Interlocking forces in healthcare IT

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Through a combination of government and tech forces, health care is moving from an IT backwater to a heavy investor in both bureaucratic and innovative technology. The influence of various stakeholders can be seen throughout the transformation. Some factors are market enhancing, some are market constricting, and each stakeholder has a separate agenda. But consumers and their patient data tend to be the common levers by which the industry participants are seeking advantage. And consumers are simultaneously gaining and losing control in the process. In that sense, the sector provides an illustration of how consumer IT, enterprise entities, and government regulators intersect.

Between government coercion and market incentives, healthcare IT has thus become a swirling mix of the onerous and the opportunistic. It has become an open tap of tech spending and investment at the keg party of rising medical costs—even while savings are soberly pursued. Not surprisingly, early results are a tumult of the inefficient and the effective, determined by the motivation behind the investment. Significant promise is often jumbled in with an explosion of bureaucratic waste.

Doctors’ varied acceptance of new technologies

Doctors and other medical professionals are on the front line of new technology use. This week we saw stories that demonstrate how mixed the reception can be for technologies in the sector:

The UC Berkeley data science blog last week posted an infographic with various electronic health record adoption rates, including the office-based physician use of EHR jumping from 18% to 78% between 2001 and 2013, and percentage of physician offices using EHR jumping from 50.3% in 2013 to 61% in 2014. There is a gap between hospital and health system-owned offices’ greater adoption than independent locations and variation in adoption from state to state. But the largest differences are seen by specialty, ranging from 80.6% use with dialysis down to 35.9% use for preventative medicine.

In turn, consumers within the medical system are likely to experience a range from the traditional, face-to-face interaction with a doctor to a doctor intently focused on the keyboard, googling and typing away—while only occasionally tossing a question out to the patient.

That IT use is only becoming more central to professionals across the medical profession is evidenced by Dell’s announcement this month of a partnership with the Texas A&M Health Science Center to create an academy for continuing healthcare IT education.

Other stakeholders influencing technology adoption

Along with the doctors and other medical professionals, there are four other constituencies influencing health IT use and spending:

  • Coercive government, with its imposition of mandates and incentives, such as for EHR and EMR investment and the Affordable Care Act. The Office of the National Coordinator for Health Information Technology this month introduced a plan to link patients’ EHRs to a national web of databases and government oversight. This follows the carrot-and-stick stimulus spending and requirements to adopt the technology, as well as the several-times-delayed, in-process, move to ICD-10 coding.
  • Cost-conscious, corporate health system participants. Mark Bertolini, the chairman and CEO of Aetna, recently offered an insurer’s perspective of how IT can help make inroads cutting the estimated 30% waste in the American healthcare system. Although he also advocates the interoperability of records, the key opportunity he sees is in the higher deductibles that are common under the Affordable Care Act. Higher out-of-pocket costs provide more incentives for consumers to weigh the benefits of services and to find cost effective providers and solutions within their networks.
  • Creative innovators, or the startups and startup investors in new health IT. Healthcare IT startups have attracted growing interest from private and public investors of various types. The sky-high IPO of Castlight Health, a cloud-based healthcare management solution for the enterprise (another major party in healthcare spending), served as confirmation for some that health IT has reached a bubble phase. Various roundups of health tech innovation are rife with applications advanced by startups. For example, one recently profiled startup employs telemedicine to improve at-home care after a patient has been released from the hospital, in order to reduce costly readmissions. (Telemedicine is a technology where regulation still impedes its adoption, due in part to in-state medical licensing requirements.)
  • Consumers, who are the actual healthcare customers. The increased nationalization of healthcare services (with the Affordable Care Act and Medicaid expansion) and consolidation among hospitals and providers at the local level (which has been accelerated by the effects of the ACA) work to reduce free market competition in health care. However, there are two other factors that are infusing some market-oriented forces into the sector: 1) Higher deductibles and generally increasing health costs give individual customers more incentive to avoid unnecessary care and to opt for lower-cost treatment where possible, and new technology is bringing more information and patient control to healthcare consumers.

Florida Hospital Celebration Health was profiled this week for its use of the GetWellNetwork in-hospital system for providing interactive patient services via in-room television sets. This is the sort of innovation that provides patients more responsive service, while also cutting hospital nursing and other labor costs. Many more innovations, such as healthcare wearables (e.g., FitBit, diet applications, home medical testing and monitoring systems), also support consumer-led healthy living and health care. (For more on healthcare wearables see the recent Gigaom Research report, The Internet of Things and the future of health care.)

Implications

In short, we see the following:

  • Increased technology use is enabling more government influence and control such that we see government often simply mandating higher levels of automation and technology use.
  • Doctors and other medical professionals have a mixed response to new technology. Among them, there will be leaders and laggards in technology use—as long as laggards are permitted.
  • Increased healthcare IT spending is a boon to the tech vendors who serve them, and a flood of innovation is opening doors for new entrants to find a niche in the market.
  • Surviving providers within the healthcare ecosystem gain from consolidation, which is fueled by the economies of scale in implementing technology and managing the burdens of regulation. This reduces consumers’ power in the market. Yet, those providers also gain from imposing the market discipline of higher out-of-pocket costs onto consumers through the higher deductibles that help mask overall rising costs in insurance and care.
  • Consumers gain from greater automation insofar as more information, self-monitoring, and healthcare decision-making is placed in their hands, although some of the associated automation and regulation is less beneficial.

Thus we see a very market-driven move toward placing more healthcare technology in the hands of consumers. In some aspects, this gives healthcare customers more control.  But this development also empowers healthcare providers to gain from what has been structured as cost-saving incentives for consumers. With fewer providers in local markets, consumers have fewer market choices, which limits their influence over pricing. Individual doctors can choose their adoption of some technologies, but are forced to adopt and respond to others. Government can more easily regulate and control with greater technology adoption.

There are hints of counterbalancing market forces—e.g., if broader geographic telemedicine licensing is permitted—but in the current environment, healthcare IT is an example of how even consumer-driven technology adoption and investment can give and take in the market, variously, for different market participants.

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