Platforms in Heatlhcare Pt. 3-Healthcare Specific Challenges & Opportunities-The HSB Blog 12/13/21
This is the 3rd in a series of articles on Platforms in Healthcare (please see our previous two pieces here: Platforms In Healthcare-Pt, 1 Platforms Explained-The HSB Blog 11/29/21 & Platforms In Healthcare-Pt. 2 What It Takes to Build A Successful Platform Bus.-The HSB Blog 12/6/21) for more background on technology platforms and the characterics of successful platforms. Please note that the list of potential sectors where platforms could make sense in healthcare, nor the examples given are meant to be exhaustive.
Our Take:
The U.S healthcare system could achieve the Triple Aim of improving patients’ experience, reducing cost, and improving population health by applying elements of a successful platform strategy in healthcare. Healthcare platforms have the potential of addressing care coordination issues in healthcare and support the transition to value-based care. However, addressing unique healthcare industry challenges like limited data standardization and system compatibility is crucial for establishing maturity and achieving network effects.
Building a successful platform business requires an understanding of successful platform strategies, long-term minded investors, a strong team with the ability to work and collaborate across platforms to deliver superior products and execution, and a well thought out roadmap that empowers a clear understanding of how the platform will deliver more efficient workflows.
Key Takeaways:
Administrative spending accounts for about one-quarter of the total cost of care delivery in the U.S. according to McKinsey.
According to a study in Health Affairs, an estimated $191 billion to $286 billion, or 5% to 8% of total US costs could be saved if interventions to reduce waste were implemented and were successfully.
A study by McKinsey found that ,it may be possible to save at least $250 billion annually in health care spending (perhaps more) by reducing/eliminating waste in health care then redirecting these funds elsewhere.
The Problem:
The platform business model has helped startups in different industries to achieve success with high valuations and returns on investment. Creating successful platform companies is extremely challenging, especially early on in their development, as it requires attracting users and customers that can generate enough value to attract even more users and begin the process of generating network effects. This initial hurdle is referred to as the “cold start” problem. The “cold start” problem is worth understanding because network effects, which refers to increasing product or service value relative to the increase in the size of the customer or user base, is the force that underlies platform companies gaining competitive advantage (ex: as social media platforms attract more users the value of being on the same network as friends and family grow dramatically, often leading to exponential growth for the network). However, those looking to build platforms in the healthcare industry must be aware of unique barriers that could delay the development of network effects and they need to be prepared to deal with the challenges they present. Some of these barriers include the fragmentation of healthcare software products, the intricate web of healthcare data privacy and security governance regulations, and the extremely risk-averse (some might say hyper-cautious) purchasing behavior in healthcare information technology.
For example, one of the major elements behind this risk-averse purchasing behavior in healthcare IT procurement departments is what is known as software lifecycle management. Software lifecycle management is the process whereby upgrades or entirely new installations of software products are initially tested, installed in systems, and updated for future versions. Due to the complex web of healthcare data security and privacy laws (HIPAA, HITECH, GDPR, CCPA, etc.) healthcare IT, departments are extremely concerned about the potential that any new installation or upgrade could lead to a security weakness or cause instability in a particular organization’s infrastructure. Despite this healthcare IT investment and software procurement require expansion to better evaluate the risk for cybersecurity, software update release cycles, and software integration with existing systems in an organization. In part, this is a reflection of healthcare organizations’ investment priorities. For example, healthcare consistently ranks as one of the lowest industries in terms of the percent of overall budgets spent on IT, relative to other industries. So if the industry is serious about creating a more patient-centered experience with new technology and in the process speeding the adoption/development of new solutions this will have to change. For example, they will need to commit more resources (either personnel or equipment,) to mitigating risks through software testing and auditing potential security vulnerabilities in order to increase the pace of software update release cycles.
For platform businesses, this implies that they will have to take a number of steps to help ensure and demonstrate the data integrity, cybersecurity, and privacy precautions they will take with any data encountered from any client’s system. These include: 1) Being able to specify and limit the number of data elements it will need to interact with as part of a client’s IT system; 2) Being able to explain and document the lifecycle of any data once it leaves an organization’s system; 3) Being transparent about security testing and procedures for any software and updates; and, 4) Focusing on the ability to integrate with existing installed software and hardware and being able to demonstrate that path.
For healthcare IT organizations, managing software issues like frequent software updates, avoiding critical system failures and data breaches, is crucial for patient safety, preventing harm caused by medical errors, and improving the quality of clinical care. For example, system failures in healthcare settings can cause issues as broad as making medication errors in an intensive care unit to having the wrong data collected from ambulatory services and sent to the billing department. For the healthcare system to embrace platforms and for them to achieve their potential, the reliability of platforms is essential. While many people may point to other industries such as finance as examples of where platforms have been embraced more rapidly and successfully than healthcare, integrity, and security are critical in the healthcare industry as any error literally could mean the difference between life and death.
Background:
Translating the elements of successful platform companies into a healthcare platform could be challenging due to barriers that are unique to the healthcare industry cited above and the interactions between payers, providers, and patients. Examples of such interactions include the payment for completed medical procedures, referrals of patients to out-of-network specialists for specific procedures as well as patients increasing expectations of higher-quality, more integrated service delivery from both providers and payers (ex: the consumerization of healthcare).
As noted in the first two articles in this series, platforms have certain unique characteristics and inherently require certain factors and elements to achieve success (please see: Platforms In Healthcare-Pt, 1 Platforms Explained-The HSB Blog 11/29/21 & Platforms In Healthcare-Pt. 2 What It Takes to Build A Successful Platform Bus.-The HSB Blog 12/6/21). Nevertheless, we feel platforms hold great potential in the healthcare industry, particularly around the areas of system integration and health data interoperability, two areas that have long plagued the fragmented healthcare industry. While the Centers for Medicare and Medicaid Services has recently established and enacted policies to foster improved data integration and interoperability between insurance companies and provider systems (through such vehicles as FHIR and HL7), to improve claims processing and patients’ access to health data, these remain in their infancy and much work remains to be done.
Other opportunities for integrating platforms in healthcare include;
Improving the transferability of patient health data to support care coordination,
Reducing the administrative costs associated with paying for medical care to reduce overbilling,
Improving cost accounting to support the transition from fee-for-service to value-based care.
Implications:
In the U.S, curbing the rising healthcare cost while delivering quality care has long been a difficult and intransigent issue to solve. Healthcare innovators and new startups are interested in addressing these issues by fundamentally changing the way patients access care and pay for medical services. Along the same line, they have been working to enable providers to deliver quality healthcare services that improve health outcomes. Healthcare platforms could be an abundant source of solutions that help reduce cost and deliver quality healthcare by increasing the efficiency of interactions between stakeholders. For instance, the consumerization of the healthcare system in the U.S aims to improve the patient experience via better customer service, improved access to care, and lower costs (ex: Cured, Medisafe). Propelled by the accelerated pace of digital adoption during COVID, most healthcare platform companies are exploring ways to leverage virtual care to improve patients’ experience by making care more accessible, either virtually, in-office, or in their homes.
Platforms in healthcare could also be used to improve the healthcare applications infrastructure. Companies that build products used by healthcare software developers simplify product development or integration into systems by providing templates for common use-cases, such as APIs, data queries, and standard data formats used. Platforms that support software developers will develop a competitive advantage by reducing the costs for developing healthcare applications especially as the developer community grows and economics of scale take effect (ex: Redox, Zus Health). While, many large incumbent technology companies have developed “out-of-the-box” solutions that are compliant with current healthcare data standards, for many of the reasons cited above it is important that platform companies focus specifically on building infrastructure for healthcare systems. While the existing standards for healthcare data are evolving as the existing conversation for data interoperability continues, it appears additional solutions will be needed to bridge this gap.
Improving the coordination of provider-to-provider interactions also seems like a fruitful area for the application of platform technology (ex: Caremerge, ConsejoSano). This is particularly important for specialty care and post-acute process, and very important in the care of high-risk populations, such as patients with chronic disease and multiple health conditions. For example, referrals of patients to different care settings, such as when they transition from an acute-care hospital to a post-acute facility can lead to a lack of consistency in care and coordination between providers. In addition, referrals from primary care providers to out-of-network specialists often lead to patients leaving that organization’s network of providers (so-called “patient leakage”) leading to large revenue losses for many providers. This is due to the fact that many primary care providers never follow on referrals and many patients never even make an initial contact with the specialist that they were referred to. For example, according to Fibroblast it can reduce nearly one-fifth of a system’s revenue per year and some systems can lose as much as half a billion dollars per year in business that goes out of network. Platforms could enhance provider referrals especially when providers could help coordinate the referrals and fill in any holes in specialty care via the addition of a virtual practice or telehealth. Network effects on provider-provider platforms could reduce costs related to specialist care, create a competitive advantage, and promote improved continuity of care for managing complex health conditions.
Moreover, another area that is ripe for the application of platforms is in enabling the access and portability of consumer records across systems, providers, and payers (ex: Health Gorilla, Validic). As noted above, the move towards healthcare consumerization is well underway and as a result, consumers are going to expect the same ease of access, transfer, and portability of their own personal health records as they do in data in other areas of their life. Consumers have become used to getting data of many kinds, when and where they want it, on whatever device they want it. Healthcare information exchanges and healthcare platforms that enable better sharing of patient data for patients and providers will increase patient satisfaction, coordination of care, adherence, and potentially aid in the detection and treatment of disease. These types of data repositories could empower better analytics, population health management and even have applications in clinical research (ex: trial recruitment from disease databases, the building of digital twins for genomic research). However, it will be doubly important that healthcare platforms pursuing these areas take significant and visible precautions to ensure the cybersecurity and privacy of patients’ data for them to succeed.
Ultimately, healthcare platform companies have many market opportunities to pursue. By enabling more efficient workflows, platforms will contribute to the transition to value-based healthcare and consumerization of healthcare. Platforms for healthcare infrastructure will provide more efficient developer resources to build healthcare software applications. Health systems will equally benefit from health platforms interventions focused on achieving the Triple Aim of improving health outcomes, reducing cost, and improving patient experience.
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