Imagine a team of healthcare providers taking full advantage of a patient’s genetic makeup, body imagery, electronic health records (EHRs), wearable devices, and real-time medical research and population health data. This vision has existed before—think about the press around the human genome project in the early 2000’s—but by 2030, predictive analytics and artificial intelligence will genuinely support this vision, bringing more accurate, timely identification and management for a range of health concerns.
Despite the wealth of available information, the variety of sources have not been integrated. Harnessing the power of these elements will bring immeasurable benefits—from predicting the likelihood of ailments based on a network of electronic health records to diagnosing diseases based on predisposition, the latest clinical research, and real-time population health trends.
Digital healthcare will also improve the system’s transparency and productivity, reducing costs. In this new ecosystem, patients can ensure they receive the best care at the lowest cost, and providers can deliver the best outcomes (see figure 1). Imagine how the economics will change.
Early disease predictions will lead to behavioral changes that prevent and eliminate system costs. Patients will be able to compare provider quality and prices and make informed choices based on value, which will improve productivity. More accurate and timelier identification of diseases will enhance treatment and reduce waste. Telemedicine and remote monitoring, coupled with new and lower-cost care settings such as home care will improve patients’ health and ensure use of the most efficient level of care. Additional and more accurate information regarding the clinical and economic performance of products and services will improve innovation.
Along almost every dimension, the 2030 healthcare vision is vastly different and improved. Although many components already exist, what’s missing is a cohesive ecosystem.
A Digital Evolution
Healthcare is accelerating toward a patient-centric, value-based model. In fact, many companies are creating innovative business models to improve profitability and create a competitive advantage. However, the way the industry is moving toward this model is chaotic—a bit like the Wild West and like nothing the industry has seen before. Apps now track data from diabetics’ glucose meters to smart devices that provide a wealth of medical information but may be vulnerable to hacking. The digital environment comes with an array of implications, and evolving will require a bit of a balancing act. For example, products will need to be “patient differentiated” while delivering both value and best-in-class quality, and solutions will need to cover a broader part of the patient pathway supporting the full continuum of care. Apps and devices must be secure yet provide seamless interoperability, and the value proposition must be transparent while driving improvements across the value chain.
Four factors are driving this evolution:
Until recently, patients were relatively agnostic about their healthcare choices. For example, a large portion of the population has insurance, which reduces a patient’s price sensitivity. Many people believe that physicians and hospitals offer similar capabilities for the same price, and there is a lack of transparency about quality and pricing.
However, as payments skyrocket and patients become more aware that they can—and should—make informed choices about their healthcare, behaviors are changing. As with the evolution of other industries, people have come to expect more comprehensive information. In retail, for example, consumers can quickly find products and browse reviews on Amazon and compare restaurants and make reservations on Yelp. The US healthcare system is beginning to support similar services. However, research shows there is still a long way to go (see figure 2).
In this evolving healthcare environment, consumers are seeing an array of benefits. People can use a variety of reputable online sources to do their own symptom and disease research—this may not always help physicians, but it is leading to empowerment of patients and more ownership of their care. Those with similar diagnoses can engage with their peers for advice and support. Services such as CareOperative’s Healthcare Bluebook help consumers compare prices for services in their area, and insurance company apps are helping people find the most effective networks and treatments.
New care models
Pharmacies, hospitals, and other industry stakeholders are establishing new care models to reduce costs, address new coordinated-care reimbursement regulations, and more optimally treat and monitor patient compliance. This comes at a time when new product innovation has dried up, costs are climbing, regulations are tightening, and the time to market is lengthy. By contrast, digital technologies allow for efficiency, create patient centricity, demand shorter timelines and less investment, and often evade government regulations. Given the landscape, the rise of new care models is driving a need for new digital technologies and practices. For example, Vidyo’s telehealth solution enables in-home, ambulatory, and acute care services, requiring seamless interoperability of connected, digital devices. In New York, Montefiore Medical Center opened a $152 million, 280,000 square-foot “bedless” hospital. Since 2000, CVS Minute Clinics have treated more than 25 million patients, helping pharmacies boost traffic and create a captive market for prescription and over-the-counter product sales.
Digital technologies have been developing and maturing for many years. Smartphones, for example, have become a gateway to almost all aspects of our lives. As a result, healthcare does not need to reinvent the digital wheel. However, the industry will need to integrate these platforms into the new models for patient care. A network of connected devices, cloud-based solutions, analytical applications, and electronic medical records are needed to create an efficient and effective digital ecosystem. The market for these services and applications is rapidly growing and is expected to be worth more than $600 billion by 2023. Driving this growth is a global connected health and wellness device market, valued at $120 billion in 2015 and expected to grow at 22 percent CAGR through 2023, primarily because of the rise of the Internet of Things and wearable medical devices.
With the growing popularity of wireless devices and services, the healthcare industry is exploring new business models. At a Chicago-area roundtable last year, executives from leading medical technology companies discussed digital strategy, stressing that they are seeking new ways to monetize and integrate data, make the system more productive, and provide more value-added services and products. They recognized nontraditional companies are experimenting in ways that reward speed and are unafraid of failing fast—a stark contrast to the approach of most traditional medical technology companies. Executives agreed that partnering traditional and nontraditional entities can unlock the full value.
Across the industry, companies are taking a variety of approaches in choosing areas of focus, ensuring their return on investment, pinpointing their ideal degree of risk, and finding ways to coordinate with ecosystem partners. Many are challenging the status quo. For example, Boehringer Ingelheim, a traditional pharmaceutical company, is working with Qualcomm Life to develop a wireless inhaler for chronic obstructive pulmonary disease. Medtronic and IBM Watson Health are developing new ways to tackle diabetes, and Philips has a handheld ultrasound device that connects to a smartphone or other handheld device.
Reimbursement and regulatory reform
For medical technology companies, the reimbursement and regulatory reform landscape is evolving. The provisions that insurance companies, Medicare/Medicaid, and other payers are introducing will improve manufacturers’ ability to create and get reimbursed for digital innovations. Many executives believe reimbursement is the biggest hurdle to unleashing innovation, with interoperability standards being a close second. The Centers for Medicare and Medicaid Services (CMS) has introduced changes to address some of these concerns. For example, the Medicare Access and CHIP Reauthorization Act (MACRA) has expanded the use of data, creating a framework to reward providers for quality of care rather than volume. The 2017 Medicare Physician Fee Schedule adds several telehealth codes to the eligibility list, and Centers for Disease Control and Prevention (CDC) program entities are required to submit claims electronically.
Other agencies have also been advancing legislative reform. In 2015, the Food and Drug Administration (FDA) clarified which apps it will not regulate as medical devices, including apps that provide wellness information and tracking. Recognizing the growing number of health apps, the Federal Trade Commission released a tool to help developers navigate federal laws.
A Path Forward
The future is bright for medical technology companies that aim to operate in this connected, digital environment. However, many of the largest firms are pursuing innovation that evolves around their existing product offerings—and they are struggling to transform their businesses (see figure 3).
Industry leaders ensure they have an end-to-end business model innovation framework that encompasses all products and services. Having a robust framework, they are integrating solutions by understanding when to develop, acquire, or partner.
Successful companies build capabilities to strategize, develop, and scale new business models (see figure 4). Although this begins with leadership and strategy, their operating model has a role in determining the degree of the transformation and the resulting market success. Companies must have an integrated approach - the supporting organizational structure, talent, culture, tools, and techniques all need to be aligned.
However, what worked for one company may no longer be relevant. Are you prepared for the future of connected digital healthcare?
Bill Tribe is a partner in the health practice at global management consulting firm A.T. Kearney. Based in Chicago, he serves a broad range of global clients in the medical devices, pharmaceuticals, biologics, and consumer healthcare sectors.
Erik Blazic is a principal in the health practice at A.T. Kearney. Based in Michigan, Erik leads globally focused operations-related engagements for clients in the pharmaceutical, medical device and nutraceutical segments.