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October 1, 2014

Psilos Healthcare Outlook Fall 2014

Filed under: Healthcare,Venture Capital — Steve Krupa @ 4:26 pm
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At Psilos we have been predicting the oncoming wave of consumerism in the health insurance market for sometime, and for that matter we have invested behind our beliefs.  But over the last couple of years it occurred to us that it may not be exactly clear what this reality means for insurance companies. This is the subject of this year’s Outlook, titled: A Race to Embrace the Consumer Business Model: Insurance companies must change or face obsolescence.

In our 2011 Outlook we wrote the following:  “Psilos believes that the PPACA [a/k/a Obamacare] will accelerate sweeping changes to consumer-oriented business models and distribution channels, as well as increase the competition among insurance companies… These changes are already beginning to occur, but they will accelerate rapidly post- 2014 [emphasis added], when the number of Americans shopping for their own health insurance will increase exponentially at the expense of the current model, in which most people either have their health insurance provided to them by their employers or simply remain uninsured.”

Post-2014 is now upon us, and it would seem that we are in the midst of much of what we predicted three years ago.

To us the most interesting question for investors in the HCIT and services space is exactly how will insurers adapt to the new reality.  And so this is the focus of our 2014 Outlook.

The fact is that insurers are not set up as a business to service individual consumers, especially the version of the individual consumer that is born from our current information age, where almost any transaction and piece of relevant information is available to us at will, through the internet and on our mobile devices: except of course our health insurance and our healthcare information.  Why?  Because the infrastructure of the industry is not set up to service individual consumers, in large part because those consumers have not historically been a primary customer; however, they are now.

Our report takes a broad Michael Porter-esque view of the insurance company value-chain, which today is set up to service their employer customers, and argues it must be completely re-thought and re-engineered to service individual consumers.  Within these changes lie ripe opportunities for investors, and those insurance companies that successfully establish a value-chain built for the consumer business have the opportunity for material gains in market share and profitability.

You can read through the entirely of our report here.

If you find it interesting, which I think (hope) you will, I would love some feedback.

SK

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