Unlocking opportunities

The deluge of data can unlock insights on patient medical conditions and eliminate inefficiencies in healthcare delivery

By Paddy Padmanabhan

Indian IT firms had a relatively low focus on healthcare till the Affordable Care Act (ACA, also referred to as Obamacare) in 2009 and its companion HITECH Act were passed in the early years of the Obama administration. Together, these Acts led to the creation of a national electronic health record backbone and a shift towards value-based care which will lead to an unprecedented level of healthcare IT spend in the coming decade.
In my latest book, The Big Unlock, I discuss the massive opportunity ahead in unlocking insights from the tsunami of existing and emerging data sources, and why much of healthcare IT spend will follow the data in the foreseeable future. In addition to the recently digitized patient medical records, we are witnessing the emergence of new data sources to help patients and providers with healthcare: these include genomics data, socio-economic data, and data from connected smart devices or the Internet of Things (IoT), just to name a few. This deluge of data, when harnessed, can unlock insights on patient medical conditions, eliminate inefficiencies in healthcare delivery, and enhance the quality of the healthcare experience for patients and providers alike.

Big unlock in healthcare
Healthcare in the US is in the midst of a significant transition. There are three important forces that are driving this transition.
Payment reform and the shift to value-based care or VBC: Alarmed by the runaway rise in healthcare costs and the high level of costs (per capita costs of over $10,000 in 2016), the Obama administration brought in controls on reimbursement rates for healthcare, and instituted quality metrics for measuring healthcare outcomes.
Population health management (PHM): The shift from fee-for-service payment models to value and outcomes based models forced healthcare providers to look at patients at a population level instead of just individually, with the goal of identifying high-risk patients for early interventions.
The rise of healthcare consumerism: The rising costs of healthcare in the US have forced health insurers to shift some of the financial responsibility towards consumers. In turn, consumers are actively taking control of their spending choices, seeking alternatives, and are demanding better service.
These trends, combined with a rise in smart medical devices and the IOT, have led to healthcare providers using data and analytics to manage patient risk proactively, prevent hospitalisations, reduce waste, and design engaging experiences.
A digital transformation is underway in healthcare to help achieve the triple aims of lower costs, improved healthcare outcomes, and enhanced patient experiences. Technology plays a central role in this transition. With the growing adoption of cloud computing and the emergence of advanced analytical tools such as artificial intelligence (AI), there is a new opportunity for technology solution providers to increase revenues by helping healthcare enterprises navigate the digital transformation journey successfully into the value-based care era of the future.

The opportunity for Indian IT
Major Indian IT firms such as Wipro, Infosys, TCS, HCL and Cognizant (who I refer to collectively as the WITCH group) have focused on building a client footprint in healthcare for the past 15 years or more. As a member of the North American leadership team with one of these firms, I saw the opportunity reach a tipping point with the passing of the ACA and the mandate to implement electronic health record (EHR) systems. However, most Indian IT firms were left out of the initial opportunity to implement EHR. Neither hospitals nor the dominant technology vendors in the EHR space showed any interest in leveraging the offshore delivery model which was the central value proposition for Indian IT. Indian IT firms mostly worked with health insurance and pharma/life sciences companies who were either on homegrown mainframe systems or ERP systems such as SAP.

However, with the near-total penetration of EHR systems in the healthcare provider space, and the emergence of cloud-based and alternate technology delivery models, the time for Indian IT companies has come to either make a big push into healthcare and stake a claim to a big chunk of the market, or risk losing relevance altogether.

Many firms have attempted to do that over the past several years, building vertical industry-focused teams and acquiring healthcare tech firms with in-depth domain knowledge (e.g., Cognizant’s acquisition of Trizetto). As the market matures and evolves, each of these companies is defining a strategic position for itself; some, like HCL, are leading with their IT infrastructure management capabilities, while others such as TCS, are focusing on their digital transformation capabilities.

However, significant headwinds lie ahead for Indian IT firms, despite the aggressive push to expand within the healthcare markets.
An analysis of the latest earnings releases by global tech firms, including many based in Europe and the US, points to some interesting trends:
⊲ Revenue growth rates are declining steadily for most firms for the past several quarters, presumably from a shift away from traditional IT services, and the impact of automation that eliminates the need for labour.
⊲ Policy uncertainties from the current Republican-led administration have slowed down technology spend in some areas, impacting some firms more than others. Wipro lost $125 million in revenues in the past few quarters from Health Plan Services; a company acquired in 2016 that was heavily dependent on the ACA exchange markets which have been seriously undermined in 2017.
⊲ The growth of cloud computing and the emergence of digital health startups have eroded market share for many traditional IT firms, with budgets increasingly allocated towards cloud enablement and SaaS-based solutions, and away from enterprise IT functions which have been the traditional hunting ground for Indian IT.
Most Indian IT firms have large cash reserves on their balance sheets as a result of years of double-digit growth but have been conservative about deploying the cash to invest for the future. Many of the firms have belatedly taken to investing in building capabilities organically as well as acquiring aggressively to maintain growth and profitability. We now see the big firms investing in automation and AI, analytics, digital, and IoT. Late entrants to the healthcare market, such as Tech Mahindra, are making aggressive plays through the recent $ 100 million acquisition of HCI, and EHR consulting firm.
The road ahead for the large Indian IT firms in healthcare is paved with gold, but it is a rocky road. While policy uncertainty has somewhat abated, the impact of the new tax reforms in the US on entitlements such as Medicare and Medicaid could significantly influence technology spending. Healthcare in the US is in a state of transition, with existing players consolidating to improve negotiating power while preparing for the entry of disruptive non-traditional players such as Amazon.
Regardless of how the story plays out, healthcare is an exciting space to be in for technology professionals, and all tech firms can take comfort in some fundamental aspects of the demand environment. Our annual survey of healthcare IT indicates that the demand environment is robust. IT firms just need to follow the money.