Council Post: 3 Ways Digital Transformation Drives… Leave a comment

Sara Vaezy is the EVP, Chief Strategy & Digital Officer at Providence, and architected their digital innovation model.


Profitable growth is of paramount importance to health systems today. In the first quarter of 2022, health systems, including large systems like Kaiser and Ascension, posted significant losses.

In my home state of Washington alone, hospitals suffered a net loss of nearly $929 million, according to the Washington State Hospital Association. The lingering recovery from Covid-19 increased operating costs, and changing demand for services all play a role.

There are three key ways digital transformation can drive growth in healthcare.

The most significant and positive way to address the growth imperative for health systems: Digital innovation. But it’s about much more than simply modernizing infrastructure. Digital innovation must be about fundamentally transforming the health care business model from a consumer perspective.

1. It bolsters both customer acquisition and loyalty.

Digital sits at the center of nearly every growth pathway. Not only does it play a critical role in demand generation, aggregation and capture, but it also supports the increased capture of lifetime or long-term customer value—thereby transforming the CAC vs. LTV equation.

In both the travel and banking industries, we’ve seen the effects of a digitally-driven model. Aggregators like Expedia and Travelocity changed the way people shop for and book travel, and they also offered new insight into the market that wasn’t fully understood before. Meanwhile, banks were able to learn more about their customers and leverage that insight into personalized offers, increasing the lifetime value of their customers.

Health systems must start adopting and driving those same principles. Enabling customers to seamlessly access, navigate and book services and care options—across all channels—are no longer nice-to-haves; they are mission-critical consumer requirements. As consumers, expectations have changed in nearly every other industry, from financial services to restaurants to travel and retail. Healthcare can no longer be the outlier.

Insights driven from customer data platforms and identity-driven engagement deliver a greater understanding of consumers in the market across various lines of care, enabling marketing to be far more personalized and efficient.

Platforms like DexCare aggregate and match digital demand with health system capacity across all lines of care, streamline the experience for both patients and providers and maximize resources.

In fact, at my own company Providence, DexCare has enabled service lines to drive new customer acquisition into a single service, capture a much greater amount of downstream revenue and generate a higher per-patient encounter in cost savings.

This digitally-driven approach requires health systems to become more sophisticated in measuring effectiveness. Metrics such as Monthly Active Users (MAU) and the number of patient/customer accounts, also known as Digitally Registered Users (DRU), lend insight into what the customer funnel really looks like. And the development of Return on Marketing Investment (ROMI) models helps business leaders to transform their marketing from an expense into an investment that fuels growth and can be attributed to specific campaigns.

2. It allows for new product enablement.

Health technology companies have experienced aggressive, record-breaking funding over the past few years. There is a tremendous opportunity for health systems to leverage the innovation market and funding by partnering in ways that create entirely new sources of revenue through new product and service enablement.

The healthcare market in the U.S. is incredibly complex and localized. Products and solutions that can support the ecosystem in a flexible way have an advantage. Imagine having a simplified and standardized platform that offers a holistic view of a patient— streamlining the transactions, communications and engagement with patients while also optimizing precious resources and reducing caregiver burnout.

These types of platforms enable health systems to take full advantage of the speed and market investment to drive transformation. Companies whose business model revolves around being a true platform company—taking into account the wide range of operational and business logic of different constituents without forcing organizations into a specific operating model—will win.

That nuanced approach to building commercial products can be a game changer. It’s also why digital innovations developed from inside a health system may be the most valuable overall.

3. It opens up new business models.

Beyond driving customer acquisition and retention, digital transformation carries the power to change the economics of the health system to support new business models that enable growth. Digital not only enables scalable solutions, but it also enables more direct, personalized and meaningful consumer interactions that can deliver greater business impact.

Consider the ability of health systems to segment customers across patient populations, conditions and needs—offering premium services that might guide users both through and between episodes of care. This is an entirely new operating model—one that Amazon’s recent $4 billion acquisition of OneMedical suggests is a mass market opportunity.

Tech-enabled Medicare Advantage models that combine care management and consumer-facing technology tools to enable high-value care delivery at scale demonstrate other examples of how digital opens up new operating models.

Devoted Health has raised over $1 billion and now has nearly 67,000 MA members, more than double its 2021 enrollment. Meanwhile, Clover Health has partnered with Walmart to expand its reach and grow new customers.

A myriad of opportunities exists, from new business models to new direct-to-consumer or direct-to-employer offerings or even new types of insurance companies. All of these digitally-centered models possess the ability to bring meaningful change to the way health systems work.

We can’t talk about growth strategy and digital strategy separately.

Accenture recently determined that when hospitals deliver “superior” customer service, in their patients’ estimation, they see a 50% increase in net margins compared to “average” hospitals. Digital will continue to play a fundamental role in driving and delivering those experiences.

Digital can no longer be viewed as a veneer simply layered upon existing health care solutions. Formalizing digital as an organizational value driver is vital to driving self-disruption of our overall business model—and driving sustainable long-term growth and recovery for our organizations.

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