Three Billboards outside Boulder, Colorado is a story set in the backdrop of an industry in flux, struggling with the shift from volume to value-based care and the financial pressures of operating in an at-risk world. Feeling resentment for “solution” vendors who had historically placed the burden of value realization squarely on the shoulders of its customers, healthcare providers are pushing back demanding they be insulated from the financial uncertainty and professional embarrassment of unmet expectations.
It’s a story about IT companies trying to redeem themselves from the fallout of those unmet expectations yet not buckling to the demands for financial risk sharing. It’s an examination of one industry’s journey out of the darkness of the misaligned risks and rewards of healthcare IT solutions and into the light of “Value-as-a-Service”.
As healthcare is coming to grips with increasingly tighter margins thanks to the economic realities of healthcare reform, leaders are demanding that risk be cascaded down to their suppliers and business partners. Angry over the economic sting from products and projects that fell short, a trio of abandoned billboards are rented outside Boulder, Colorado to call attention to the problem.
Vendors were simultaneously sympathetic yet unmoved to change their revenue models. The billboards stayed up while the war of wills played on for years. Finally, a “Value-as-a-Service” (VaaS) model took shape.
How’d We Get Here?
In the late 1990’s, the Information Age was booming under the belief that technology was a disruptor providing huge competitive advantages when deployed. Throughout the Dot-com tech bubble, companies spent massively on technology because they were afraid to be left behind. Technologies were purchased and implemented on-premise without any clear line-of-sight as to how they could realize a return on their investment. Customers paid a king’s ransom for software licenses, computing infrastructure, and expensive consultants to implement the software. They added staff to support these new technologies, trained and retrained thousands of end-users with relatively low adoption rates. They incurred huge upfront costs and steep annual maintenance fees with less than stellar results downstream because the siren of the tech bubble lured them to add complexity they were ill-prepared to use let alone optimize. Over time, buyers became jaded and suspicious of any vendor relationship where the vast majority of the risk was borne by customer.
Next came the subscription era where customers mitigated the financial burden of front-loaded technology costs by effectively financing the product purchase via a leasing arrangement. Still, clients were looking at the offering from the same vantage point – paying a hefty price for some expected/hoped for future benefit but now simply spreading those payments over time with the contractual right to terminate the contract (if they had the appetite to swallow the associated switching costs). The buyer gained more leverage but no assurances that something of value would be returned.
In the mid-2000s, the “subscription economy” was ushered in by companies like Salesforce.com, Amazon, and Netflix who pivoted to new consumption models: from buying/selling products outright to subscribing for services. Subscription economy companies realized it was not enough to slap a low monthly price on a product and call it a service. They also needed to re-architect the way products were built, sold, and delivered by adding a service component to manage the entire subscriber lifecycle.
The customer-centric market shift lead to the next iteration: XX-as-a-Service Cloud- computing offerings where “Pay-as-you-Go” models tied vendor compensation to actual capacity or on-demand utilization of their solutions. Think “Infrastructure-as-a-Service” or “Platform-as-a-Service” from vendors like Amazon and their Amazon Web Services where you paid for the elasticity of capacity without having to overpay for excess hardware and infrastructure to meet peak demands.
Subscription economy vendors focused on customer retention and usage monitoring as proxies for the presumed value customers would receive from their products and services. But there was still a breach between the presumption of value vs. actual outcomes. We were getting closer but not quite there yet.
Those three billboard messages outside Boulder…
“PREPAID SUBSCRIPTION FEES”, “UNCERTAIN RETURNS” and “HOW COME?”
were prophetic statements about over-promised and under-delivered solutions and a harbinger for the reconstruction of customer/vendor relationships. Consumers had a new set of expectations. They now wanted outcomes, not ownership. Personalization, not generalization. Constant improvement, not planned obsolescence. Customer success, not satisfaction.
Value-as-a-Service hypothesizes that the future will be much less about the delivery model and will shift to the ultimate focus on measurable value creation.
VaaS promotes the simple vendor promise to deliver something that will lead to quantifiable improvements asking customers, in turn, to pay only for that certain quantifiable value received. There is no vagueness, no marketing-speak, no presumption of value, it’s all about paying proportionate to the objective results delivered.
The new VaaS frontier establishes a relationship not based on features and functions designed to solve a particular problem but as a business partner paid on the basis of the actual value realized. Rather than placing your focus on the “product” or the “transaction,” VaaS companies live and die by their ability to focus on the customer. Whereas, all the preceding models placed the burden on customers to attain success with the products and services they bought and were all priced on variables that were at best proxies for value, VaaS vendors conditioned their relationships on outcomes; not promises.
VaaS in Healthcare
The shift to value-based reimbursement models creates a new “Fee-for-Value” (FFV) paradigm; a sea change in the delivery and financing of medicine in which care is delivered by an entire coordinated medical community sharing in the responsibility—and risk—of outcomes and costs. The phrase “doing more with less” has evolved from an inspirational challenge to an industry credo forcing healthcare providers to operate differently to remain solvent. To mitigate the inherent risks in profitably financing and delivering patient care, providers will need a reorientation to (1) operate more lean, (2) outsource non-core competencies, and (3) mandate that outsourced business processes be priced and paid retrospectively on the realized vs. potential benefits they deliver. You simply cannot be at-risk and not expect your partners to likewise bear proportionate risk in delivering their part in the overall care delivery/financing equation.
No more squishy ROI projections or business cases that are pillared more on hope than reality. No more Field of Dreams “build it and they will come” leaps of faith. Business relationships will all be conditioned on iron-clad ROIs with hard dollar profitability and retrospective payments triggered by quantified results.
In the end, Three Billboards Outside Boulder, Colorado is a story of forgiveness. Holding vendors’ feet to the fire has lead the industry away from the strained customer relationships of the past and into the relationship-centricity of Value-as-a-Service.
The pendulum of risk has swung and with it, the business landscape has forever changed. When relationships are framed by objective outcomes and the financial obligations are conditioned on actual results, risks are no longer a variable in the contracting process. With the financial certainty afforded by VaaS solutions, those three billboards on the outskirts of Boulder have been replaced. VaaS customers no longer have to ask “How come?” but instead ponder “Why not?”.
AcuStream Revenue Assurance – VaaS in Practice
AcuStream, Inc. a pioneer in Revenue Assurance, has been using VaaS to rewrite their customers’ story and reinvent the industry. At AcuStream, our knowledge, skills and culture are all aligned to our singular objective of delivering value in the form of incremental revenue and newfound insights to our clients; to help them mitigate the margin erosion they’re experiencing and will continue to experience as the shift from volume to value gains momentum in the immediate future.
“Our business model enables us to develop relationships with customers; to be a true business partner aligned to a common goal of optimizing financial performance in the face of margin erosion,” said Jeff Colvin, CEO at AcuStream. “Every day, we find new ways to deliver value to our customers that far surpasses the revenue recovered from missing charges. That drive and commitment is a byproduct of our VaaS model and the relationship-centric culture it inspires.”