Big Tech & the Cloud: A New Frontier for Healthcare?
What’s big tech up to in healthcare?
Tech behemoths are making huge investments in healthcare. What are they up to?
Google recently partnered with the Mayo Clinic to explore medical artificial intelligence (AI) applications leveraging Mayo’s patient data in Google’s cloud.
Microsoft and Humana announced a seven-year initiative combining Microsoft’s Azure cloud with Humana’s vast Medicare network to “build predictive and personalized health care solutions”.
Amazon Web Services launched a partnership with Cerner, a leading electronic health record system, to bolster their machine learning and artificial intelligence capabilities.
Apple announced availability of the Apple Health Record to veterans across the US, continuing their efforts to help provide a better understanding of health. Apple is currently integrated with the EHRs of 40 health systems and 300 clinics across the US.
All are vying to become the cloud architecture of choice for providers and payers hoping to better leverage patient data to improve the consumer experience and business operations of care. This blog explores whether cloud technology will be a “disruptor” in healthcare and identifies several risks and opportunities to monitor as the technological arms race takes off.
Cloud: A new frontier for healthcare?
Cloud technology has been around for a decade or more. While most healthcare companies dabble with cloud-based applications for administrative and IT functions, widespread cloud adoption in healthcare has been slow and cumbersome compared with other industries. However, now that the technology itself has matured, that dynamic appears to be changing. Will widespread cloud adoption disrupt healthcare as we know it today?
The Basic “S-Curve” (Source)
That answer depends on where we are along the technology “S-curve”. The technology S-curve, shown in the figure to the right, depicts the advancement of a technology from initial application to widespread adoption and maturity. This life-cycle typically comes with three distinct phases. In the first phase – the initial flat portion of the S-curve – technology developers experiment with variations in the product design and key functionalities. In the second phase, adoption of the technology begins to “take off” and variations begin to narrow. In the final phase (where the “S-curve” flattens out), adoption is widespread and centered around a single dominant design. Only at this point in the technology maturation life cycle will process innovation with the new technology begin to meaningfully occur. At this point, users can scale their investments in the technology without fear of the “next best thing” rendering their investments obsolete. With scaled adoption, users can begin to innovate the processes, delivery models, and services that the technology supports.
I believe we are seeing such significant investment and competition in the healthcare cloud right now because we are approaching the third phase of the S-Curve. In a highly consolidated market such as healthcare, the selection of a “dominant design” is likely to coincide with considerable market power for the innovator(s) behind it. The “winner” of the dominant design race will influence critical rules of play, including questions of interoperability between systems, opportunities for integration with complementary technologies, and standards of data privacy and ownership rights. The stakes are high, and so big tech is making big bets on cloud’s promise for tomorrow’s healthcare ecosystem.
Riding the “Digital S-Curve”: Disruptions & New Business Models (Source)
Who will win?
Given that disruption is imminent, who will succeed as the IT force that disrupts healthcare and how will the industry shakeout? Will established server-based electronic health records suppliers (EHRs) build cloud technologies into established IT systems, or will big tech introduce a replacement architecture that launches a new era in healthcare’s digital disruption? Several factors will influence each side’s chances of success:
Massive Switching Costs. Nearly 100 percent of hospitals have adopted electronic health records systems in the United States – and the vast majority have done so within the past 10 years. Investing in an EHR system is no small expenditure. Studies estimate the cost of implementing these systems at up to $70k per provider, including hardware and software investments, implementation assistance, training, and ongoing network fees and maintenance. Until existing contracts expire and returns on EHR investments are realized, healthcare systems will likely be hesitant to invest in the “next best thing”. This will advantage incumbent EHR providers who successfully implement cloud technologies into their existing offerings.
Organizational Inertia. However, the drivers of high switching costs also discourage established EHR providers from innovating with new cloud technologies. Given their widespread installations across hospitals and ongoing service obligations, established EHRs lack the market and organizational inertia required to experiment and invest in new cloud computing technologies on their own. Cannibalization is certain to be a concern, particularly given that these incumbents are organized to sell, maintain and upgrade the systems their clients once paid massive sums to install.
Risk Appetite. Established EHR systems also have an existing reputational asset to protect; if the server-based systems were to invest in becoming cloud technology providers themselves, the trial-and-error required to move up the cloud learning curve would present a significant risk to their established brand as trusted software providers. New entrants to the sector are likely to be cut more slack as they explore and identify the correct application of the technology. Indeed, players like Google, Microsoft, and Amazon are entering into research and development “partnerships” with established healthcare firms. This positions them to experiment with different applications and features, and affords them flexibility to pivot as they learn more about the likely “dominant design” for healthcare in the cloud.
While EHRs are not likely to be replaced anytime soon, they are unlikely to be the driver of innovation along the cloud technology frontier. If Amazon can transcribe patient visits directly to its cloud through voice recognition, and integrate machine learning capabilities to drive meaningful operational improvements, point-and-click form entry through incumbent EHRs will not last. Perhaps that’s why Cerner has wisely partnered with Amazon to drive its innovation forward. If you can’t beat your competitor, partner with them.
Let’s Not Forget What’s at Stake
The rules and standards of the technology ecosystem that emerges from this innovation cycle are far more critical than identifying “who” will win the race for the dominant design. Will the next generation of healthcare IT infrastructure, through efforts such as Fast Healthcare Interoperability Resources (FHIR) standards, truly enable widespread healthcare interoperability and an open platform ecosystem that accelerates complementary technologies? Will the “dominant design” in healthcare IT strengthen data privacy standards, or will it challenge the current regime by linking records across systems? (Can it accomplish both?) Will the next technology ecosystem alleviate physician burnout, or add to it? The answer to these questions will fundamentally shape the future of healthcare. We look forward to exploring these topics further at the conference in January. We hope to see you there.
About the Authors:
Brittany Moran is a 2nd year in the Kellogg full-time MBA program. She previously managed software development for patient engagement in clinical studies at PRA Health Sciences. This past summer Brittany worked with the Chartis Group, an analytics and advisory firm dedicated to the healthcare industry. She chairs the Marketing Team for this year’s Business of Healthcare Conference and is enthusiastic about engaging others in meaningful dialogue surrounding this year’s theme: unconventional perspectives.
Olivia is a second year 2Y MBA. Prior to Kellogg, Olivia worked at athenahealth. At athena, she focused on identifying and incubating new offerings beyond athena’s core business, including harnessing athena’s data asset to better advance clinical research and athena’s API platform to engage as an open healthcare platform. This summer, Olivia worked at Mount Sinai to help launch their patient navigation business. For the Kellogg Business of Healthcare Conference, Olivia is leading the Startup Fair and Marketing communications efforts.