep insights on the economic, technological, and competitive forces undermining healthcare’s traditional business model.
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