HEALTHCARE INTELLIGENCE REPORT | August 2019 Healthcare ... · Healthcare providers should not try to stay a step ahead of these disruptions. Their business and their mission is healthcare;

COMPETING WITH TECH DISRUPTIONHealthcare Intelligence Report Page 1

© HANYS | August 2019

HEALTHCARE INTELLIGENCE REPORT | August 2019

COMPETING WITH TECH DISRUPTIONHOW TO WIN WHEN YOUR OPPONENT IS NOT AFRAID TO LOSE



• Alphabet, Amazon, Apple, Facebook and Microsoft are not just technology giants –they are now healthcare giants. Rather than try to compete with these companies, health systems must leverage these companies’ technology disruptions to provide an enhanced patient experience.

• Tech giants are nimble and have capital – but they also have a lot to learn about healthcare. History suggests that they will cannibalize each other before they take on healthcare incumbents.

• Health systems should pursue the technology innovations that best align with their long-term strategic goals to create revenue, reduce costs or improve operations –and to strengthen their relationship with the patients and communities they serve.

KEY TAKEAWAYS



The chart below notes major areas of interest for the tech giants and indicates which traditional healthcare business processes will be impacted. We also indicate the disruptive potential for each type of technology. (See the Appendix for details about each company’s healthcare initiatives.)

WHERE’S THE ACTION?

Areas of Interest

Companies Involved

Business Processes Impacted

Disruptive Potential

Analytics + AI

Consumer engagement

Sensors

Operations

Enterprise productivity

Alphabet Facebook Microsoft

Apple

Alphabet Microsoft

Amazon

Alphabet Amazon Microsoft

Radiology, research, risk assessment, cancer care

Patient education, wellness, cardiology care, clinical trial development

Remote monitoring, surgery

Supply chain, pharmacy, purchasing

Data sharing, research, interoperability, communication

In early 2016, The New York Times columnist Farhad Manjoo coined the term “Frightful Five” to describe the major U.S. tech companies that were poised to “dominate digital life” – Amazon, Apple, Facebook, Google (now Alphabet) and Microsoft.1 These five companies are using their size, influence and reputation for innovation to push into the healthcare industry in the United States – and in New York.



WHAT IS THE TRUE THREAT?The tech giants’ forays into healthcare could potentially threaten provider organizations in four significant ways.

1. Deep PocketsThe market valuation of the Frightful Five exceeds $3 trillion and is fast approaching the size of the entire healthcare industry in the United States ($3.5 trillion as of 2017).2 The companies’ profitability in other business lines enables them to take on “moonshots,” either as in-house development projects or through financial investment and collaboration.3,4 Apple’s Chief Executive Officer Tim Cook has even admitted that some of his company’s healthcare initiatives may never make money.5 Technology companies are used to failure and embrace it as a necessary part of the creative product development process.6 Neither financing nor failure are luxuries that a margin-strapped, mission-driven hospital or health system can afford.

2. Agility and FlexibilityIt takes an average of 17 years for published medical research to be put into practice; it also takes 14 years for new drugs or medical devices to move from conception to market availability.7 Compare this to software development, in which projects are completed in two-week “sprints” and product updates are released several times per year.

While it is unreasonable, irresponsible and unethical for health systems to apply the “move fast and break things” mantra to life-critical patient care, the inherent agility of technology development allows tech giants to respond to changing market conditions and other external pressures in weeks – not years. For example, the voice assistant has rapidly evolved from a novel way to interact with a smartphone to a platform for Health Insurance Portability and Accountability Act-compliant applications,8,9,10,11 with future use cases including connecting a “smart home” and a virtual care provider through voice assistants, bypassing traditional health systems entirely.12,13



3. Consumer AccessTech giants have achieved substantial growth and market share by reaching consumers where they are. Video streaming services, for example, are linked to accounts that can be accessed on smartphones, tablets, laptops or smart TVs. When it comes to collecting, analyzing and utilizing data to capture consumers’ attention and inviting engagement, these companies have a leg up on health systems – in experience, expertise and technology. They also own massive amounts of non-clinical consumer data that can be used for clinical purposes such as disease diagnosis.

Traditional healthcare delivery, on the other hand, continues to emphasize in-person care episodes initiated by the patient. Brands that offer easy, convenient access to healthcare could capture patients at the top of the funnel, leaving health systems with a missed opportunity to acquire and retain new patients.

4. Technology-enabled ServicesMost of the “easy wins” for tech giants in healthcare are already in process: cloud-based software, mobile device support, back-office process automation, etc. But tech giants are turning their attention to technology-enabled services that establish new workflows and processes, like real-time remote patient monitoring and predictive modeling. If these services achieve their promise of increased accuracy, efficiency and convenience, they would present a threat to traditional hospitals and health systems.



HOW DO YOU EVALUATE THE THREAT IN YOUR OWN MARKET?More than 22% of adult Americans and more than 17% of adult New Yorkers do not have a primary care physician or “personal doctor.”14 Health systems have good reason to be wary of the potential for tech giants and other market disruptors to appeal to these types of consumers and capture their business.

At the same time, there are a number of reasons for health systems to temper their concerns.

The tech industry has a recent history of bitter battles for supremacy in many market segments, including data storage, operating systems, spreadsheet software, internet browsers and mobile hardware. This history suggests that the Frightful Five will focus on healthcare technology before they take on healthcare delivery.

Care delivery disruption has to date focused on tech giants’ employee populations, largely by offering access to various forms of low-cost, high-efficiency care. This follows the lead of large employers like Walmart15 and embodies the tech industry’s philosophy of using its own software advances for internal processes.

The fast pace of digital disruption in numerous consumer industries is unlikely to be duplicated in care delivery, where regulatory barriers remain high, workflows are more specialized and there is less of an appetite for disruption.

Technology’s “fail fast, fail often” mantra has led tech giants to quietly shelve a number of healthcare products. Digital health startups also have a poor track record, particularly if they charge ahead with business-to-consumer sales models that fail to meet the needs of clinical staff or administrators.16,17



Tech giants face increased scrutiny from lawmakers as well as the public about their collection and use of customer data.18 This could erode customer trust and reduce their willingness to use tech-enabled services to discuss sensitive health issues, even in direct interactions with licensed medical professionals.

Many disruptive technologies can be leveraged to a health system’s advantage. Examples include ride-sharing apps, mobile and wearable tech, direct-to-consumer telehealth and CDC-approved chronic condition management platforms.

Healthcare in the United States has a history of discovery: vaccine and antibiotic development, sanitation improvement, blood transfusion and storage, organ transplantation, the Human Genome Project, genetic therapy, stem cell research, etc. The efforts of tech giants to disrupt low-acuity care delivery will not disrupt this longstanding tradition.



WHAT CAN HEALTHCARE PROVIDERS DO?Countless business leaders have dismissed streaming video, mobile phones, and cloud-based software – not to mention PCs, TVs and the landline telephone – only to see their companies suffer at the hands of those same innovations.19 For all of the potential for technology companies to move fast and break things, they rarely achieve disruption overnight and they often fail many times along the way. The challenge for leaders of established organizations is twofold:

1. Separate the true disruption from the latest distraction.2. Recognize the disruption before it’s too late to react.

Healthcare providers should not try to stay a step ahead of these disruptions. Their business and their mission is healthcare; they cannot compete with technology giants at a game that tech companies are not afraid to lose.

Instead, hospitals and health systems should strive to simply keep pace with the disruption occurring around them and understand how emerging technology will impact the business of healthcare. Large enterprises in changing industries, such as technology and news, have done this by focusing on two efforts in tandem: repositioning their core business in response to disruption while at the same time creating a separate business or division to develop innovation.20

While hospitals and health systems face unique challenges, there are three general ways to approach adopting such a strategy.

1. Use technology to build your own competitive advantage.

Health systems can benefit from carefully considered technology implementation in two areas:

• Operations improvements enabled by a range of back-office products – cloud hosting, enterprise productivity, AI, communications and so on. Unlike most things, the cost of using these services is going down over time, not up. Explore opportunities to add these services, leveraging relationships with existing vendor partners where applicable for minimal purchasing and onboarding disruption.

• Clinical care improvements enabled by physician- and patient-facing products that address the precise areas where health systems often fall short: chronic care management, wellness, disease prevention, low-acuity care, etc. To maximize return on investment as well as executive buy-in, align investments in these services with your health system’s major business goals.



2. Don’t move ahead without looking back at your strategic vision.

When technology in healthcare fails to deliver as promised, it’s often the result of solutions being developed and implemented without a clear understanding of the problem at hand. This wisdom rings true for big tech products as well as health tech products. Think of the electronic medical record’s negative impact on productivity or the tepid adoption of the patient portal.

As you consider your first (or next) steps, make sure that your short- and long-term strategic vision guide your adoption and use of technology – and not the other way around. Focus investments on the specific areas where your health system has already committed to making a change. If technology does not meet that criteria, avoid an investment unless 1) the vendor can demonstrate specific clinical and financial outcome improvements at a similar health system and 2) one or more physician or nurse “champions” recommend its use.

3. Further emphasize your community connection.

Tech giants have no problem abandoning a project if it’s not working – and leaving a slighted community to pay the bill.21 Your health system, meanwhile, remains committed to serving your community through thick and thin. You do not turn away those who need emergency care or abandon those for whom you have already provided care. You do not focus solely on low-acuity care with a high ROI.

In addition to being a care provider, you are a local business. You know the needs of your patient population and community better than a tech giant operating as an outside entity and you are a trusted and longstanding partner for local technology companies and universities who share your vision for community service and growth.

Above all, you are a longtime, trusted and experienced partner in supporting all patients in your community through all steps of their journey through the care continuum. No disruptive technology company can make that claim.



APPENDIXAlphabet’s healthcare ambitions, ranging from artificial intelligence to fitness bands to passive sensors, have been described as “fragmented” and lacking a clear strategy.22 The company is also studying the potential to increase accessibility to relevant medical information with its one billion Google searches per day about health.23

Amazon’s execution has focused on disrupting business operations, whether through the pharmacy (PillPack),24 access to care (Haven)25 or purchasing medical supplies (Amazon Prime Business).26 Other initiatives include HIPAA-compliant Alexa skills27 and machine learning research at the Harvard-affiliated Beth Israel Deaconess Medical Center.28

Apple has positioned its most popular consumer products as tools to detect atrial fibrillation (Apple Watch),29,30,31 access EHR data and participate in clinical trials (iPhone).32 Both products also provide easy access to fitness data.

Facebook is using its AI technology to try to make MRI scans more efficient.33 The social network is also cracking down on opioid misuse34,35 and analyzing user data for risk of suicide or self-harm36 – though a controversial plan to share users’ data with hospitals with the intention of creating more specialized treatment plans was shelved amid privacy concerns.37,38

Microsoft’s healthcare division is leveraging existing products to target interoperability, communication, remote monitoring and cloud-enabled collaborative research.39,40,41 A partnership with Philips will use augmented reality for minimally invasive surgery,42 while a partnership with Walgreens Boots Alliance will explore new models of care delivery.43



1. The New York Times. “Tech’s ‘Frightful 5’ will dominate digital life for foreseeable future.” Jan. 21, 2016.

2. Centers for Medicare and Medicaid Services. “National health expenditure data – historical.” Dec. 11, 2018.

3. MIT Technology Review. “I saw Alphabet’s health watch.” Sept. 28, 2016.

4. TechCrunch. “Alphabet’s healthcare subsidy Verily is expanding its startup investment program.” Jan. 24, 2019.

5. Fortune. “Tim Cook on how Apple champions the environment, education, and health care.” Sept. 11, 2017.

6. Forbes. “Why the ability to fail leads to innovation.” Aug. 3, 2017.

7. American Journal of Critical Care. “Narrowing the 17-year research to practice gap.” May 2016.

8. CNBC. “‘Alexa, find me a doctor’: Amazon Alexa adds new medical skills.” April 4, 2019.

9. STAT News. “New voices at patients’ bedsides: Amazon, Google, Microsoft, and Apple.” Feb. 6, 2019.

10. MobiHealthNews. “Designing Alexa skills for consumers? Focus on content first, Cigna head says.” Aug. 8, 2018.

11. Orbita. “Orbita and Mayo Clinic team up to extend award-winning Alexa skill to Google and voice-powered Web chat.” Feb. 13, 2019.

12. Digital Trends. “Smart home technology may help senior citizens remain independent.” March 11, 2019.

13. The New York Times. “Looking to technology to avoid doctor’s offices and the emergency room.” Feb. 21, 2019.

14. Kaiser Family Foundation. “Percent of adults reporting not having a personal doctor, 2017.”

15. Harvard Business Review. “How employers are fixing health care.” March 2019.

SOURCES AND SUPPLEMENTAL READING



16. Fast Company. “Why do digital health startups keep failing?” Oct. 17, 2018.

17. Wired. “Embattled tech companies charge deeper into health care.” March 1, 2018.

18. NPR. “Targeting online privacy, Congress sets a new tone with big tech.” March 13, 2019.

19. Business Insider. “13 times bosses mocked new technology and got it wrong.” Nov. 10, 2017.

20. Harvard Business Review. “Two routes to resilience.” December 2012.

21. The Verge. “Google Fiber is leaving Louisville in humiliating setback.” Feb. 7, 2019.

22. The Verge. “Google hires a health care CEO to organize its fragmented health initiatives.” Nov. 9, 2018.

23. The Telegraph. “Dr. Google will see you now: Search giant wants to cash in on your medical queries.” March 10, 2019.

24. Healthcare Dive. “Amazon’s PillPack secures more state licenses, could be eyeing national rollout.” Feb. 4, 2019.

25. STAT News. “The Atul Gawande health care company finally has a name: Haven.” March 6, 2019.

26. CNBC. “You can now buy an actual hospital room on Amazon’.” Jan. 27, 2019.

27. CB Insights. “Amazon in Healthcare: The e-commerce giant’s strategy for a $3 trillion market.” September 2018.

28. GeekWire. “Amazon fuels Harvard hospital’s machine learning research program.” March 4, 2019.

29. STAT News. “Here’s the data behind the new Apple Watch EKG app.” Sept. 13, 2018.

30. STAT News. “Giant study shows Apple Watch can spot heart rhythm changes – but it’s far from ‘medical grade technology.’” Published March 16, 2019.

31. MobiHealthNews. “Apple, J&J partner on multi-year study of Apple Watch’s health features.” Jan. 17, 2019.



32. CB Insights. “Apple is going after the healthcare industry, starting with personal health data.” Jan. 8, 2019.

33. Healthcare Dive. “Facebook, NYU team up to use AI to accelerate MRI scans.” Aug. 21, 2018.

34. STAT News. “Facebook to redirect users searching for opioids to federal crisis health line.” June 19, 2018.

35. CBS News. “Facebook shuts down drug hashtags on Instagram.” April 8, 2018.

36. NPR. “Facebook increasingly reliant on AI to predict suicide risk.” Nov. 17, 2018.

37. CNBC. “Facebook sent a doctor on a secret mission to ask hospitals to share patient data.” April 6, 2018.

38. The Washington Post. “Facebook knows a ton about your health. Now they want to make money off it.” April 18, 2018.

39. GeekWire. “Microsoft Healthcare reveals more of its strategy with new cloud and AI products for hospitals.” Feb. 7, 2019.

40. The Verge. “A closer look at Microsoft’s new Kinect sensor.” Feb. 25, 2019.

41. Microsoft. “Medical, health, and genomics.” https://www.microsoft.com/en-us/research/research-area/medical-health-genomics.

42. Healthcare IT News. “Microsoft, Philips partner on augmented reality for surgery.” Feb. 25, 2019.

43. IoT Evolution. “Microsoft and Walgreens create a strategic partnership for health care delivery.” March 13, 2019.



Read past issues here: http://bit.ly/HealthcareIntelligence.

PAST ISSUES

March 2019

Vertical integration will test health systems’ vulnerabilitiesOur first Healthcare Intelligence Report highlights how payers, retail pharmacies and non-healthcare entities continue to partner, driving new vertical integration deals which will affect health systems.

July 2019

Primary care: An opportunity to rethink sustainabilityOur second Healthcare Intelligence Report explores non-traditional opportunities in primary care as the front doors of healthcare are being reshaped by patients’ preference for convenience and affordability.

Page 14

If we can help you with your printing needs, call us at (855) 853-5234.Check us out on the Web at hanysprintingservices.com.

hIgh-qualIty

affordable

tImely

PRINTED BY

For more information about new market entrants or other industry issues, contact HANYS’ Managed Care division.

Jeffrey Gold, Esq. Senior Vice President and Special Counsel, Insurance and Managed Care 518.431.7730 [email protected]

Stefanie Pawluk Director, Insurance and Managed Care 518.431.7827 [email protected]

Victoria Aufiero, Esq. Director, Behavioral Health 518.431.7889 [email protected]

Anna Sapak Policy Specialist 518.431.7871 [email protected]

Bernouche Aristilde Executive Assistant 518.431.7890 [email protected]

HANYS’ MANAGED CARE TEAM

Documents

HEALTHCARE INTELLIGENCE REPORT | August 2019 Healthcare ... · Healthcare providers should not try to stay a step ahead of these disruptions. Their business and their mission is healthcare;