U.S. Healthcare: Converting Vision to Reality

• Cognizant 20-20 Insights

A tremendous amount of change has occurred in healthcare over the last decade as the industry has pushed to address significant cost and quality issues. Long before the Patient Protection and Affordable Care Act (PPACA), the healthcare industry has steadily worked to enact funda-mental changes to everything from administra-tion to patient care, prompted by incremental regulatory change. Given increasing demand for services and the unwieldiness of the industry — tens of thousands of professionals across hospital systems, physician groups, long-term care facilities, bio-pharmaceutical firms, health insurers, government agencies, suppliers — the redesign of healthcare to reduce costs and improve access for all U.S. consumers will continue to be a large-scale transformation effort.

Recent legislation such as the PPACA, as well as provisions in the American Reinvestment and Recovery Act (ARRA), are seen as catalysts that are accelerating the transformation process through mandates and incentives. Mechanisms that the government hopes will accelerate industry change include the use of electronic health records, enhanced data coding standards and the creation of health insurance exchanges to support direct sales to consumers. While a number of PPACA provisions went into effect in 2010, many mandates are expected to be phased in over the next decade. It is hard to predict exactly how healthcare reform will proceed, given the broad scope of the legislation, still undefined provisions and the uncertainty introduced by the

mid-term elections. Significant progress, however, can be anticipated in the following areas:

A national/international healthcare IT (HIT) • infrastructure, linking providers, health plans and consumers. This infrastructure is likely to comprise public and private networks, with data collected and shared electronically using an array of enablers and tools, from Web services-based transactions between trading partners and personal smartphones, to netbooks and social network-style applications for consumers.

Integrated health management• based on the concept of coordinated care. This means a healthcare process that is not a series of disjointed events but a synchronized effort to provide wellness services and preventive care, along with acute/post-acute care, through patient-centered medical homes (PCMH) and accountable care organizations (ACO). The effort also includes consumers increasingly

cognizant 20-20 insights | may 2011

Given increasing demand for services and the unwieldiness of the industry, the redesign of healthcare to reduce costs and improve access for all U.S. consumers will continue to be a large-scale transformation effort.

engaged in managing their own health, through smartphone applications and intelligent home monitoring tools.

Personalized care strategies• based on more targeted diagnostic tests made possible through advances in molecular profiling technologies, including genetic testing, and coordinated by both local and virtual teams of caregivers who have real-time access to monitoring data, as well as electronic health record information.

Easier access to care• , through mass use of new applications such as physician office visits (e-visits), online appointment scheduling, online access to test results, and the ability for patients to connect electronically with their physicians through secure e-mail messaging.

Pieces of this vision exist today, but many changes are required to bring it to fruition. For example, the electronic, real-time exchange of health-care information, whether clini-cal or administrative, requires an extensive base of content, transaction, interoperability, product and messaging stan-dards. Many of these standards exist and are in various stages of adoption, but more are

needed. PCMH and ACO organizations and qual-ity-based reimbursement models require more experimentation and development before broad adoption can be achieved. Finally, personal-

ized medicine is still in the early stages of development, although the industry is expect-ed to double in size by 2015.

Healthcare will also be affected by external societal and cultural changes, as well as the rise of disruptive, ubiquitous technol-ogies and structures, such as cloud computing, mobile apps and social networking tools, globalization and virtualization. And because its fundamental purpose is caring for individu-

als — often at their most vulnerable moments — tackling these shifts will require sensitive, well-designed and well-executed change management strategies.

Real-Time Connections The HIT infrastructure is a basic requirement for a connected healthcare system that shares patient data with whomever requires it, at the moment it is needed. Another requirement is widespread availability of standards-based health data that can be shared through Health Informa-tion Exchanges (HIE), and properly and safely interpreted by another caregiver.

At the macro level, all this makes sense: providing information in real time to caregivers, who can then make informed, accurate decisions and thus eliminate expensive redundant tests, inef-fective treatments and prescription errors, while improving outcomes. However, at the organiza-tional level, developing a business case for EHRs and HIEs has been challenging. For example, management consulting firm McKinsey & Co. estimates that U.S. hospitals will need to spend approximately $120 billion, at an average of $80,000 to $100,000 per bed, for the required EHR project planning, software, hardware, implementation and training.1 Incentives are, therefore, likely to offset only up to one-fifth of the total expenditures, leaving a significant gap that hospitals will have to fill through improved management, process efficiency and quality.

HIEs also face challenges. According to the seventh annual HIE survey published by the eHealth Initiative, respondents cited sustainable business models as one of the top three challenges facing HIEs. On a positive note, the same survey reported that out of 234 known initiatives, 73 were opera-tional and 18 were breaking even without federal funding, the major source of funds being subscrip-tion fees and membership dues.

Innovation will be necessary to bring down the cost of needed technological solutions. One promising area of innovation that could accelerate the deployment of HIT is cloud computing. Through the cloud, providers could avoid capital expenses and pay only for the capacity they need, yet still have access to the latest technology.

Using hosted services and cloud computing for patient demographic and medical information requires adherence to significant data, security and privacy requirements. Effectively managing these requirements, however, goes well beyond mere compliance — consumers will want additional assurances that their personal health data is private and well protected.

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PCMH and ACO organizations

and quality-based reimbursement

models require more experimentation and development before broad adoption can

be achieved.

In the long term, payment based

on the quality of data collected and

exchanged with other partners

in the healthcare ecosystem will help

sustain the industry’s investment in IT.

cognizant 20-20 insights 3

In the long term, payment based on the quality of data collected and exchanged with other partners in the healthcare ecosystem will help sustain the industry’s investment in IT. Specific issues require more sophisticated solutions to make this a reality. For example, healthcare has specific security and privacy challenges that must be addressed in order to adequately protect data from unauthorized access and use. In addition, the industry’s ability to actively analyze data and use it for informed decision-making will be critical to achieving improved outcomes at lower costs. Achieving a positive return on investment should drive continued IT investment.

New Business ModelsIntertwined with HIT are new and evolving models of care and reimbursement structures. PCMHs and ACOs are concepts designed to provide coor-dinated comprehensive wellness and preventive care to individuals and thus reduce urgent and acute care episodes. Deploying these models will not only require new organizational models but also a significant level of collaboration among providers and health insurance plans to transition from volume-based to value-based care.

With reimbursement patterns changing to reward wellness and quality outcomes, plans and providers will have to collect and analyze more data in new ways to effectively monitor and optimize the health of a specific segment of the population. The industry, as well as society, will need to define what constitutes a quality outcome for a variety of diagnoses.

The increasingly sophisticated and information-rich diagnostic tests that will enable personalized medical care will also likely alter business models and workflows for delivering preventive care.

It will be important for these new delivery models to continue emerging alongside more traditional approaches to prevent business disruption. Transitioning will require sig-nificant change management, a process that will challenge all players across the industry.

The Millennial ImpactInterwoven with these shifts are profoundly disruptive societal and cultural changes that have a direct impact on the professionals who will deliver care, as well as those who receive it. These changes may pose the greatest business opportu-nities — and challenges — of all.

Members of the millennial workforce now enter-ing the profession have essentially been raised using the Internet, mobile devices and social net-working tools. They require this technology to be effective in their jobs. This fact alone has powerful impli-cations for the industry and its technology investments: Millennial workers may not be drawn to healthcare as readily if they perceive it as behind the technology curve.

Large-Scale Transformation

DriversAccelerators

Cost concerns; quality issues;

legislation(ARRA PPACA)

Mandates and

incentives; electronic health

records;content

standards; B2C

insurance exchanges

Figure 1

The industry, as well as society, will need to define what constitutes a quality outcome for a variety of diagnoses.

Millennial workers may not be drawn to healthcare as readily if they perceive it as behind the technology curve.

Planned Outcomes Description

National/international healthcare IT (HIT) infrastructure

Linking providers, health plans and consumers to collect and share data electronically using an array of devices and tools.

Integrated health management (based on the concept of coordinated care)

Synchronized effort to provide wellness services and preventive care along with acute/post-acute care through patient-centered medical homes (PCMH) and accountable care organizations (ACO).

Personalized care strategies

Using more targeted diagnostic tests made possible due to advances in molecular profiling technologies, includ-ing genetic testing.

Easier access to careLeveraging technology to create virtual teams of caregiv-ers who have real-time access to monitoring data as well as electronic health record information.

cognizant 20-20 insights 4

This will only exacerbate predicted shortages of qualified personnel.

Furthermore, these same individuals will expand the ranks of healthcare consumers. They will want to interact with the healthcare ecosystem in the same way that they interact with all of their other service providers: through Web sites and

portals, via e-mail, using smartphone and tablet PC apps. Technologically astute industry players will have the advantage with these consumers.

Yet providers and health insurance plans also will have hundreds of thou-sands of employees and customers who will prefer more traditional, non-tech-nical tools. Consumers 65 years of age and older will remain the largest con-sumers of the healthcare dollar, and while some members of this group would welcome new mobile and Web-based technolo-

gies, most simply will not, unlike millennials, who view technology as a necessity.

Furthermore, approximately 36% of practicing physicians today are 55 years of age or older.

Not all of these physicians eschew technology, yet many see no compelling business reason to invest in EHRs or support HIEs. This may change, however, given recent decisions by several health insurance plans to require physicians to have EHRs in order to remain part of their provider net-works. It is the younger physicians, themselves millennials, who will expect to use technology.

Balancing the requirements of millennial employees and consumers with those who prefer more traditional methods will require careful attention to what technology is implemented, how and where. Satisfying such a wide range of needs could require a mix of traditional and new methodologies. For instance, some physicians are hiring scribes to enter data into electronic devices while they give full attention to their patients.

Handling the Future NowMany of the tensions, challenges and opportu-nities specific to healthcare also mirror broader, critical megatrends that promise to redefine how successful enterprises will engage their employees, customers and partners. Specifically, the explosion of cloud computing, the rise of knowledge global-ization and an increase in virtualization all hold great potential for the healthcare industry.

Healthcare players across the ecosystem that are able to embrace these trends should have the tech-nological and business agility required to test new business models, create powerful real-time data

Consumers 65 years of age and older will

remain the largest consumers of the

healthcare dollar, and while some members

of this group would welcome new mobile

and Web-based technologies, most

simply will not, unlike millennials, who

view technology as a necessity.

Megatrends Driving Change

B

Mobile and social technologies have rapidly become necessities for

millennial consumers and employees. They are increasingly frustrated by

workplaces with technology lagging behind the tools they use at home.

Cloud computing and mobile tools like smartphones and social networking

applications offer real-time data collection, access and collaboration that can help

solve healthcare challenges.

Healthcare organizations must carefully select cloud, mobile and social

solutions that offer new business value or capabilities aligned

with specific business objectives.

Technology and globalization are converging to enable the creation of

virtual organizations, processes and teams. In healthcare, this trend is already visible in

the form of ACOs and PCMHs.

Social Change – The Millennial Impact

D Globalization – New Business Models

C Virtualization – A Precursor to Globalization

A Technology – Real-Time Connections

Figure 2

cognizant 20-20 insights 55

Healthcare organizations must carefully select cloud, mobile and social solutions that offer new business value or capabilities that are aligned with specific business objectives.

The flexibility to re-focus resources will help the industry develop an HIT infrastructure, shift to integrated health management and personalized care delivery services, and make those services easier to obtain, more affordable and of higher quality.

for information sharing and satisfy the demands of a millennial workforce and customer base.

Key trends shaping the future of healthcare today include:

Technology: Cloud computing and mobile tools such as smartphones and social networking applications offer real-time data collection, access and collaboration that can help solve healthcare challenges. This “anytime, anyplace” data management makes it possible to design and support new, virtual ways of delivering care that use information and expertise, wherever it is located. Cloud solutions can support HIT deployment and benefits exchanges, as well as internal data sharing. When combined, these technologies and tools will support ACOs, PCMHs, personalized care, information-sharing applica-tions and more.

In addition, mobile and social technologies have rapidly become necessities for millennial con-sumers and employees. They expect to interact with all of their service providers virtually and in real time, and are increasingly frustrated by workplaces with technology lagging behind the tools they use at home. The healthcare industry will need to adopt cloud and mobility to meet baseline service expectations of the next genera-tion of consumers, and to compete successfully for talent.

Fortunately, cloud and mobile solutions can be deployed without inflating capital budgets and can actually reduce costs and improve efficiency. That said, new cloud platforms will typically complement existing IT platforms, which means healthcare organizations must carefully select cloud, mobile and social solutions that offer new business value or capabilities that are aligned with specific business objectives. Further, the healthcare industry’s ever-present regulatory compliance requirements are likely to affect how it uses these tools.

Globalization: The real-time, mobile and social aspects of technology are enabling a new phase of globalization, in which knowledge is freely accessible from all points, worldwide — including healthcare expertise and skills. Using resources from the global marketplace, healthcare organi-zations can accomplish labor-intensive, repetitive tasks, such as physician credentialing, at lower costs. The global market is also able to manage complex tasks more cost effectively, from reading

radiological scans, to analyzing population health data. Clearly defined core expertise — what a healthcare organization does better than anyone else — will be a critical pre-requisite to successful-ly adopting globally-based knowledge resources. Only then will organizations understand which global knowledge and skills to tap and why.

In particular, globally sourced skills and processes — delivered via the cloud — can help reduce the costs of mission-critical but noncore operations. Trust-ing these processes to a low-cost service provider releases human and financial resources to strengthen and adapt core expertise to respond to the many forces exerting pressure on the industry. The flexibility to re-focus resources will help the industry develop an HIT infrastructure, shift to integrated health manage-ment and personalized care delivery services, and make those services easier to obtain, more affordable and of higher quality.

Virtualization: Technology and globalization are converging to enable the creation of virtual orga-nizations, processes and teams. In healthcare, this trend is already visible in the form of ACOs and PCMHs. These are effectively virtual organizations. Each member entity provides its core expertise, while common administrative processes could be outsourced to a third party, giving patients and consumers the experience of dealing with only one organization. New partnerships among industry players could also be support-ed by virtualized structures and processes that enable a blending of expertise with reduced capital investment and operating costs.

The impact of virtualization will also be apparent as certain highly repetitive, redundant industry processes become commoditized and ripe for servicing by trusted third parties. These process-commodities are likely to range from claims administration to data analytics. Commod-itized processes will lead to lower costs because

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of service provider economies of scale. Simul-taneously, commoditization will give healthcare organizations both the freedom and the necessity of differentiating themselves based on how well they deliver their core expertise.

Finally, virtualization of knowl-edge will enable the health-care ecosystem to use the most effective resources and services available, whether they are across town or on the other side of the globe. All the key trends coalesce here: Technology enables knowledge to be accessed regardless of its location in the network infrastructure, and tools like smartphones and tablet PCs can function

as video cameras and communications devices. This allows analytics data to be accessed anytime/anywhere (privileges permitting) from a cloud-based server. Globalization opens up a wealth of knowledge and ability regardless of location, so virtual teams can collaborate on everything from administrative tasks to patient care, and can include both internal resources and business partners. It will be the combination of technology, globalization and virtualization that will shape the industry, even as it enables effective new strate-gies and services.

Healthcare is one of the five major sectors of the U.S. economy and represents 17% of the GDP. The industry faces momentous change, not just in response to legislative efforts but because medical science is evolving so rapidly. Healthcare organizations need the benefits of technology,

globalization and virtualization to help them flex, shift and evolve so they can succeed in delivering high-quality, lower-cost care for everyone.

The impact of virtualization will also be apparent as certain highly

repetitive, redundant industry processes become commoditized and

ripe for servicing by trusted third parties.

Footnote 1 “Reforming Hospitals with IT Investment,” McKinsey & Co., Summer 2010.

About the Author

Patricia (Trish) Birch is a Cognizant Vice President and leads the company’s Healthcare Consulting Practice within Cognizant Business Consulting. She has 25 years of experience in healthcare operations and management consulting and serves on the board of directors of Franciscan Services Corp., which provides healthcare services in the midwest and south-central U.S. Trish is also a published author and speaker on issues facing the healthcare industry. She earned a BSBA in Finance from Boston University and an MBA from Jacksonville University. Trish can be reached at Patricia.Birch@cognizant.com.

A Healthier FutureThe conversion from ICD-9 to the ICD-10 coding structure will provide opportuni-ties for the healthcare industry to use technology, globalization and virtualization to its advantage.

ICD-10 will provide more granular data than ICD-9. The diagnostic detail in the new codes should enable health insurance plans and providers to more effectively identify at-risk populations, detect fraud and abuse and enable new types of care and reimbursement models, such as PCMHs and ACOs. The processes required for effective use of credible ICD-10 data must be supported by technology that can maximize the value of the additional diagnostic detail available.

With the use of effective processes and technology, the transition to ICD-10 will provide the opportunity for more sophisti-cated data analytics and thus the potential to enhance quality and reduce costs. The contributions that virtualization, globaliza-tion and cloud-based applications can make to improve the quality and cost equations will make them strategic considerations as the industry matures in driving value from the transition to ICD-10.

About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 111,000 employees as of March 31, 2011, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 1000 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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