E-Health Two-Sided Markets

Implementation and Business Models

Vivian Vimarlund

• Publisher: Academic Press
• Year: 2016
• Print ISBN: 9780128052501
• eBook ISBN: 9780128054413
• Topic: Computer Science
• Subtopic: Computer Science General
• Index: Computer Science

E-health two-side Markets: Implementation and Business Models presents empirical models and suggestions that focus on how to remove barriers to deliver online services across borders and how actual barriers affect business models in a two-sided market with regard to eHealth. Technological innovation and business developments in online trade result in fast-evolving markets with the continuous emergence of new products and services, thus requiring a specific approach. This book discusses how to develop innovative and cost-effective implementation strategies for complex organizations, the importance of barriers and facilitators for two-sided markets when implementing e-health services and/or IT based innovations, which pre-requisites have to be achieved in complex organizations that act in two-sided markets when implementing e-services, the ecosystem for implementation of services and innovations in complex organizations, and its effects for business models. This book is a valuable source for researchers in medical informatics, and is also ideal for stakeholders, consultants, advisors, and product designers involved in eHealth services. - Presents guidelines that can be used as examples of pros and cons in two-side markets - Provides knowledge that enables readers to identify the changes that need to be considered in budget proposals for eHealth implementation - Includes examples of business models applied in two-side markets, diminishing external effects and failures

Part I

Introduction to the Ecosystem for Two-Sided Markets, Barriers and Facilitators

Outline

Chapter 1 Introduction to the Ecosystem for Two-Sided Markets, Barriers and Facilitators

Chapter 1

Introduction to the Ecosystem for Two-Sided Markets, Barriers and Facilitators

V. Vimarlund¹ and T. Mettler², ¹Linköping University, Linköping, Sweden; Jönköping University, Jönköping, Sweden, ²University of Lausanne, Lausanne, Switzerland

Abstract

Two-sided markets arise in situations in which there are externalities and in which transaction costs, broadly considered, prevent the two sides from solving this externality directly. In the e-health market, the expansion of the Internet economy has shown to be significant in stimulating the entry of business organizations, many of which are already in two-sided markets.

An e-health two-sided market needs to offer sustainable structures, i.e., an ecosystem to support a flexible model that must meet unexpected demand and at the same time be able to handle high demand peaks and long periods if needed. In this chapter we introduce key concepts and factors that are of relevance in two-sided markets. We further discuss the fundamental role of two-side market ecosystem in enabling parties to realize gains from trade or other interactions by reducing the transactions costs of finding each other and interacting.

Hence, e-health market ecosystems first and foremost need to be designed for adaptability and network effects. We discuss issues that influence the sustainability and further development of a two-sided e-health market.

Keywords

Two-sided markets; e-health; ecosystem

Introduction

Currently most consumer markets are push markets. Producers and suppliers develop and mass-produce products and then persuade consumers that they need these products, through marketing and commercialization efforts. These push markets have become so extreme that most producers spend upwards of 90% of their capital in marketing and commercialization, leaving very little for production and innovation. This means that new producers cannot break into the market without the necessary marketing infrastructure, as new ideas are difficult to launch without expensive commercialization efforts. Given the costliness of marketing, most producers also compete for the largest market, ignoring marginal products and marginal needs. Consequently, specialized products and services increase cost structures.

In contrast, a pull market begins with the demand rather than the supply. That is to say, the need to produce specific e-health services that fulfill the prerequisites consumers and healthcare providers stated, either by regulation or by managerial decisions. This greatly reduces the need for marketing and commercialization. Producers respond to demands expressed by consumers directly. This removes the barriers to market entry experienced by new producers, developers, and emerging economies. Consumers also drive the design and can thereby steer production in more diverse directions. A pull market is, however, dependent on effective communication, consumer demands to appropriate producers or suppliers, innovative business models, sustainable implementation models, as well as inclusive design approaches, security, and evaluation of outputs.

As e-health undergoes the digital transformation that has occurred in many other sectors of modern society and the global economy (Barrett et al., 2015) moving from a push market to a pull market, it has implied even an evolution of the market from a one-sided market to a two-sided market with all its implications and opportunities.

Two-sided market key characteristics are to serve two distinct user groups that generate value for each other in symbiosis (Eisenmann et al., 2009). Examples of such markets include credit cards, composed of cardholders and merchants; HMOs (patients and doctors); operating systems (end-users and developers); travel reservation services (travelers and airlines); yellow pages (advertisers and consumers); video game consoles (gamers and game developers); and communication networks, such as the Internet. In e-health, a two-sided market is, however, expected in addition to serve distinct groups of users, to benefit providers and consumers of goods and services through brokers that sustain two-sided market phenomena and also to support more coordinated healthcare management because of the emergence of population health platforms in data analytics services over aggregated electronic patient health records providing insights that will support more coordinated healthcare management (Vincent, 2014).

The theoretical literature on two-sided markets is relatively new. Most of the studies of the prerequisites for sustainability of two-sided markets have been performed using industrial examples which highlight issues related to the economic relationship among the various industry participants, as well as the nature of and effects from the interplay between service providers and service consumers. The resulting network effects have been pointed out as the most relevant factor for the sustainability of such a market structure.

A number of papers in the “multisidedness” literature have discussed the difference between one-sided and two-sided market structures. Three types of definitions generally appear in the literature. The first is the one of Rochet and Tirole (2006). “A market is two-sided if the platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other in an equal amount.” Comparing this definition with a one-sided market, it is possible to appreciate two main differences: (1) the price structure matters for participating in a two-sided market, and (2) there are membership externalities that do not exist in one-sided markets because of the possibility to determine price by bargaining or monopoly.

A second definition of multisided market is the one proposed by Schmalensee and Evans (2007). According to their definition, “a multisided market has two or more groups of consumers, who need each other, who cannot capture the value of their mutual attraction, and who rely on a catalyst to facilitate their interaction.”

A third definition finds that there is a two-sided market when there is “some kind of interdependence or externality between groups of agents that are served by an intermediary” (Rysman, 2009).

In the e-health market, the expansion of the Internet economy, spurred by lower communication costs, reductions in the cost of computing, and software technology advances, has shown to be significant enough to stimulate the entry of business organizations many of which are already in two-sided markets. The relationship among the various industry participants and the existence of two groups of customers (providers of e-health services and customers) cannot, however, solve externalities by themselves and in many cases there is a need for some kind of regulation, as in the case of Scandinavian countries where the prices the consumers pay are regulated by policies or other price strategies (subvention, differentiated pricing due to maximum roof costs, etc.).

The Ecosystem of a Two-Sided Market in E-Health

The fundamental role of a two-sided ecosystem for a two-sided market is to enable parties to realize gains from trade or other interactions by reducing the transactions costs of finding each other and interacting. Two-sided markets do this by matchmaking audience, building audiences, and minimizing costs for duplication, advertising supported media, building audiences and exchanges.

A market is characterized as being able to facilitate exchanges between two groups who can generally be considered “buyers” and “sellers.” The exchange¹ helps buyers and sellers search for feasible contracts—that is where the buyer and seller could enter into a mutually advantageous trade—and for the best prices—that is where the buyer is paying as little as possible and the seller receiving as much as possible.

Exchanges provide participants with the ability to search over participants on the other side, and the opportunity to consummate matches. For instance, health and/or social care, personnel search for available alternatives of services. Having large numbers of participants on both sides increases the probability that participants will find a match. However, a larger number of participants can lead to congestion if no variation of providers of similar or identical services exists.

In some cases, some exchanges charge only one side. Healthcare organizations pay for the services delivered and used by some groups of patients, while patients get them for free or pay a minor amount of money for them. In other cases, exchanges charge both sides. Insurance brokers historically charged both insurance customers and insurance providers in some types of transactions.

Further, in e-health, a two-sided market is composed of different stakeholders, who act in parallel. For example, public agencies or public organisations, decision makers (e.g. politicians or other governmental stakeholders), patients and/or consumers of services (citizens), and practitioners (experts that produce and deliver services) and that represent:

Service consumers use the services and define the usage goals for the services, i.e. tasks that need support. They may also report on problems and failures in the service usage and provide feedback for the service validation.

Service providers are independent members that provide digital services to be used by other members or consumer participants in the two-sided platform.

Service brokers promote the services, enable service delivery, and match the demand with the best available services.

Infrastructure providers render services that implement the purpose and capabilities of the platform, such as establishing, modifying, monitoring, and terminating collaborations, and operations for joining and leaving collaborations.

The business ecosystem may emerge spontaneously due to a common interest or demand, or as a result of long-term strategic planning. The members share the common regulation of the area but are able to act independently, and join and leave the ecosystem freely, since there is no dependency between members. In some cases, organizations, firms, and companies work toget...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• List of Contributors
• Foreword
• Preface
• Acknowledgments
• The Purpose and Aim of this Book
• Part I: Introduction to the Ecosystem for Two-Sided Markets, Barriers and Facilitators
• Part II: Usability and Design
• Part III: Safety and Privacy
• Part IV: Implementation and Introduction of Technologies
• Part V: Business Models
• Part VI: The Future of the Area
• Author Index
• Subject Index