For decades, the most recognizable subscription business model was one that delivered glossy issues of Sports Illustrated, People, Reader’s Digest, and other publications to mailboxes and doorsteps around America.

The business model was straightforward: Magazine publishers would entice as many (preferably high-income) readers to subscribe and then sell access to their audience to advertisers. Today, though, the subscription business model has expanded well beyond publishing.

Most of us now ingest a steady supply of movies and television shows thanks to the wide array of streaming services that usher content directly into our living rooms. While that particular subscription service has upended how Hollywood operates, it’s one of many subscription offerings. Others include everything from meal kits to underwear to razors.

The reason subscription services are multiplying is because they have proven to be successful. According to one recent report, subscription services have grown nearly six times faster than the S&P 500 over the past nine years.[1] According to a survey of consumers conducted by Harris Poll, customers who sign up for subscription services cite their convenience, cost savings, and variety as reasons for joining.[1]

And there’s plenty of evidence that consumers and investors are putting real dollars behind their preference for subscription services. According to the research firm eMarketer, subscription service sales rose by more than 40 percent in 2020, reaching $23 billion.[2] While some of that popularity can be explained by the unique value subscription services provided to people stuck at home during the pandemic, the level of investment supporting the business model indicates that many believe it has lasting value.

Indeed, according to PitchBook Data, a research company focused on capital markets, venture capital firms invested about $3 billion in online subscription companies between 2018 and 2020.[2]

A Model for Healthcare

In recent years, subscription services have also gained momentum in the healthcare industry. One of the big reasons a subscription service model is becoming more popular in healthcare for both operators and customers is certainty. For healthcare companies, subscription services provide predictable revenue; for consumers, subscriptions deliver certainty around the cost of healthcare.

This is a significant departure from the traditional healthcare business model. For years, healthcare has followed a fee-for-service model. This is where a patient will pay a certain amount for the physicals, treatments, scans, and other services they receive from their primary care doctor or specialist. For many patients, the calculation of these fees – not to mention how much they can vary from doctor to doctor – is a source of confusion and frustration.

Subscription services in healthcare operate in a fundamentally different way. Rather than pay a hard to predict amount for care, subscription services provide patients with access to a range of services – including everything from primary care and telemedicine to more specialized services – in exchange for a monthly, quarterly or annual fee.

The California-based company One Medical is already delivering primary care using a subscription service model. For patients, the approach is delivering cost savings. According to a study published in JAMA Network Open, employees of the company SpaceX who received most of their primary care from an on-site One Medical clinic spent 45 percent less on healthcare than those who opted not to use the clinic.[3]

How Healthcare Businesses Can Improve Their Bottom Line With Subscription Services

Technology companies and other businesses that have not traditionally provided healthcare are increasingly examining the potential of subscription services to gain entry into the market.

But healthcare companies retain significant advantages over even large and well-financed new entrants. Perhaps the most significant advantage is simply the deep and trusting relationship so many patients have with their doctors, nurses, and other caregivers.

For healthcare companies, the question is how the subscription model can better serve patients while also providing business benefits. In a report prepared for the American Hospital Association’s (AHA) Society for Health Care Strategy & Market Development, consultant Ken Kaufman suggested a number of approaches,[4] including:

  • Consider partnerships: Partner with a technology company or invest in the necessary resources to create a customer-friendly digital platform for delivering services. Cost savings and customer satisfaction can both be bolstered by utilizing a digital platform for scheduling appointments and delivering care. While it should never replace in-person consultations, a secure and easily usable digital platform is an important foundation for a healthcare subscription service.
  • Bundle services: Healthcare companies also have the advantage of being able to provide a wide range of services and expertise. A successful healthcare subscription service will bundle the most popular services into a subscription product. What those services will be will vary depending on the population a healthcare company serves. But a healthcare provider is in a good position to know the needs of the population it already serves.

Just as it has in other industries, the subscription business model has the potential to transform healthcare in ways that benefit both hospitals and clinics as well as the patients they serve. Developing a unique strategy that fits a healthcare company’s current operations, capabilities and patient population can be accelerated and improved by collaborating with banking professionals with deep expertise in healthcare.