Health IT: How Developing Markets Can Trump US - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
IT Life
Commentary
1/6/2015
04:26 PM
Connect Directly
Twitter
RSS
100%
0%

Health IT: How Developing Markets Can Trump US

With the US market hostile to health IT innovation today, entrepreneurs should look to the developing world for markets and opportunities.

CES 2015 Preview: 8 Hot Trends
CES 2015 Preview: 8 Hot Trends
(Click image for larger view and slideshow.)

A quick glance at the headlines might suggest to Americans that there's no place like home for IT innovation in healthcare. Health-related IT venture funding hit $2.3 billion in the first half of 2014 and is on pace to double last year's record level of investment.

And it's not just startups that are placing big bets. Samsung and Apple are among a growing number of established players now wading into the healthcare IT space with significant investments.

The bet, of course, is that US healthcare will seek new solutions to improve quality and efficiency, creating a wave of IT-related innovation. And though I have faith that we will get there someday, new entrants to the market are learning a lesson familiar to those of us who have been working to transform the industry from the inside: The US healthcare industry is still a terrible place to get new ideas off the ground.

Most hospitals are paid by insurers and Medicaid/Medicare for the quantity of services they provide, despite much talk about moving toward pay-for-performance healthcare. These hospitals have little incentive, if any, to invest in more cost-effective ways to provide these services. This is a big problem for IT innovators as the discovery of more efficient ways to do things and the ability to automate more effective workflows is exactly the value proposition of information technology.

[Are these new healthcare companies poised for takeoff? Read 9 Healthcare Startups To Watch.]

Lacking appropriate financial incentive, hospital IT departments and their budgets are largely focused on maintaining installed systems that tend to be associated with revenue generation (e.g., MRI machines or billing systems). In addition, hospitals have been investing enormously in the installation of electronic medical records, thanks to the up-to-$44,000 per eligible doctor incentive provided by the federal government via the HITECH Act. Such installations are significant undertakings that will consume the bandwidth of clinicians and IT departments for years to come. Health IT startups that are patient enough to weather the EMR installation marathon will then face government-subsidized EMR oligarchs that have much to lose and little to gain by allowing access to their data and interfaces.

Entrepreneurs, engineers, and forward-looking clinicians dream of tablets connected to diagnostic devices that use the cloud and advanced analytics to identify and deliver lifesaving recommendations just when and where they're needed most. Unfortunately, when they wake to their day jobs, most find themselves working on direct-to-consumer products or developing "sidecar" systems that remain an arm's length from patient care.

But there's another possibility: What if we look to developing markets for healthcare IT innovation to flourish? Many of the necessary ingredients are there. Overseas markets are so inviting, in fact, that would-be US entrepreneurs should even consider taking their game overseas, proving their health IT products in developing markets, and returning when US healthcare is finally ready for widespread health IT innovation.

A better place to innovate?
I'm currently part of a team working with the Indian government and the Bill and Melinda Gates Foundation to improve childbirth in Uttar Pradesh, India. Healthcare delivery and maintenance in rural India is hampered by shortages of qualified clinicians, supplies, and clean water. Electricity goes out quite frequently. Record keeping is sparse, if existent. Corruption can be a problem. All of this makes it seem like less-than-prime conditions for healthcare IT innovation.

And yet there are hard-to-ignore features of developing healthcare systems that make places like India ripe for health IT innovation.

Aligned incentives: Having a problem to solve is certainly a prerequisite for innovation. And there are no shortages of challenges in delivering healthcare both locally and abroad. However, as we've seen in the US, without economic incentives, the greatest solutions do little more than consume venture capital or take up shelf space in medical libraries. In contrast, the healthcare systems of many developing nations are economically incentivized to invest in improving care.

In India, for example, care is provided via a mix of public and private clinics. Care provided in private clinics is typically paid for out-of-pocket. This means private clinics must compete not only against other private clinics, but also against public clinics, where care is largely free. The public clinics also are incentivized to realize more efficient ways to provide care, since they serve as both payer and provider.

Market opportunity: The next deal-breaker question is whether there is real money to be made. Certainly there is not the type of money that sloshes through the US healthcare system, which makes up around 18% of the US GDP. Healthcare spending is, after all, the one global health measure in which the US continually comes in first place. However, "developing nation" implies a growing middle class with an increasing amount of resources to spend on healthcare. And though the dollar amount per transaction may be relatively low, in some developing nations that may be made up in volume.

According to Bloomberg, healthcare-related spending in China will nearly triple to $1 trillion annually by 2020. In India, there is public as well as private investment available for

Next Page

Leonard D'Avolio, PhD, is the Director of Informatics at Ariadne Labs, a joint venture of Brigham and Women's Hospital and the Harvard School of Public Health. He is co-creator of the healthcare prediction platform Cyft, an assistant professor at Harvard Medical School, and a ... View Full Bio
We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Previous
1 of 2
Next
Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
zerox203
100%
0%
zerox203,
User Rank: Ninja
1/8/2015 | 10:59:33 AM
Re: Health IT: How Developing Markets Can Trump US
Thanks a lot, Leonard, this way very thought-provoking. It's practically a cultural pastime to take a pot shot at the state of US healthcare, but it's much less often that we actually see someone explain why it's in such a sorry state and offer some real examples of how things are in the rest of the world. Double points for making this a great read for IT pros and luddites alike. Anyone can appreciate the value of a  solar-powered, portable testing lab priced under a thousand dollars. There's a video demo embedded in the linked article. So cool! Some of the economic and societal factors you list are well-known, but others were a bit more surprising (and illuminating). It's important to remember the world is a complex place not simply divided into 'developed' and 'undeveloped' to get a full picture.

It's not so hard to see how the US system got to the state it's in today. As others have pointed out, it's justifiable that there are limits placed on how rapidly healthcare systems and processes can be changed - there are security, privacy, and human safety concerns. Like many other things, though, these regulations seem to have spiraled out of control and caused the opposite of their intended effect. To say that medications and procedures are priced arbitrarily based on numbers that the insurance providers already decided they want to pay is an understatement. The notion that in India I would pay a little more out of pocket to actually have my problem adressed on the first visit instead of being ping-ponged around to five different ones only to see no tangible benefit is well-taken. That's not incidental to the problem - that is the whole problem. And technology can help, if we would get out of it's way.
Ariella
100%
0%
Ariella,
User Rank: Author
1/7/2015 | 5:27:22 PM
Re: using the cloud
@soozyg You'd be surprised at the amount of paper still generated in healthcare. I've seen the backoffices of a doctor with rooms and rooms just devoted to files.
soozyg
0%
100%
soozyg,
User Rank: Ninja
1/7/2015 | 5:25:16 PM
Re: using the cloud
The government estimates that the cost for all the new forms, processes, and documents for the healthcare industry  would be in the neighborhood of  $114 to $225 million for the first year. 

An interesting point that actually supports the cloud case--they should go green! ; )
Ariella
100%
0%
Ariella,
User Rank: Author
1/7/2015 | 5:15:48 PM
Re: using the cloud
@soozyg Anything that has the potential for information to be accessed by multiple people as in the case of the cloud has to be secured well enough to satify the Ombnius final rulemwhich went into effect on on March 26, 2013. It is intended to reinforce the Health Information Technology for Economic and Clinical Health (HITECH) Breach Notification requirements enacted in 2009.

The penalty has to be high because the costs of compliance are very high. The government  estimates that the cost for all the new forms, processes, and documents for the healthcare industry  would be in the neighborhood of  $114 to $225 million for the first year. 
soozyg
0%
100%
soozyg,
User Rank: Ninja
1/7/2015 | 5:05:57 PM
Re: using the cloud
So there are HIPPA laws that specifically govern the cloud? Or are they more general, under "sharing" information?
Ariella
100%
0%
Ariella,
User Rank: Author
1/7/2015 | 5:00:38 PM
Re: using the cloud
"Institutions have to pay a lot of money for IT security as a result of using the cloud " @Soozyg yes, and it gets even more complicated and expensive with HIPPA regulations in place. I know of doctors who have to spend days just learning the laws.
soozyg
100%
0%
soozyg,
User Rank: Ninja
1/7/2015 | 4:59:00 PM
Re: using the cloud
I agree. Sadly, many health care facilities are losing money, not making money and they need to budget only the most necessary tools.
Stratustician
100%
0%
Stratustician,
User Rank: Ninja
1/7/2015 | 3:41:20 PM
Re: using the cloud
Sadly, I think you are right.  Let's put aside the fact that all the IT systems already in place are often outdated, outsecured and well, not a key concern when it comes to where funding should be spent. Updating all these platforms not just to be more interconnected, but to support emerging technologies is probably not high on IT radars, despite the advantages they help with.  Throw into that the fact that users of the technology are still grasping to deal with all the current technology, and aren't hugely technically savvy to begin with and sadly, I think many IT managers are less than excited to go ahead and make changes, even if they can secure funding.
soozyg
100%
0%
soozyg,
User Rank: Ninja
1/7/2015 | 10:39:13 AM
using the cloud
Entrepreneurs, engineers, and forward-looking clinicians dream of tablets connected to diagnostic devices that use the cloud....

Yes, unfortunately it is a dream and will be for a while. Institutions have to pay a lot of money for IT security as a result of using the cloud and they'd rather invest in others areas such as medical research and more staff.
soozyg
100%
0%
soozyg,
User Rank: Ninja
1/7/2015 | 10:34:00 AM
Re: More opportunities
In developed markets, there are already mature system and rules in place.

Excellent point. Those rules and regulations, while they have their place and necessity, can hinder progression. Under-developed nations tend to have more wiggle room--though they also tend to have a lack of funds, no?
Page 1 / 2   >   >>
Slideshows
What Digital Transformation Is (And Isn't)
Cynthia Harvey, Freelance Journalist, InformationWeek,  12/4/2019
Commentary
Watch Out for New Barriers to Faster Software Development
Lisa Morgan, Freelance Writer,  12/3/2019
Commentary
If DevOps Is So Awesome, Why Is Your Initiative Failing?
Guest Commentary, Guest Commentary,  12/2/2019
White Papers
Register for InformationWeek Newsletters
State of the Cloud
State of the Cloud
Cloud has drastically changed how IT organizations consume and deploy services in the digital age. This research report will delve into public, private and hybrid cloud adoption trends, with a special focus on infrastructure as a service and its role in the enterprise. Find out the challenges organizations are experiencing, and the technologies and strategies they are using to manage and mitigate those challenges today.
Video
Current Issue
The Cloud Gets Ready for the 20's
This IT Trend Report explores how cloud computing is being shaped for the next phase in its maturation. It will help enterprise IT decision makers and business leaders understand some of the key trends reflected emerging cloud concepts and technologies, and in enterprise cloud usage patterns. Get it today!
Slideshows
Flash Poll