How Subscriptions will Play a Role in the Future of Health Tech

How Subscriptions will Play a Role in the Future of Health Tech - Source PexelsImage | Pexels.com

Zuora is the world’s leading expert on the subscription economy. We talk to John Phillips, EMEA GM and SVP of Sales at Zuora about how subscription models will play a role in the future of health tech!

To kick us off, can you tell us a little bit more about you and your role at Zuora?

I have over 25 years of expertise in sales leadership and general management of businesses across SaaS, Enterprise and Open-Source models, having worked at companies like EMC, OpenText and Oracle. I started working at Zuora in 2014 and have since led the European business throughout the company’s rapid growth to IPO and beyond.

Zuora is the world’s leading expert on the Subscription Economy. We invented a subscription management platform that functions as the foundation for any company – regardless of industry – to launch, manage and scale subscription business operations. Zuora’s technology streamlines the complexity of managing and operating a subscription business – from the initial order a customer makes all the way to the way a company recognizes its revenue.

Since its inception in 2007, Zuora has grown to serve more than 1,000 of the best subscription companies globally including Zoom, Ford, Fender, Siemens Healthineers, Schneider Electric, The Guardian, and more.

We noticed Zuora recently launched its latest Subscription Economy Index. What is the purpose of this report and are there any key findings this time around in terms of healthcare?

The Subscription Economy Index™ (SEI), a bi-annual report published from our Subscribed Institute – a think tank for the Subscription Economy – analyses the health and growth of global subscription businesses, in various industries including SaaS, IoT, manufacturing, publishing, media, telecommunications, healthcare, education and corporate services – in order to compare how subscription-based models are faring compared to traditional companies.

Of course, our latest report – which was released earlier this month and featured new data for the last 6 months, ending in December 2020 – was particularly interesting, given the period of uncertainty that all sectors are currently facing in the light of the pandemic. It sheds some light on how the recent health crisis has impacted the business landscape and speaks to an accelerated preference for (and adoption of) subscription-based offerings.

For the healthcare industry, Zuora’s SEI suggests that subscription models are empowering providers to continue to be resilient and adapt in the face of change. The past year has transformed the trajectory of healthcare delivery. Front and center has been the need to provide wider, more affordable access and to provide services remotely when possible.

According to the SEI, healthcare companies with at least some recurring revenue saw some of the lowest churn rates of any industry, underscoring how vital relationships, customer-centric models, and flexible access are to this sector in particular. This is because subscriptions enable healthcare companies to gather insights from minute-by-minute service data, enabling them to better understand and serve patients in a way that wouldn’t be possible within a traditional healthcare environment.

Health companies utilising subscription services also saw higher levels of usage-based billing than any other sector. Usage-based pricing is a way of quantifying the value of the product or service provided. The goal is to let customers pay only for the services they need. Incorporating it makes it easier for healthcare providers to align and grow with customer needs – making them both more appealing and more profitable. In fact, according to a Subscribed Institute benchmark on usage-based pricing, companies that implement this model for 1-50% of their overall revenue, grew at 28% year-over-year (1.5 times higher than companies with no usage-based pricing at all).

It sounds like subscription models in healthcare are set to increase at a global level. Why do you think this is and how will it impact the UK market specifically?

Today’s pandemic has brought about some key changes in consumer behaviour, accelerating a trend we’ve been witnessing over the years known as “the end of ownership”. Increasingly, individuals want the freedom to access services and use them anytime, anywhere. They want the latest technology or product model available at their fingertips at all times. They want choice in terms of how they pay, alongside the ability to pause and resume services. Thanks to this shift in behaviour, subscribing is swiftly becoming the new norm, with 77% of UK adults using subscription services today, according to our most recent End of Ownership Report. This is up from the 58% that had subscriptions 5 years ago.

However, the subscription business model is not just for increasing access to software and entertainment services. At its core, it’s all about increasing access and improving outcomes, and if there is one outcome that we are all striving for these days, it is a healthy population. A pricing model focused only on selling units at the highest price possible – which is the current healthcare model in a lot of countries – does not successfully support this outcome. A subscription-based pricing model focused on providing wider and more affordable access to disease-curing medicines could do much better, as long as it provides cost savings for healthcare providers, and enough revenue for pharmaceutical companies to continue their innovative work.

Although the UK’s National Health Service is fairly unique and, our health system operates slightly differently, subscription models could still help to improve outcomes and boost the patient experience. For example, thanks to a substantial amount of usage data they collect, subscription companies know who their customers are and what they want. As a result, they can adjust their services to match demand, encouraging longer term commitment. Providers of healthcare services could use this information to personalise their offerings and ensure patients are receiving the best treatment possible.

Are there any other examples of companies in the healthcare space already benefiting from this model?

There certainly are! Another company we work with is Siemens Healthineers. Physicians around the world use equipment manufactured by Siemens Healthineers to produce millions of medical images every year. Medical images contribute to a continuously growing pool of multidimensional health data ranging from electronic medical records, image databases, and other multi-layered health IT systems.

The advent of cloud-based data management and artificial intelligence (AI) have enabled advancements in medical technology that are increasing operational efficiency while improving patient outcomes. Siemens Healthineers has been at the forefront of this trend. The company recently introduced digital health offerings like the teamplay digital health platform, which enables healthcare providers’ digital transformation through AI RAD Companion – an AI-supported, cloud-based image interpretation tool – and AI-Pathway Companion – an AI-based software facilitating personalised and standardised diagnosis and treatment decisions.

However, as the team at Siemens Healthineers launched these new subscription-based products driven by the cloud and AI, the existing IT infrastructure (built for one-time transactions) didn’t have the capabilities to support a subscription business model with multiple customer touch points. Therefore, the company was unable to fully monetise these new products and unlock the true patient value. In order to solve this, Zuora Billing and Zuora Revenue was added to the IT stack, enabling the team to automate previously manual processes and institute new key performance indicators (KPIs) to power their subscription recurring revenue business model.

From the perspective of Siemens Healthineers, subscriptions mean new revenue streams, increased productivity and significantly less processing time – for example bill run time was reduced by about 75%. But, more importantly, this new model drives the company to focus on the customer relationship, with both hospitals and other healthcare providers, and how to provide value – on a continuously evolving journey.