Disruptive forces in good health
Chris Gonsalves asks who could be the Amazon of healthcare IT
We often talk about the opportunity in healthcare IT - part of the massive $2.8trn (£1.7trn) US healthcare sector. While the focus has been on improving the technology deployed by incumbents - through electronic medical records (EMRs) and patient management systems, for example - there's evidence the action is happening outside traditional healthcare boundaries.
Technology partners and vendors aiming for this formidable market are finding traction with products and services in an innovation-driven transformation that could roil health care in the same way the banking, finance, entertainment and publishing industries have been altered by technology.
The case for this so-called "new health economy" is spelled out in a report from PricewaterhouseCoopers' Health Research Institute (HRI). Titled Healthcare's New Entrants: Who will be the industry's Amazon.com? , the report finds patients are anxious to embrace new offerings from technology and telecom players, from "smartphone otoscopes to online evaluations of digital photos of rashes".
"Today's new entrants are in the vanguard of a new health economy that over the next decade will see today's siloed health care industry become a wide-open health marketplace," said Kelly Barnes, PwC's US health industries leader.
"To meet looming revenue threats, traditional health care companies will have to partner, innovate or can face fading away. Meanwhile, the nimble and innovative new entrants can benefit from partnerships with existing health care organisations, which understand the complex regulatory and reimbursement landscape."
Among the most stunning findings in the HRI research: half of the Fortune 50 last year were new entrants into health care - including seven retailers, eight technology and telecom companies and two auto makers.
PwC figures the US market for fitness and "wellness" products and services will add $267bn to American health spending, a sector being pursued by new entrants, particularly startups and venture capitalists.
An HRI survey conducted late last year found a $64bn market for health diagnostics, treatments and services is at risk of being drawn away by upstarts, a move fuelled by consumers' willingness to seek and use competitively priced health "solutions" from non-traditional sources.
That should be welcome news to partners anxious to expand into lucrative health IT practices, even if efforts to date have been around more traditional sales and deployment of healthcare offerings such as infrastructure, document management, EMR, mobility, telehealth, cloud services/applications, IT support, EMR assessments, HIPAA risk analysis and financial services.
Spending by global healthcare providers for IT services is growing at six per cent annually and is expected to approach $31bn this year, according to market analyses. And healthcare IT consulting is climbing at nine per cent per year, the fastest-growing sub-segment in the global healthcare provider IT market.
The healthcare IT results are even better for the best-performing partners included on the latest Ingram Micro SMB 500, a list compiled by Ingram Micro's Business Intelligence Center and US SMB Business Unit, and channel research services firm the 2112 Group, the parent company of Channelnomics.com.
Specialised IM SMB 500 tech providers serving healthcare clients grew sales revenues nearly 256 per cent over the past three years.
Driving much of that growth is the fact that hiring managers in hospitals and other medical care facilities have been stymied by the lack of skilled healthcare IT workers are willing to turn over their technology work to qualified partners, a recent study found.
According to a research report by HIMSS Analytics, 76 per cent of health care provider organisations say they outsource a service rather than hiring directly - and a whopping 93 per cent have plans to outsource in the next year.
With the new health economy being identified by PwC, expect even those figures to blossom.
"As the health sector's center of gravity shifts toward customers, savvy new players are moving fast to capitalise on the change," said Vaughn Kauffman, of PwC's Health Industries. "These new entrants are poised to shake up the industry, drawing billions of dollars in revenue from traditional healthcare organisations while building lucrative new markets.
"Within a decade, the health and wellness business will look and feel like other consumer-oriented, technology-enabled industries - retail, banking, publishing and music. Soon, healthcare will have its own Amazon.com-style, iconic, new economy brands," Kauffman adds.
If PwC is right, this paradigm will require a significant shift toward the consumer, which cannot happen without innovative technology services and tech providers leading the supply-side charge. Today's healthcare systems, which largely flow from government and employers through third-party payers, tend to insulate patients from true healthcare costs.
In the new health economy, PwC posits, patients will be true consumers with the freedom and responsibility to spend their own money on their own care and "rewarding the trusted advisers that can help achieve that" - be it a clinical team, a sporting goods company, a nutrition counsellor or a website.
US partners should expect to see a rapid jump in the number of retail-based health clinics (think the Kaiser Permanente micro-clinics in select Walmarts). Other near-term gains are likely in technologies that improve healthcare price and quality transparency, as well as technology-enabled fitness and wellness efforts.
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