Hospital systems have to decide: Do they want to be Apple or Android?

Convenience is rapidly becoming a guiding principle for hospital system strategy and competition. As patients demand a more convenient, integrated care experience, and new partnerships/acquisitions (for instance, CVS Health and Oak Street Health, or Amazon and One Medical) redefine what the consumer health care journey looks like, the industry will continue to see a collision between virtual, at-home, and in-person care.

In our decades of working with health systems, we have found that delivering higher-quality care on razor-thin margins means hospital systems must optimize for both consumer convenience and clinical effectiveness, across each of these distinct channels. In an increasingly competitive environment, this means choosing between Apple and Android approaches to business and partnership. Apple represents a more controlled and vertical approach to growth, while Android leverages more of an ecosystem, platform strategy. Whatever choice administrators make, they can learn from both about strategic prioritization, driving change at scale, and delivering a superior consumer health care offering.

Research shows just how important convenience is to the patient experience. Rock Health’s 2022 consumer health survey found that patients prefer telemedicine for addressing minor health issues and filling prescriptions, and in-person care for complex conditions and emergencies; it also saw an upswing in the adoption of asynchronous telemedicine modalities, including apps, email, text, and phone calls. Analysis from Trilliant Health further reinforces that patients still like to see their doctors in-person — only 25.6% of Americans utilized telehealth for care during the first two years of the pandemic.

With patients flexing their preference muscles across care channels and modalities, hospital and health system strategy must be developed through a rubric of convenience, or what can be dubbed as “the convenience formulary.” The convenience formulary is organized around three key principles:

• Health systems should try to solve care needs virtually first
• If virtual care can’t be safely and effectively completed, then at-home care options should be explored
• If at-home care is not feasible, either via safety or economics, then patients should move to facility-based care within a provider or hospital setting

One way to operate according to the convenience formulary is through a verticalized approach. Like Apple, health systems can try to take a full-stack, own-it-all perspective and work to design the entire system to provide a signature experience.

In practice, this can include directly staffing, resourcing, and subsidizing unprofitable service lines in an effort to control more of the patient experience. It can also include investing in ancillary facilities (such as ambulatory surgery centers) and capabilities (e.g., virtual care) to extend the reach of the brand.

However, this approach is incredibly difficult, especially for health systems that are smaller and/or outside of integrated delivery networks. For example, a vertical approach may be particularly challenging for rural and public hospital systems, given the resources and expertise needed to pull off such a feat in-house.

The other pathway to meeting the convenience formulary is for health systems to embrace an Android-like ecosystem approach. In this scenario, the system might look to outsource unprofitable service lines to partners that can more efficiently manage those businesses, develop a mutually beneficial partnership model with community practices, and look to third-party technology companies for innovative ways to extend their reach.

For most hospital systems, the Android approach is the only viable option — given their financial and operational constraints, they can’t realistically deliver a balanced combination of care modalities between virtual, at-home, and in-person on their own. With this guidance in mind, to achieve the convenience formulary model, hospital systems will first need to embrace their constraints and then seek strategic partnerships to fill the gaps.

The health care industry today resembles the mobile phone industry in the 2000s, primed for peak disruption. Hospital systems are akin to that era’s Nokia — the dominant brand that was overtaken by Apple iPhones and Google Androids as consumers gravitated to devices that more intuitively offered features valued for easier engagement. Of note, in a 2011 internal memo from then Nokia CEO Stephen Elop, published in the Wall Street Journal, he compared Nokia’s plight to a man on a burning oil platform: unable to jump, but not able to survive as is.

Both Apple and Android embrace an ecosystem approach, leveraging third party app developers to innovate and create value for their consumers. But they took different tacks. Developers flock to Apple because of consumer demand for its hardware and overall experience. The Android model works off of an open-source system that allows compatibility for an array of device manufacturers and app developers, providing a highly-customizable experience. This kind of adaptability and flexibility is paramount for hospital systems that want to cultivate a more consumer-driven experience but are unable to invest in truly differentiated capabilities. Their best option is to partner with best-in-class technology firms.

Android, for its part, continues to dominate the mobile industry with its ecosystem model. As of the first quarter of 2023, Android maintained its position as the leading mobile operating system worldwide, with a market share of just over 71 percent, compared with Apple’s iOS, which had a market share of just under 28 percent during the same period.

Despite a smaller market share, however, Apple takes roughly 75% of the share of mobile phone profits.

The takeaway for hospital systems? An ecosystem, Android, approach will be the optimal strategy for most. Android’s open-source, ecosystem approach has paved the way for market share dominance while still enabling innovation, while Apple’s more proprietary approach has led to outsized profitability and control but required enormous investment. Hospital systems should take stock of their balance sheet, their competitive position, their internal capabilities and then actively decide if they want to take the Android or Apple approach.

There are four questions every hospital system leader should consider as they reorient strategies around the convenience formulary to create opportunities for growth and optimization, including:

• What does our organization do best? What unique capabilities or services is our organization well-positioned to deliver? In what service lines are we world class? What are our economic engines today (in a fee-for-service world) and tomorrow (in which we take increasing financial risk for managing populations)?
• What are our weaknesses, and where does it make sense to form partnerships to help address those needs?
• Should we opt for a vertical or more open ecosystem approach? Does my system have the resources to pursue an Apple-like vertical approach, or is an ecosystem approach more appropriate?
• Why would healthcare consumers choose us? What are we uniquely positioned to offer consumers and how can we meet those expectations better than our competitors? This final question is the roof over the other three. In a competitive marketplace, systems must examine their operation through the lens of patient experience and plan accordingly.

Without taking these questions into consideration, hospital systems risk having dangerously misaligned goals that won’t survive a demanding patient population. But with the convenience formulary as the strategic north star — and the right development model fueling the journey — hospitals will be best positioned to actually meet shifting consumer preferences while solving financial struggles that will continue to stand the test of time.

Hospital systems can’t afford to wait to innovate; they must learn from Nokia’s mistakes, and Apple and Android’s successes.

Sean Duffy is CEO and founder of Omada. Seth Joseph is founder and managing director of Summit Health Advisors.