Additionally, the highly regulated industry is an inefficient, poorly-maintained machine. Strained under the tremendous weight of safety regulations and ethical principles, many modern health systems are described as "competitive, heterogeneous, inefficient, fragmented".
It is no wonder many experts believe that the healthcare industry is ripe for disruption.
Behold the three behemoths
Amazon, Berkshire Hathaway and JPMorgan Chase saw the opportunity and announced on 30 January, the joint formation of a possibly not-for-profit healthcare group – whose mission is to reduce the healthcare costs for their combined workforce of nearly a million employees in the US.
Little information was given at the press release. However, the tri-alliance illustrates precisely the frustration over the state of the healthcare systems and the sky-rocketing medical costs. Billions of the valuations of the corporate tapeworms – such as UnitedHealth Group and Anthem, which fed on the US healthcare systems, were shaken upon the announcement.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But, we also do not accept it as inevitable,” proclaimed the Chairman and CEO of Berkshire Hathaway, Warren Buffett.
“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” echoed Jeff Bezos, Amazon’s founder and chief executive. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.
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Inefficiency or opportunity?The Amazon-Berkshire-JPMorgan alliance is not the first that intends to rattle the healthcare industry. More than a decade ago, electronic health record (EHR) vendor Athenahealth, opened the floodgate for software engineers, tech companies and investors into the ever-growing fertile land of healthcare.
After successfully going public, the valuation of Athenahealth rose tremendously – indicating a fundamental shift in the perception and acceptance of healthcare professionals towards a new business model: software as a service (SaaS). SaaS is a cloud-based service which allows users, in this case, healthcare professionals, to access and use different apps over the internet – such as emailing, EHRs, information exchange and hospital management systems.
Gone were the days where doctors had to rely on paper-based records to perform their duties – at least, in developed countries. With the advent of the internet, innovations flourished in the sector, garnering the attention of other entrepreneurs and investors into the sector.
Even the US government recognised the benefits, and pushed for greater innovation in the healthcare sector with the Affordable Care Act (ACA). Under the ACA, a large amount of health information on cost and quality must be made freely available. Health information exchange (HIE) and interoperability became priorities for policymakers at both local and national level.
Part of the problem of general inefficiency could be traced to the systemic arrangement of how payment for services is reimbursed. The conventional fee-for-service model is now largely considered outdated and inefficient, as it is not congruent with the broader goals of healthcare. A comprehensive push for value over volume also prompted many health systems to adopt and rely on software to engage patients, analyse data, manage performance and control costs.
These macro-level economic and legislative changes signal that the healthcare industry is undergoing a major transformation to rid itself of wastefulness. As such, the industry presents appealing prospects for new players – tech and insurance companies – to contest for lucrative trades.
Paradoxical future for healthcare: a blur, yet certain transformationThe healthcare industry is set to change, but it is just the question of how. As the line between healthcare and IT becomes increasingly blurred, health technology will be likely to experience significant growth in the future. Waves of innovation will continue to push forward, generating more data to shorten the disruption-cycle time and ultimately a near-zero inefficiency – if this is at all possible.
Incumbent health companies will be forced to innovate to address inefficiencies and compete to offer better quality care at lower costs. Ultimately, patients will benefit from these changes as the market forces work in favour of them.
However, meaningful and beneficial changes cannot happen in a day. With multiple factors still affecting healthcare, will the healthcare industry be able to achieve anything in the next decade? MIMS
Read on Part II of this series, which explores how the sector will evolve. Will it be for the better, or for the worse?
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