Top Ten Tech Trends 2018: Could Newfangled Business and Technology Combinations Upend the Landscape of Healthcare Delivery?

Sept. 4, 2018
What will the impact be of all of the recent bold technological and business moves for established patient care organizations in U.S. healthcare?

Editor’s Note: Throughout the next week, in our annual Top Ten Tech Trends package, we will share with you, our readers, stories on how we gauge the U.S. healthcare system’s forward evolution into the future.

In an article online in the Business Insider published in July, Shelagh Dolan put it very directly: “Healthcare disruption is no longer looming—it's here, and it's necessary. As the population continues aging, health organizations and providers are struggling to keep up with growing demand for care, while consumers are facing astronomical costs—often for subpar service.”

What’s more, Dolan wrote, “Desperate for ways to cut costs and improve accessibility of patient care, traditional healthcare providers are turning to tech innovations for help. In the last five years alone, healthcare funding among the 10 largest US tech companies jumped from $277 million to $2.7 billion. New technologies including telehealth, wearables, mobile apps, and AI are facilitating a shift towards preventative medicine and value-based care, in turn reducing claims, improving benefits plans, lowering patients' premiums, and increasing their lifetime value.”

What are these companies up to? Alphabet, Google’s parent company, is leveraging its extensive cloud platform and data analytics capabilities to hone in on trends in population health, the Business Insider report noted. The company plans to drive more strategic health system partnerships by identifying issues with electronic health record (EHR) interoperability and currently limited computing infrastructure. Meanwhile, Amazon’s recent acquisition of PillPack is another step towards integrating medical supplies and pharmaceuticals into its platform and distribution. The company is also ramping up its AI capabilities to transform Alexa into an in-home health concierge, thereby driving consumers to the website for prescriptions and basic medical supplies. Apple and Microsoft are moving in, too, with Apple looking to turn its popular consumer products into powerful healthcare tools — with monitoring capabilities that benefit both patients and providers, and Microsoft, like Alphabet, leveraging its robust data and analytics capabilities for visibility into population health.

As a June 15 report in the online publication EHR Intelligence noted, the research firm Kalorama Intelligence reports that those three companies—Google, Apple, and Microsoft—have filed more than 300 healthcare patents between 2013-2017—among them, Google’s 186 patents, mainly focused on investments for DeepMind, its artificial intelligence and Verily, its healthcare and disease research entity; Apple’s 54 patents focused on turning its iPhone into a medical device that can monitor biometric data such as blood pressure and body fat levels and to develop algorithms to predict abnormal heart rates; and Microsoft’s 73 patents, centered around expanding its artificial intelligence capabilities and developing monitoring devices for chronic diseases.

That EHR Intelligence article also stated this: “Although Amazon has not officially announced details, industry rumblings indicate that Amazon has been working with a secret project team that is exploring platforms for EMR data, health apps and telemedicine. This secret team is known as 1492 and is working on extracting data from EMRs to make it more useful to healthcare providers. Reportedly, the team is also working on building a telemedicine arm, using technology to make virtual doctor/patient consultations a reality.”

Will New Business Combinations Upend the Healthcare Provider Landscape?

Meanwhile, new business combinations are hitting healthcare, too. The announcement on Dec. 3, 2017, that mega-pharmacy retailer CVS was planning to acquire health insurer Aetna for $69 billion, threatened to reshape the landscape of healthcare delivery and organization in the U.S. And, just seven weeks later, three corporate giants—Amazon, Berkshire Hathaway, and JPMorgan Chase & Co.—announced on Jan. 30, in an ambitious-sounding, if vaguely worded, announcement, that they were launching an initiative to improve satisfaction and reduce costs for their companies’ employees.

And all of these moves to disrupt healthcare are connected, fundamentally, to the high, and growing cost, of the U.S. healthcare system, which Medicare actuaries expect to reach $5.6 trillion, and 19.9 percent of gross domestic product, by 2025.  As Joseph Walker noted in a July 31 article in The Wall Street Journal entitled “Why Americans Spend So Much on Health Care—In 12 Charts,” “Americans aren’t buying more healthcare overall than other countries. But what they are buying is increasingly expensive. Among the reasons is the troubling fact that few people in health care, from consumers to doctors to hospitals to insurers, know the true cost of what they are buying and selling. Providers, manufacturers and middlemen operate in an opaque market that can mask their role and their cut of the revenue. Mergers give some players more heft to enlarge their piece of the pie. Consumers, meanwhile, buoyed by insurance and tax breaks, have little idea how much they are spending and little incentive to know underlying costs.”

So what will the impact be of all of these bold technological and business moves, for established patient care organizations in U.S. healthcare?

With regard to the planned CVS-Aetna merger, Tim Zoph, client executive and strategist at the Naperville, Ill.-based Impact Advisors, Inc., and a former healthcare CIO, says, “This is a vertical play. Part of this is just the need to really manage the pharmaceutical supply chain and costs. Medications and drugs still represent the largest and fastest-growing costs in healthcare. So the idea that you can insure and also be close to the management and distribution of those medications, sort of brings the insurance risk of managing the PBM (pharmacy benefit manager) side, to the fore. And Aetna is really seeing an opportunity for CVS to reinvigorate beyond its current business model. There may be an opportunity beyond pharmacy management, to look at other retail services, in retail settings. Care is really the growth market; it’s lower-cost, distributed, and convenient. The idea that you have a retail venue that starts with pharmacy is a strong vertical play.”

Tim Zoph

Meanwhile, Steve Valentine, vice president of strategic advisory services at the Charlotte-based Premier Inc., says, “Today [Aug. 3], the California Attorney General opposed the CVS-Aetna merger over cost concerns. We would call that a vertical merger. They have the Minute Clinics, the PBM, etc.—we see them invading the healthcare space to compete for what we call ‘stickiness with the consumer.’ You have 9 to11 percent of the spend in pharmaceuticals. It will be interesting to see whether they go down a path like United, which has Optum, and which is acquiring medical groups.”

And, says Valentine’s colleague Shawn Griffin, M.D., vice president, clinical performance and applied analytics, at Premier, “You’re seeing continued attempts to find ways to put together groups that can help you save on healthcare spend. You’re seeing that with innovations, and with partnerships of all kinds, and they’re all trying to find out what the right team is, to become more efficient and improve quality. You’ve seen it with the EMR vendors, too.”

Don Crane, president and CEO of the Los Angeles-based America’s Physician Groups (APG), a nationwide association of physician groups involved in risk-based contracting, says of all the new combinations, both the technological and business ones, “To me, they signal a very restive employer world, a restive and dissatisfied employer world, certainly, when you talk about Google and Amazon, and so, too, with the carrier-PBM combination. There, it’s more about the players looking for a new model, implying that there’s a dissatisfaction to the point of abandonment of faith in the existing model. So, has the inefficiency of our current healthcare delivery system now produced pain at such a high level that it’s no longer about academic conversations, but time for a variety of different actions? That’s what it’s telling me, that we’re about to hit a pain point. Healthcare is using up more and more of our GPD, and really is hitting our global competitiveness now. So yes, this is very significant.”

Don Crane

Of course, the fundamental practical question is, should the leaders of hospitals, physician groups, and health systems worry about all these new disruptive developments? “Yes, I think so,” says Impact Advisors’ Zoph. “There are two trends to think about here,” he says, speaking of the pending CVS-Aetna merger. “One is the distributed-care, remote to retail, focus on the consumer, follow the higher margin, business; and the other is the issue of consolidation among providers. We’re seeing a growing consolidation of physicians, and of hospitals. That deal gives them greater control and greater market share; evidence shows that… there will be tension because of the consolidation and shoring up of the traditional healthcare market at the same time as these new entries.”

Meanwhile, APG’s Crane notes that “I don’t think that the architects of these various transactions see them all in the same way. They have slightly different strategies, and are facing different challenges. For example, he notes, referring to the CVS-Aetna deal, “The minute-clinic concept never really took off; it didn’t exactly work. But what’s different about these diagonal mergers? I think some of it lies in the data—you’ll be combining the data of a health plan with a pharmacy with a PBM. And we’re moving into an era of artificial intelligence and machine learning and the ability to stack up algorithms to the nth degree and know things we didn’t know before.”

What’s more, Crane says, the leaders of patient care organizations need to begin to rethink the organization and delivery of primary care, as new models come into being. “There’s also the factor of the idea of the transformation of primary care,” he says, speaking of the business and technology disruptors. “I think they envision a world where you don’t have to call your doctor six weeks in advance, drive through traffic, wait for hours, wait for days to get your results—and that just doesn’t seem cool in the second decade of the 21st century. It’s a model begging for revolution.”

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