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Information technology has revolutionalized financial services. So why is healthcare so far behind?

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The U.S. leads the world in healthcare expenditures – an astounding $2.7 trillion in 2012 and rising every year. Yet in one recent study of medical outcomes in the world’s most highly developed countries we ranked last. By any measure we are experiencing a healthcare crisis. If we hope to change this – to improve the quality of care and make it available to more people, while still reducing costs – it is imperative that our health system embraces new and disruptive technologies.

Healthcare IT in infancy

In 1969, just six weeks after NASA landed the first men on the moon, the first $20 bill was dispensed from an automated teller machine. IT systems have since revolutionized financial services, and as a result banks have since saved billions of dollars as consumers first used ATMs for deposits and withdrawals, and then started to pay their bills and make purchases online. According to a Bain & Co. brief, transaction costs have dropped from $4 at the teller window to just 8 cents when paying a bill via a smartphone.

From my perspective, healthcare IT is still just a few paces beyond where the financial services industry was in 1969.

Electronic health records (EHR), the backbone of health IT systems, are a perfect example of the health system effectively using technology to both improve care and reduce costs. For those healthcare systems that have proactively decided to digitize, EHRs are already proving to save lives and costs, from identifying redundant tests and dangerous drug interactions to revealing trends in treatment outcomes.

For example, we have used EHRs at Kaiser Permanente to analyze a database of 1.4 million members, and that led to the discovery that the widely used COX-2 pain reliever Vioxx was dangerous; the drug was eventually taken off the market. It took a large data set and the right tools to find this lifesaving information.

IT costs growing faster than healthcare

The following market research indicates that spending on health care IT will grow at an even faster rate than overall healthcare spending:

  • According to Insight Research, health care IT spending will grow 9.7 percent annually between 2012 and 2017. That compares to an annual 6.4 percent growth rate in overall healthcare spending.
  • Neal Patterson, founder and CEO of Cerner, the world’s largest stand-alone developer of healthcare IT (HIT) systems, told Forbes magazine in May 2012 that he expects HIT sales in the U.S. to double or even quadruple by 2020 – growing from $5 billion to $10 billion annually.

Opportunities for entrepreneurs

Investing in innovative health IT is a winning strategy for entrepreneurs. Here are three opportunities that I find particularly compelling:

Cloud computing 

Cloud computing is one disruptive technology that makes setting up and running an electronic health record faster, simpler and more affordable. Bain & Co. suggests that the move to cloud computing could cut costs from 30 percent to 40 percent compared to legacy IT systems. That’s a big selling point. The smartest new EHR vendors go the extra mile to guarantee, as Athena Health does, that their systems will allow a practice to qualify for Medicare Meaningful Use payments (a government incentive program for health care professionals).  This is a smart strategy for vendors, as it gives healthcare providers an income stream that will help defray the cost of adopting the technology.

Big data analytics

Here at Kaiser Permanente, the 1-2 terabytes of data we’ve collected every day since 2003 have resulted in a patient database that’s larger than the Library of Congress. Our system can analyze and leverage this massive dataset with a variety of tools: Predictive analytics, clinical decision support, data mining, and natural language processing, among them. What we have learned has changed the way we, and doctors around the world, practice medicine. Big data has already attracted the attention of major players like Dell, Intel, and Oracle.

But storage also offers fertile ground for exploration: Providers now dump nearly 90 percent of data they generate due to storage issues – literally trashing valuable information that could save lives.

Mobile health

Mobile capabilities offer incredible opportunities to advance the way healthcare is administered, chiefly through telemedicine (the delivery of care via telecommunication technologies like video) and telehealth (remotely provided preventive health services, such as patient education and e-mail consultation). It’s all about high-tech tracking and high-touch connection. Existing innovations include portable pulse oximeters that can send data on pulse and blood oxygen rate from a patient sitting at home to his doctor, in real time. According to BCC Research, these technologies were a $3.5 billion global market in 2011, and are expected to reach $9.7 billion by 2016.

No one can deny the stakes in health IT are high, but the rewards we stand to gain are even higher. Some rewards are financial. Reducing our overall healthcare expenditures would strengthen our economy and ease the financial burden of healthcare on individuals and family. But the biggest rewards are intangible: higher quality care enabled by health IT will provide better health outcomes, and a healthier population.

Phil Fasano is executive vice president and chief information officer of Kaiser Permanente, the nation’s largest not-for-profit health plan and health care provider, and author of Transforming Healthcare: The Financial Impact of Technology, Electronic Tools, and Data Mining.

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11 Responses to “Information technology has revolutionalized financial services. So why is healthcare so far behind?”

  1. ishekhar

    As David Goldhill puts it in his ‘Catastrophic Care’; its not accidental that the health Industry hasn’t invested in IT. There is a reason behind it.

    And the reason is they don’t’ see IT benefiting them. The profit motive for the health Industry is to drive ‘cost’ up and not to drive-down price. Medicaid pays them as % of cost for each service, and that’s pegs the rate paid by even Medicare and private insurer.

    So, assuming that the last 40+ years of IT innovation has just passed them by accidentally and with the cloud computing, big data mobile health, they will reboard the bus, is ignorance.

    When will they see the profit motive to invest in IT ? When the consumers becomes customers (we aren’t now, the insurer are) as then only the system will be unclogged of all the wasteful spending, a real competition to earn business will be felt and efficiency will improve to drive the cost down.

    All other steps in the meantime are just eyewash, steps to increase cost while promising just the opposite

  2. Vinod Shintre

    Well put & advancements in cloud or HPC on demand certainly helps churn out data for clinical research & trials. But I think there is a gap which exists in Preventive Care domain. medical research of course is the holy grail for population at large. I’m sure there will be lot of activity in social+healthcare domain specifically for preventive care.

  3. Jan Eriksson

    The article and the question is good! An entrepreneur in Sweden has developed a software Diagnosis assistent as change the way to put diagnosis on people’s!! Why hasn’t investors, medical companies contacted him? It’s difficult for small inventors to reach the market whith out any help from the bigger ones! We all know that doctors need help to sorted out the right diagnosis because there are more then 5000-6000 deseases to choose between!

  4. Gregory Nicholas

    What crap. It’s April 2013, and in a tech journal, your “predictions” are 2 sentence descriptions of “cloud computing” and “big data analytics”? Wtf giga, how did this get through

  5. I can appreciate this article but it paints an overly optimistic picture of Healthcare IT, or HIT as it were. I’m not entirely convinced that EHR’s as they exist today are the absolute win the author makes them out to be. They are incredibly inflexible, notoriously difficult to use, costly to set up and even more costly to maintain. Further, they mostly exist to further the goals of “Healthcare Business” as a documentation tool for billing purposes, not as a tool to benefit patient outcomes. Not discussed is the 800 pound gorilla of interoperation. Established EHR providers are incentivized to not share data in any meaningful fashion with their competitors or even the operators of their systems. It is my contention that government needs to step in and incentivize EHR providers to publish interoperability standards and guidelines for their systems. There will never be one system to rule them all. Interoperability is the only way to go.

    Regarding cloud computing, sure the cloud is a major factor in driving down costs for IT in the large but it remains to be seen how Healthcare providers can leverage the cloud in the face of ever increasing HIPAA and HITECH regulations.

    It is a singularly focused organization like Kaiser Permanente that will stand to benefit at a greater rate than their peers at the operational level due to streamlined decision making capabilities. Academic institutions may make great strides in different areas of Healthcare IT R&D with unique and promising projects but their bureaucratic inertia will keep those insights from having practical application. Overall, it is a change in leadership at the top that is necessary to push the ball forward. When major institutions have leaders that recognize the long term benefits from Healthcare IT then costs will come down and outcomes will improve.

  6. Sohin Shah

    According to the latest research by IDC, Big Data grew to 2.7 zettabytes in 2012. This was a significant increase from 2011 (almost 48%).

    Before, scientific research required hours sitting in the library going through a large number of books or running after researchers for their data. Now that same data can be easily accessed online or through existing databases such as the extensive one the NCAR (National Center for Atmospheric Research) has to offer.

  7. Dinesh Chavan

    Good Article, Although I completely agree with “Big data has already attracted the attention of major players like Dell, Intel, and Oracle.”; major players are still struggling and planning aligning their business model around open source principle.