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The Challenges of Investing in the US Healthcare System

Healthcare in the US is not only huge in size (over $3 trillion is spent each year or 15% of total GDP) but is also relatively recession-proof compared to most other industries (we all need healthcare services at some stage in our lives!). But what looks like a very attractive industry for investment on the surface is often not so easy when we take a closer look with regulatory hurdles, significant data compatibility challenges, high concern for patient safety (meaning time frames to make any changes are very long) and a very conservative attitude and therefore slow to change culture being just some of the hurdles that any entrepreneurial or innovative company needs to overcome. Perhaps even more significant is that most technology startup firms only grow by moving fast, trying prototypes, gaining feedback and then iterating. Healthcare is far less tolerant of this approach and prefers to avoid any kind of failure along the way-often for very good reason where people’s health or even life, at least in some cases, is at stake.

As we move towards value-based care and results or outcomes that are measurably better (as opposed to a fee-for-service system), attention to individual patient needs is the new priority and this is an area where digital health solutions can excel, especially as so many people now carry a smart device with them at all times. Whether it’s using software to connect customers/patients with clinicians or caregivers that match their preferences or helping customers to find a tailored insurance package, this is an ideal time for agile digital companies to find segments and niches where they can fill gaps in the healthcare market and allow them to compete with some of the larger and more entrenched players very quickly.

Although there are many areas of digital health that are interesting to look at, let’s consider five that seem to promise the most interesting solutions:

Data Collation and Interpretation

Healthcare is an industry that is capable of generating huge amounts of data right across the spectrum. This comes from wearables on people and in the home, various sensors, and real-time analytics from smartphones and tablets. These big data sets can help with creating sound population health analysis, drug use and efficacy research and development statistics, disease monitoring outputs, and even tracking patient treatment over time. With Big Data also comes the need for high levels of intelligent analysis so that we have better information on which to make our healthcare intervention decisions on a much more individualized basis.

Healthcare “Apps”

Mobile and integrated applications have exploded in recent years, particularly as the penetration of both smartphones and tablets has increasingly reached so far and wide. In healthcare this means that there are already well over 100,000 apps in the online stores to purchase, with the potential for much more development. This development will be in both the B2C space in helping patients to better access the services that they need, but perhaps more exciting, will also be heavily in the B2B space, helping healthcare providers to better collaborate an coordinate their efforts and save large amounts or time and money in the process.

Better service/patient SaaS connection platforms

Software as a service or SaaS has become a hugely popular business model in many industries with healthcare being the latest to adopt this approach increasingly aggressively in many areas. This approach in which software is licensed on a subscription basis from a centrally hosted system can help in matching patient needs with niche services, enabling healthcare education to be widely and quickly disseminated and even provide products and services that can be operated remotely (such as alerts, monitoring devices and even medication dispensing systems, for example).

Aging in Place and Creating easier Access to Care

What is now called “telemedicine” or “telehealth” has become a more and more common way for individuals to gain access to a clinician in a way that minimizes the need to arrange transportation and appointments, saving time, hassle, and money. Some healthcare providers have already made good use of this technology, but we are only at the beginning of the changeover. Not only will telehealth penetration grow quickly in the next few years, but the platforms to exchange information will evolve substantially too, all helping to enable the huge shift from intuitional healthcare to healthcare delivered in the home, especially as the nation’s aging population grows substantially.

Health IT Growth

Most hospital administrators and physicians running healthcare provider organizations believe that healthcare information technology will improve the quality of care provided for all patients in the long term, especially when organizations can get beyond the many problem of transitioning from paper records to electronic ones. The main area of interest here is the so-called electronic health record; making it not only easily accessible to the patient but truly transportable across multiple healthcare providers. Open systems with full interoperability is often the ultimate goal of electronic health records and digital companies that are prepared to share data across platforms will be the big winners here.

In summary, all of the digital health-based solution/technology categories described above will have a huge impact on healthcare in the next few years and will alter the way that care is rendered substantially. This means that Healthcare as an industry is ripe with opportunity for investors and entrepreneurs but they will only be successful when both investors and entrepreneurs appreciate how the industry operates, can develop products and services and iterate in different ways and are prepared to be extremely patient in a sector that is extremely complex.

 

Jon Warner is a business consultant in Los Angeles and adviser to Adaptive Healthcare, a healthcare investment fund. He works with clients in healthcare and life sciences to develop business strategy, performance and productivity goals, as well as technology deployment tactics.

caretaker helping senior woman to get up from wheelchair

Home Based Care: What Does the Future Hold?

The home care provider sector is one of the fastest growing in healthcare and even when measured against other industries. This is particularly true in the US and around much of the rest of the western world.  This is mainly because most governments have now recognized that home care can save considerable money every year by treating patients or dealing with high care need people (such as seniors) in their own homes instead of in hospitals and other institutional providers. Over the last five years, these factors have contributed to an annualized revenue growth rate in the sector of almost 5% per annum and a home care and home health sector with combined estimated revenues of around $90 Billion.

Before we go on to look at what the future potentially holds for this sector within the large healthcare industry, let’s distinguish what we mean by “home care” versus “home health”. Home health generally refers to agencies that provide a skilled service in a person’s home (in the US typically under a Government run Medicare payer source). Skilled services include those provided by a registered nurse, physical therapy, and occupational therapy. Home care, on the other hand, generally refers to mainly private pay services in a person’s home (mainly because there is little or no government or insurance coverage for it). Most home care agencies provide basic personal care and homemaker services. Personal care typically relates to bathing, personal hygiene, dressing, transportation, light housekeeping, and meal preparation.

Despite strong growth, particularly in the last decade or so, sector profitability (on both sides) has been under pressure. The largest payers for home health services are government programs. But these budgets have shrunk greatly, and decreased funding has thus resulted in reimbursement cuts for the industry and has suppressed operating profit. However, the numbers of adults aged 65 and older, as well as the fact that people are living longer means that home care and home health will continue to grow in both size and reach over the next 20 years.  The question is therefore how will this growth occur and what major challenges will need to be overcome? In this article we want to describe six areas that need to be carefully considered.

  1. Client Satisfaction

In both home care and home health clients are not only highly varied in their needs (ranging from the young seniors to the “old-old” and with “light support” needs to a number of specialized and chronic “heavy support” needs) but they can readily switch from one agency provider to another. In addition, seniors are not the only ones to make the judgment call about whether or not they are satisfied with the service but their children (who often pay for home care) are also likely to take a view as well. The implications of these expectations, is that every home base care provider needs to take client satisfaction extremely seriously and seek to tailor their services as much as possible.  This might be to offer specialized services, in areas like Alzheimer’s or COPD for example, or to better match a carer with a customer and his or her personal, social or health needs.

  1. Access to greater numbers of high quality people to provide care

Since 2014, the so-called “baby-boomer” population has been retiring at the rate of 8-10,000 people every day. This is a situation that will continue for almost the next 20 years. Combined with the cost savings to be had from treating people at home and making sure patients are not re-admitted to healthcare intuitions, this has meant that there are many more home care agencies chasing more home care staff. This presents both a quantitative problem (there are not enough people to currently meet the demand) and a qualitative problem (the quality of people has declined on average). Both of these challenges can only by addressed by recruiting more people to come into the sector and training both existing and new recruits to operate at a high standard of care.

  1. Developing and retaining home care and home health staff

Historically, home based care staff came into the sector with little or no direct qualifications or much in the way of experience. But in this fast-changing area, which is both growing in number and in terms of having more demanding clients, this is not sustainable. Home care and home health workers therefore need more and better training and even more importantly need to be nurtured to stay in the sector. This need for better retention strategies has many facets to it.  Apart from regular and ongoing development it entails designing the work to be more interesting, giving the individuals chances to progress to more interesting/higher level work over time, learn about and use a wider range of technology and designing more creative reward and recognition approaches, just to name a few.

  1. Navigating the law

Most western countries are starting to regulate the home care sector to a much greater extent. In the US, for example, the law has gone much further to create more rigorous licensing standards (although these vary by state)and to dictate employment conditions. The two most pressing of these employment condition changes relate to treating all staff that work almost exclusively for a given agency as a full-time employees (and not as contractors) and for all care employees and contractors to be given overtime pay when they go beyond minimum hour standards. Both of these stipulations add to agency costs and either squeeze relatively low margins in the sector or make the costs of care higher to the customer (whether they are paying cash or seeking reimbursement).

  1. Getting paid

The home-based care market has two sides to it-cash revenues (around 10% of the population or 15% of the value) and reimbursable revenues, where insurance or government schemes operate).  Home care is heavily cash pay based and home health is heavily reimbursement based. In both cases however, home based care organizations are under pressure to get paid for their services. At average rates of $20-$25 per home care non-overtime hour, service is only affordable to individuals and families that are typically earning above median wages (especially if a senior needs considerable care or has a chromic condition). Home health is more expensive (typically $30-$65 per non-overtime hour) but is often fully or heavily reimbursable. However, a provider still takes the risk of rendering the service and receiving the expected reimbursement, both in terms of time it takes and quantum (and it may fall considerably short of expectations thereby reducing profit margins).

  1. Making the best use of technology

Healthcare in general has been slow to adopt technology compared to other industries and this is perhaps even more the case in home-based care. However, gradually this is changing with technologies such as the deployment of a variety of medical devices to monitor vitals, for example, sensors in the home, smart phone and tablet based applications and telemedicine all being increasingly used. Perhaps more interestingly, there are now several care platforms, which operate, that use web-based technology to better match carers and clients and to schedule service using a range of technology. This has helped to lower costs to clients in some cases although a determination of whether the quality of care has been improved has yet to be determined.

Summary

Home based care as a sector is growing rapidly due heavily to the “boomer” population retiring and living longer. This is also because it’s estimated to be anywhere from 30% to 60% cheaper to render the care that is needed in a home setting than in an institutional environment of any kind (such as hospital, skilled nursing home, assisted living facility, or hospice, for example).  However, the industry faces many management-side challenges that need to be quickly addressed if it is to continue to grow and thrive in the future.

 

Dr Jon WarnerDr. Jon Warner

CEO-RX4 Group-The Business of Healthcare

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How Will Artificial Intelligence Influence Healthcare’s Next Decade?

Artificial Intelligence is already operating in a range of limited but interesting ways across the healthcare sector. The use of processing computers that can sift and sort data hundreds if not thousands of times quicker than humans is growing, with research suggesting that we spent around $2 billion in venture backed capital on it in 2015. But where is its use likely to impact healthcare in the next decade or so, with reports predicting spending on AI in healthcare will reach as much as  $20 Billion in 10 years time?

Before we look at applications in healthcare in particular, we should remember that AI is an umbrella term for three related technologies; machine learning, extended human cognition and robotics. AI is quite a broad field and in this regard the impact on healthcare as one large industry is likely to be significant, especially in being able to be major new platform/systems leveraging by SAAS systems and databases intelligently talking to each other.

Let’s look at 6 areas within healthcare that seem to have most potential for the use of artificial intelligence.

Clinical Trials

Clinical trials take a long time to process and understand. AI, clever algorithms in particular, can assist with thousands and sometimes millions of datasets. A particular challenge in this sphere is when a doctor are looking to find an appropriate clinical trial for a patient who has exhausted all available treatment options. In this case, artificial intelligence systems can quickly sift through thousands of clinical trial protocols around the entire world, from multiple databases, and determine whether a patient is likely to qualify for the trial and then communicate the results back to the doctor. This fast searching process can readily cover specific patient populations, diseases, conditions, procedures, medications, and much more. 

Diagnosis and Treatment

The volume of healthcare and medical related information is already enormous and is added to and changed every day. In fact, some experts say that medical literature that a physician needs to draw upon to do perform their role well is doubling every two years. This makes it almost impossible for any provider to keep up and only computers can now perform this task in a comprehensive way. A good example of a large computer that can do this is IBM’s “Watson”.  Watson’s AI uses cognitive computing find data patterns that are relevant for a variety of individual patients in order to help them make stronger diagnoses and craft better treatment interventions.

Robots

The cultural image of robots is shaped by androids, which look and act like humans. This idea is shaped a little too much by science fiction books and movies perhaps –  in reality the robots of today are much more limited in their scope and focused on very specific tasks where there can be precision on movement. Laser eye surgery was an early adoption of robotic arms, for example, and there are many surgical procedures that can be performed or assisted by robots.  These will not only proliferate but evolve into machines which can give and get instructions verbally and offer medical interventions to patients in a variety of ways. These might be simple at the outset, such as offering educational advice, but will rapidly evolve to highly intelligent response sensitive machines which will be able to do much of what a clinician might do today.

Medication Management

There are many issues in getting patients to adhere to a particular drug or medication regime. These include under-medicating, over-medicating, and drugs or medications going to a person for whom they were not prescribed or intended.

While AI cannot completely eliminate these problems it can help significantly by using several approaches. For example, mobile technology and facial recognition to technology can determine if the right person is taking a given drug at the right time. In addition, patient data from a computer or tablet and draw upon automated algorithms to identify patients, the medication and the process of medication ingestion. Data gathered can be relayed in real-time back through a HIPAA-compliant network where a clinicians can confirm that the patient is taking their medication as directed, or not, as the case may be.

Managing Chronic Disease

When patients have chronic diseases, doctors may use AI to gain better insights to understand their patients’ needs and then tailor care accordingly.

AI can assess disease pathways and why certain people might respond better to certain types of care processes better than others. This is done by not only comparing patient data with others in a database with the same disease but also by taking into account a range of wider data-points such as socioeconomic data and demographics, to help predict how patients will respond to different treatment options. 

Encouraging Wellness

With natural language processing capabilities, AI can assess a patient’s activity goals and readily store these stated goals and then and prompt the person to make sure that he or she meets those goals-with both incentives and sanctions for non-conformance. At one end of the continuum this may be about simple goals around diet or fitness in order to stay well or prevent disease. The other could include predicting which diabetes patients need more help in keeping their blood sugar under control. And it’s not just the providers that can use AI to encourage wellness.

Healthcare payers and Accountable Care Organizations (ACO’s) can also use AI to identify potentially unnecessary services during the review process and improve quality of care. This might include using a database of established clinical guidelines, a specific patient and disease knowledge base, and a predictive analytics algorithm to assign a confidence score that enables consistent clinical and administrative decision-making.

In summary, as we can see, AI is already being used in a variety of ways in healthcare and is set to extend it reach considerably as the technology evolves. Even better, many of these AI solutions (especially the machine learning and cognition parts of it) are now available in the cloud making it both easily accessible and affordable for most providers.

Dr Jon WarnerDr. Jon Warner

CEO-RX4 Group-The Business of Healthcare

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Can Digital Health Substantially Improve Healthcare?

Technology has long been thought to be able to play a big role in reducing the overall cost of healthcare, now estimated to be close to 20% of GDP in the USA. Digital Health is perhaps the sector of technology expected to make the greatest contribution. But is this hype justified? Can digital health substantially improve healthcare organizations’ efficacy while reducing costs? Read More