Two roads diverge

Which path will we take?

One the one hand, we have an unmistakable trend for large health care systems to try to expand their market reach by acquiring insurance companies.  The latest in this category is Ascension Health.  As reported in Modern Healthcare:

Ascension Health is in talks to acquire an unnamed insurance company that operates in 18 states, which would be a significant escalation in the brewing shift among hospital operators toward the business of selling health plans.

The St. Louis-based system owns 101 hospitals and is the nation's biggest not-for-profit healthcare provider. Ascension Health President and CEO Robert Henkel said during an investors conference in New York that the potential deal is one strategy to boost the system's capacity to accept the financial risk of value-based contracts with employers and insurers. “We anticipate that we'll take more risk,” he said. 

Meanwhile, an upstart emerges, exemplified by Oscar.  As noted by Crain's New York Business:

Oscar, with its clean user interface and playful consumer-facing ads, is trying to be the Amazon of health insurance.

Oscar's sleek user interface is also a point of pride for the company. Members can search for doctors who use electronic medical records or treat many patients their age. They can also look up their symptoms in Oscar's database and see a range of treatment options, complete with price estimates. By showing consumers that a visit to an asthma specialist could cost $200, but a primary care visit costs $100, they hope to subtly encourage cost-saving behavior. When members sign up, they get a $10 gift card to fill out a detailed health history questionnaire. That information helps Oscar pinpoint chronically ill (and therefore expensive) patients, and encourage them to seek treatment. 

Oscar is focused only on New York so far, but it has attracted capital and has the potential to expand. To use the term of art, it is scalable.  A savvy friend of mine puts it this way:

The millennial's don't give a hoot about the traditional hospitals and insurance companies. In fact, they are offended by this line of thinking and behavior.  They develop code and companies in the same speed we change lanes driving on the expressway. They are quick, nimble and very fickle.  They changed forever the communications industry in the world in less than 7 years - Facebook and Google. YouTube is less than 5 years old. It is the sharing economy. Zipcar, Hubway, pop-up stores. They have changed they way we buy and consume almost everything from news, information, clothes, stuff and things through Amazon and Apple and Netflicks.

This generation has no patience for stupid, analog, wasteful bureaucracy. iTunes thought they were immune (and they were a disruptor) and then came Spotify from Sweden which is 7 years old and owns 70% of the music market today.  Smartphones didn't exist until 2007 or 2008 and with that need to get information in different formats out instantaneously constantly without interruption.

So, with all their swagger and intelligence, how do the people who run hospitals believe that they can truly compete with the millennials who are hell bent on breaking down walls, dematerialising everything and bringing margins as thin as possible?

Is health insurance disintermediation the next part of disruption in the health care world?