Formally trained as a health economist, I have been primed to think about healthcare from the lens of supply, demand, and yield. Even though markets for healthcare services deviate from what we economists would call the ideal market, the core principles offer a valuable framework for decision making.
The supply-side of the equation refers to all the providers of health services ranging from hospitals and physician practices to retail pharmacies, new entrants (e.g., Walmart, Amazon), and virtual care platforms. Demand refers to both the exogenous and endogenous factors that influence consumer preferences (e.g., location, price) and need (e.g., genetic predisposition) for services; the intersection of the two informs the expected yield, which is also influenced by market dynamics such as regulations and reimbursement incentives.
A common misconception is that healthcare supply is going down, and demand is going up. It is true that the burden of disease is increasing, but it is merely one component underlying demand. When you analyze the data at the health economy level, it is clear supply is increasing while demand is relatively flat or even declining (the intricacies of which we will explore in the weeks to come).
In fact, the supply of health services providers has increased significantly over the last 30 years. Long gone are the days when the consumer was limited to receiving care at a physician practice or hospital, with choice often defined by narrow networks.
In the last two decades, consumers have adapted their lifestyles around services like Amazon Prime and Uber/Lyft. This shift has fundamentally changed what they expect as it relates to how they access and receive care. Today’s healthcare consumer has an array of choices, from CVS Minute Clinics and home delivery for prescriptions to hospital-at-home and virtual services. With emerging omni-channel models from Galileo to Tia, it is only inevitable that consumers will have even more choices in the years ahead.