About 3 years ago, HMS would describe itself as a provider of cost containment services to government and private healthcare payers. HMS specialized in coordination of benefits services and revenue integrity solutions. Their main value propositions revolved around preventing future improper payments, reducing fraud, waste and abuse, and ensuring regulatory compliance. Today HMS has a vision of “Moving Healthcare Forward” by helping payers reduce costs and improve health outcomes through industry-leading technology, analytics, and engagement solutions. They provide a broad range of payment integrity, risk analytics, care management, and member engagement solutions. So, what can we learn from this transition?

Cisco’s Growth Strategy in the 90s

HMS transition seems to be happening in a systematic manner with a clear leadership vision and strategy. In fact, their strategy seems to mimic Cisco’s growth strategy in the networking industry in 1990s. It’s interesting to see the similarities in the market dynamics in the networking industry in the 1990s and the population health management market for value-based care (Medicaid MCO, Medicare Advantage & Self-insured Employers) right now. Here are the current trends in the healthcare value-based care market that harken back to that time in the networking industry:

  • Rapidly changing market and customer needs. Just think about the multitude of changes in healthcare payment models, cost containment, and quality improvement pressures driven by healthcare consumers through CMS, State Medicaid agencies and self-insured payers
  • More demand with short technology life cycles when adapting technologies like predictive analytics, AI, big data, and blockchain for healthcare organizations
  • More efficient processes and cloud-based technologies that make shorter implementation timelines plausible for existing solutions
  • Vendors that are offering complete, one-stop solutions that bring together the best capabilities from across the market with software, data services, domain consulting & business intelligence services converging to provide “intelligence”-as-a-service
  • Sophisticated consumers that are good at looking past market noise and challenge providers and payers to deliver real impactable outcomes

To dominate in the emerging networking industry in the 90s, Cisco knew that it could not hope to internally develop the needed array of technologies and services. Its strategic policy of acquiring or partnering with entrepreneurial startup companies for their unique technical expertise, innovative capabilities, and market-leading products provided them a significant time-to-market advantage. Cisco bought 14 companies from 1993 through 1996 and continues to use its acquisition and partnership strategy as its core growth strategy.

To meet the growing needs of the population health market, the healthcare analytics market is moving fast, and the legacy technology platform vendors are not able to keep up with their customer demands. In fact, no single vendor has all the population health capabilities that the customer wants in their solutions. The platform vendors are pursuing the strategy to build it all with solutions that are mile-wide and inch-deep, or they are packaging up old solutions and rebranding them under new buzz words resulting only in market noise and customer disappointment. This is evident by watching the continued interest in huge investments (by both venture capitalists and private equity) in the healthcare AI and predictive analytics markets to address the imminent market demand and financial market realization that it is not easy for traditional technology players to build the deep expertise in all emerging markets. If the traditional healthcare technology did have the best solutions, there would be no further interest in investing in entrepreneurial-driven analytics startups. 

 

HMS is blazing a different trail while borrowing from Cisco’s strategy

HMS’s leadership team seems to understand the structural market changes, customer needs, and has the pulse of the overall healthcare market. They are building their growth strategy based on three of their most precious assets:

  1. Clear entrepreneurial leadership vision and a mission of healthcare cost containment – HMS is a traditional business rooted in contingency-based business models. That made it easy to transform to an outcomes-based performance model when a critical market need emerged with the increased popularity of Medicaid block grants, Medicare capitation, and commercial value-based payment models.
  2. Deep market access and a loyal customer base – HMS has access through their customer base of 325 health plans, 40+ state Medicaid agencies, and 650 employers. These customers allow them to grow and pivot with a built-in audience.
  3. Extensive data assets – HMS serves the needs of their present customers with 3 billion+ paid claims records and 7 petabytes data.

HMS could have fallen into the trap of many legacy healthcare technology vendors and wasted time and resources in the quest for a natively-built population health solution. Instead, they have systematically pursued a strategy of internal development coupled with acquisitions and strategic partnerships. The underlying platform to this transformation seems to be the nimble culture that HMS CEO Bill Lucia is building. In a recent HealthIdeas video, he boldly claims, “slow and shallow have never been my strong suits” when referring to why he insists on maintaining an entrepreneurial culture in a tenured, publicly-traded company. Other legacy vendors like Optum, Cognizant, EPIC, and Cerner are in pursuit to build it all by themselves. For example, Cognizant and Optum announced multi-million investment in building their internal core competency for AI-driven predictive analytics platforms.

Like Cisco in their early days, what HMS is doing right is listening to their customers and bringing them best-of-breed technologies in an integrated technology platform. HMS is making it easy for its customers to cross the chasm in population health by removing all operational risks through “Best-of-Breed” integrated platform (see Figure 1).

Figure 1: The chasm between a technology that is early in the adoption cycle and one that is mainstream is no small leap. By bundling three solutions grown out of startups and integrating them with a homegrown platform, HMS has the best chance of bringing population management to the rest of the market.

The acquisition of the Essette Care Management platform (2016) followed by the Eliza Member Engagement solution (2017) and the release of the internally developed HMS Elli Risk Intelligence solution (2018) is the output of their well thought out, well-orchestrated execution strategy. The latest strategic partnership with AI-driven predictive analytics company VitreosHealth (2018) is aligned with their mission to partner with the best in the emerging space.

My experience working with HMS over the last 18 months during their systematic due-diligence process is that they seem to value the lessons that come with building a solution as a startup. HMS realizes that it may be easy to copy a technology, but you can never replicate the learnings of early adopters in a complex, emerging, AI-driven predictive analytics space. This thought-process is critical to their success as they bring the best of care management, member engagement, risk intelligence, and AI-driven predictive analytics together under the HMS Total Population Health Management platform for Medicaid MCO and Medicare Advantage Markets.

The Medicaid and Medicare health plan market seems to be responding to their Total Population Management story with early big customer wins. Now it’s all about executing with grit and delivering the promised population health outcomes for customers by assimilating the new technologies into their platform and making these partnerships work seamlessly.

Is HMS Holdings following the Cisco strategy?

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