Beneficiaries vs. Customers

The uniqueness of the health sector, but also the reason why building business models is more complex in this sector than in other sectors, lies in the fact that the beneficiary of the product/service is not the same person as the one that pays for it.

Regular product/service: customer = beneficiary

For a product like a phone or a car, the person paying for the product will most probably be the one who will enjoy the benefit of it. The customer is interested in the product given its functionality and its price: knowing that the car will get him to places or the phone will allow him to call, the customer is willing to pay for the product. There is, in other words, a clear paying customer for the product. For the producer of the product, the decision whether or not to produce depends on whether there is a positive or a negative business case:

  • Is the willingness to pay of the customer higher than the cost to produce the product?

Then go for it!

  • Is the willingness to pay of the customer lower than the cost to produce the product?

Stop the project and search for another idea.

Preventive health care product/service: no clear paying customer

In the health sector and more specifically when looking at preventive healthcare products and services, things are different. Take for instance a preventive product like a serious game that simulates people to move and consequently reduces the obesity rate of the user population. This product has two types of beneficiaries:

  • Health beneficiaries (the users): if the serious game works like it should, the users should enjoy health benefits such as reduced body weight related health issues such as type 2 diabetes, heart diseases and strokes, sleep apnea, etc…

  • Financial beneficiaries (the health insurers or government): if the serious game works like it should, the health insurance companies or the government – who would otherwise face serious financial costs due to the obesity, diabetes, heart diseases and other weight related health problems of their customers/population – should enjoy high cost savings.

The problem here: Although the health beneficiaries are the actual users of the preventive product, most of the time they do not have a willingness to pay that is sufficient to cover the development and commercialization costs of the preventive product. Consequently, preventive healthcare products and services are often not developed nor commercialized.

This is why more sophisticated revenue models are needed in order to convince the financial beneficiary to participate in the business model of preventive products and services. One possible way to do this, is by using Health Impact Bonds (hyperlink naar deeltje over HIBs 6.2.5 ).