In my continued look at disruptive scenarios, the focus shifts to Connected Health. In a recent White Paper, the term is used as an umbrella description that covers digital health, eHealth, mHealth, telecare, telehealth, and telemedicine. Analyst firm IDC defines it as “a broad spectrum of technologies that use telecommunications to facilitate the exchange of health information and delivery of care across a geographic distance as well as manage chronic conditions and promote health and wellness.”
There are several drivers that make this both a viable and desperately needed scenario. According to the IBM Institute for Business Value, inefficiency in the Healthcare ecosystem wastes over 2 trillion USD per year. According to the popular Internet Trends Study produced by Mary Meeker each year, healthcare costs have reached 17% of the U.S. GDP and 27% of health spending is wasted. The same study found that over 25% of family income is likely to go to health spending in 2015, and 50% of bankruptcies are driven by health costs.
The challenges get bigger as our population ages and chronic illness rates continue to rise. Aside from the traditional challenges of aging, there is a desire for independence and the ability to receive care at home. Many will embrace technology as a way to provide care for loved ones while they age at home rather than in nursing homes – and a key connected health value proposition is the support of home care. Emerging capabilities coupled with behavioral changes enable a shift in care delivery from hospitals to the home – for example, the “Quantified Self Movement” depicts the required behaviors, as proactive consumers use devices and apps to track their personal health data. The expansion of this proactive behavior drives the need for personalization – something that is increasingly common across all industries. With connected smartphones, sensors and wearable devices, there is a growing explosion of personalized data that changes healthcare delivery. The traditional stand-alone home health monitoring device has given way to new networked products and services that extend their utility and create new scenarios for data aggregation and analytics.
Rising chronic illnesses like diabetes are taxing healthcare systems. According to the American Diabetes Association, a 41 percent increase in the overall cost of diagnosed diabetes has occurred since 2007, with $176 billion relating to direct medical costs. These chronic conditions account for most health care spending, and behavior is at the heart of many health related problems. Lack of activity, eating wrong, and lack of medication adherence are some of the primary behavioral culprits. Although advances in technology and medical science have addressed many health problems of the past, advancement is also partially to blame for modern day health issues: for example the rise of obesity due to less active life styles that are driven by technology advancement.
Innovation in Healthcare is therefore critical, and much hope is placed on advancements in connected health. Solutions that offer early detection, behavior modification, increased patient engagement or improved disease management could save the healthcare system billions of dollars every year. A June 2013 Juniper Research study forecasts remote monitoring will save the world’s healthcare systems as much as $36 billion throughout the next five years. These potential savings drive an expectation of huge growth in healthcare and the Internet of Things in the coming years. Analyst firm Markets and Markets projects the worldwide mobile health market will grow to more than $23 billion by 2018. The authors of this piece on Connected Health Predictions identify other drivers including: consumer-directed care; a shortage of healthcare providers; changes in reimbursement and care delivery; an influx of some 30 million consumers under the Affordable Care Act; the development of less-expensive and more efficient monitoring devices; and more emphasis on health and wellness.
The enabler is once again combinatorial innovation. It is the ability to rapidly combine innovation that gives rise to disruptive scenarios. The visual below reflects this notion of innovation as building blocks. There are two parallel paths: the building blocks – some that we see and many more on the horizon. Each of these building blocks creates tremendous value in their own right. The second path is spawned by the first – these are disruptive scenarios enabled by the combination of building blocks that drives a value creation multiplier effect. It has been fascinating to discuss emerging ecosystems, as they expand to enable these scenarios and challenge much of our traditional thinking.
In the connected health scenario, these are the primary innovations that are combining:
As with each scenario, connected health drives disruption and an associated set of responses across an evolving ecosystem. A common theme with each of these scenarios is an emerging horizontal ecosystem that spans multiple industries and comes together to drive value creation. In the context of Connected Health, here is a current snapshot of this emerging ecosystem:
Let’s look at the potential for disruption, and the possible responses that begin to re-imagine healthcare.
The potential for disruption is high, but dependent upon many factors. Scenario analysis should tap into the collective intelligence of the stakeholder ecosystem to help assess this potential. Some examples:
- Future business models are likely disrupted by a system shift to reward prevention versus treatment. The combinatorial innovation of connected health and the behavioral data that it spawns is one of the enabling platforms for this focus on prevention
- As mentioned in an earlier post on Transforming Medicine, future diagnoses and care will increasingly happen in the home. There are significant implications to ecosystem revenues, as $30 billion in U.S. hospital revenue alone may be reduced by eliminating unnecessary hospitalization
- A system shift to prevention and loss-control leads to a decrease in insurance losses – a phenomenon that also plays out in P&C insurance, as the Smart Home and Autonomous Vehicles drive a similar scenario. In each of these cases, premium revenue will decrease in proportion to decreases in losses over time. This could serve to reduce the size of the Insurance industry in the context of the overall economy
- A growing focus on wellness and wellness plan participation enabled by connected health could give rise to new distribution platforms that capture a big share of the individual life insurance market – delivering another blow to an industry already dealing with market share erosion due to the combination of longer life expectancies, increased choice in retirement products, and an increasingly volatile investment market. Life insurers are faced with the need to change their business models in order to remain both relevant and viable
- Internet Companies like Apple, Google, Facebook, and Amazon enter the Connected Health space. This is already playing out, as we track announcements like this latest one from Apple. The increased competitive threat from non-traditional sources puts traditional revenue streams at risk
- As visualized by a diagram on the Law of Disruption, rapid technology progression combined with the slow incremental pace of change inherent in traditional companies creates a large opening for killer apps. New connected health market entrants will emerge from many unforeseen places
Disruptive scenarios will drive companies to respond. The disruptions listed above – and many that are not captured – likely drive the re-imagining of traditional structures. Those forward looking companies that analyze scenarios and experiment with responses will thrive. Some potential responses to the connected health scenario are:
Insurers pursue alternative sources of revenue – as premium revenue declines, Insurers either shrink or seek alternative sources of revenue. An alternative could be a role in connected health, where Insurance companies deliver a different value proposition to its customers. Traditionally, it has been difficult to correlate healthy behaviors and their impact on life expectancy. However, behavioral data is increasingly available via sensors and devices, and combined with advances in medical science, Insurers can create an explicit link between well-being behaviors and how they impact life expectancy and quality of life. How does this linkage change the relevance and utility of life insurance? One potential industry response is a focus on changing customer behavior in order to help them live longer and more healthily lives. In so doing, Insurers create a more meaningful and frequent connection with their customers while broadening their market appeal – especially for Life Insurers who have significant challenges attracting young, single, healthy individuals
Offerings aimed at changing behaviors – car Insurers are using Telematics to monitor the driving behaviors of their policy holders and offering discounts for safe behaviors. This is a likely response across the healthcare ecosystem to reward well-being behaviors – and it is likely to extend to other industries like Retail, where discounts or points are offered for healthy choices. Technology will also be applied in areas like medication adherence – connected pill bottles that remind a patient to take their pills – and tracks when they haven’t. There is mounting evidence that digital technology can facilitate the changing of behavior. Studies show that app and text messaging interventions result in reductions in body weight, waist circumference, body mass index, sugar-sweetened beverage intake, and television screen time. As wearable technology starts tracking more sophisticated health and environmental data, the opportunity to influence behavior expands – and Juniper Research projects this market will be worth $19 billion by 2018
Smart home ecosystem connects to healthcare – in my Smart Home post, I described the impact on elder care and assisted living. The connection to healthcare is broader, as the Smart home becomes a future source of behavioral data, and a foundational piece of remote monitoring. For example, smart carpets will detect falls associated with homebound seniors and proactively reduce medical response times. A smart fridge could drive health insurance discounts for storing healthy food. There are countless opportunities for virtual healthcare enabled by the Smart Home
Wellness advisory services emerge – with the ever growing base of behavioral data; wellness advisory services are likely to expand. These services are powered by cognitive computing technologies designed to improve health and deliver advice in the event of new health conditions. Some responses are likely to leverage gaming techniques to reward well-being behaviors. A recent article on the Well Being Business Model describes the use of such techniques. A large insurer in South Africa has used a wellness program to reinforce desired behaviors in support of its health insurance, life insurance, and auto insurance offerings. Their policy holders earn points based on their behaviors and attain one of four levels, – blue, bronze, silver, or gold. They use their points towards travel, leisure, and shopping rewards. The program offers its members personal guidance that includes six components: disease management, smoking cessation, mental health, nutrition, preventative care, and physical activity
Companies extend experiences and markets – the value ecosystems that emerge around future disruptive scenarios offer an opportunity to extend the customer experience; that is the quality, frequency, and reach of engagement. The Connected Health ecosystem is no exception, as companies leverage it to create new compelling customer experiences. This challenges traditional views of customer experience and leads companies to look at next generation experiences
Remote monitoring and diagnosis – combinatorial innovation enables self-care and remote monitoring and diagnosis. This response is already the biggest IoT application in healthcare for people with chronic conditions, where connected devices collect patient data, store it in the Cloud, and enable action by a clinician. For example, a diabetes patient uses a connected glucose monitor that allows their doctor to monitor health status remotely and recommend changes in medication. Remote diagnosis allows doctors to assist patients and first responders quicker. This scenario response introduces remote clinical enterprises that provide on-demand patient consultation via phone, video, and online services
Internet Companies and entrepreneurs expand the ecosystem – across every industry and company, executives are talking about Internet Companies like Google and Apple as potential competitive threats. In response to this disruptive scenario, look for an expansive App and device ecosystem to evolve. The opening for Killer Apps is very large – look for Internet Companies and entrepreneurs to continue to jump into that opening
There are likely countless future responses to the Connected Health disruptive scenario. Once again, the intent is to compel the executive community to view these scenarios and their disruptive potential, and begin the process of formulating a response. The question of “where’s the ROI” is still relevant, but it can’t prevent us from leading responsibly in the world that these scenarios create.