I was in Newport Beach last week to chair IBF’s Consumer Health and Wellness Innovation Summit. It was a very interesting event with about 100 people from many different segments of the health and wellness industry—a very eclectic crowd. There were people there from healthy food purveyors (Nestle, Kelloggs), provider organizations (MDVIP), health insurance firms (United Health Group, SeeChange Health) and even the U.S. Department of Health and Human Services. There were also a plethora of entrepreneurs representing a variety of emerging wellness and preventive health companies and, of course, the venture firms that they love and hate. 10 years ago you could not fill a room with people to talk about consumer health; now it is becoming a mainstream topic.
The consumer, aka the patient, has been largely absent from the healthcare discussion for far too long. Yet recently, a harmonic convergence of events has put the consumer center stage in the healthcare discussion. Those events include:
- The devastating human and financial toll of chronic illness. CDC estimates that 50% of Americans over 18 have one or more chronic illness. At the event I had the wonderful opportunity to do a fireside chat interview with Dr. Richard Migliori, EVP and Chief Healthcare Officer of United HealthGroup. I asked him why payers had so recently decided that they should, in fact, begin to pay for preventive health/wellness programs and he said, “everyone finally woke up.”
- The crash of the national economy has made it impossible for payers of all types as well as consumers to ignore the cost of health insurance as well as the cost of poor health. One statistic: while the employers’ cost to provide family health insurance has risen an average of 113% over the last 10 years, the cost to consumers has risen by 131%. A disproportionate share of the burden is cascading down to consumers’ pockets. James Carville once said, “It’s the economy, stupid.” In this case it’s the stupid economy.
- Healthcare reform, driven by the first two on the list, is next. Someone finally drew a line in the sand and it has catalyzed a major paradigm shift. Whether you love it or hate it, a key feature of the Patient Protection and Affordable Care Act (PPACA) is increasing attention to consumers’ personal and financial accountability for their own health, as well as ensuring that consumers can access preventive care without barriers. The advent of health insurance exchanges will only magnify this impact as consumers move to purchase their own policies without their employers as intermediaries.
- Technology–the widespread availability of sensors and smart phones, augmented by the profound impact of social media, has made it feasible to efficiently engage consumers and to engage in true mass customization. True, we may be creating a whole race of activity monkeys who measure every bodily output including how many times they measure it, but we have a long way to go. Some consumers’ idea of prevention is still ordering the DIET Coke with their Wendy’s Triple Baconator.
It’s a sign of the changing times when large insurance carriers are dedicating serious resources to preventing illnesses that may befall those they no longer insure, and the Hostess Corp, makers of Twinkies, have filed bankruptcy in part due to the trend towards healthy eating. At the conference there was a panel featuring representatives of the food industry, including Nestle, Kellogg (Kashi), Ralph’s (retired executive), Immaculate Baking Company and The Hartman Group. James Richardson from The Hartman Group made the point that between meal healthy snacks are THE growth engine for the grocery industry these days. He cited a statistic that snacking accounts for 52% of all adult eating and that in the current U.S. food purchasing environment, 62% of snack choices are about people trying to achieve specific health goals. It’s a good time to be an almond grower and a bad time to be a Twinkie.
On the other hand, Richardson also talked about how people are now more relaxed about body image than they once were. He said that “people have moved from the Jane Fonda orientation of pain and punishment” to achieve body perfection and now are “ok with a little chub.” Well thank God for that, as most of the people I know are going to choose chub over punishment any day of the week. I am just hoping that no one comes up with a new market for things that are both punishing and chub-inducing. That would just be cruel. Ironically, the word “patient” is derived from an ancient term meaning “to tolerate or suffer” according to Mark Murrison from MDVIP, so perhaps punishment is simply unavoidable.
In response to the above-described market drivers, there is a nascent but rapidly growing set of ideas and business models blooming around consumer health and wellness. The consumerization of healthcare is and will take many forms depending on people’s health status, age, technical literacy, and personal and financial motivation. Furthermore, this consumerization trend is forcing companies traditionally not thought of as consumer branding organizations to learn quickly about how to reach this powerful and lucrative emerging sector. There was a lengthy discussion at the conference about how traditional brands such as Kellogg and Nestle do not have any cache in the healthy food market so the companies go to some lengths to hide those names on the healthy food brands they own (such as Kashi).
Consumer branding is going to be an interesting exercise among the big insurance companies over the next several years. These entities will be forced to re-focus a sizeable portion of their marketing efforts toward the individual and away from the large employers as Health Insurance Exchanges (HIX) shift the purchasing dynamic downstream. Depending on whom you ask, between 30 and 100 million people will be directly purchasing their health insurance from a HIX within the next several years. No one knows better than payers how to follow the money, except maybe Deep Throat (the one from All the President’s Men, not the one with Linda Lovelace). But on the other hand, this segment of the healthcare market has not been in the business of direct-to-consumer advertising like the folks in the drug industry have been. Will their brands carry weight with consumers or will they be viewed as punishment and be better hidden from view? By and large consumers are not especially in love with their health insurance providers these days so it will be a serious exercise in marketing genius to bridge this divide.
In closing, I must add that while not a primary focus of the conference, there was an odd tendency for it to drift towards the pet marketplace repeatedly throughout the day. Tom Blair, a Nestle/Purina executive, talked about how consumers who may sacrifice their own health will never do so when it comes to their pets. He cited a WalMart study that said in times of economic stress, consumers will cut back on every category of food purchasing except infant food and pet food and he described how pet foods are now becoming more and more organic, gluten free, and otherwise Whole Foods like. As I and my table-mate, a well-known medical device investor, watched a presentation about FitBits and other devices for tracking fitness, he leaned over to me and said, “Now I bet there’s a pet market for that too,” suggesting that people would fork over plenty of cash to put a step tracker on Rover’s collar. Since every discussion about consumer health eventually turns to social media, there were also numerous remarks about the connection between social media and people’s pets. Maybe there is an as-yet-untapped market for healthy between meal cat snacks to fortify them when they are resting between YouTube video shoots. Now there’s a focus group. Marketing geniuses, start your engines.