The Current Temperature of High-Tech Care
The healthcare IT (“HCIT”) market is expansive and dynamic. A cursory glance at 2017’s wealth of deals—from predictive analytics applications to cloud-based claims management solutions—illustrates HCIT assets’ immense value to both strategic and financial investors.
However, if you ask a doctor about on-the-ground technology implementation, you will likely hear a different story. The healthcare industry is notoriously slow to adopt emerging technologies. Some people even joke that the healthcare industry is 15 years behind the latest technology. Itamar Kandel, president at OrbiMed-backed TigerText, explains that this trend is due to a confluence of concerns surrounding two key factors: safety and workflow. Safety is intuitive. If things go awry with HCIT systems, people can die. Thus, providers must go to great lengths to test every potential flaw of every prospective solution. This demands a great deal of time and resources.
Workflow concerns require a bit of additional background. Kandel explains that rigid workflows are an integral tool for physicians because they must navigate torrents of work and deliver care in a “sliver of minutes. A deviation from an established workflow is risky and could be deadly, so the payoff needs to be significant.”
The state of electronic health records (“EHRs”), digital profiles of each individual’s medical history, exemplifies the consequences of workflow disruption. Healthcare providers have sought to optimize and standardize EHRs for the better part of the past two decades. Standardized EHRs promise to provide doctors critical information when it is needed most, a “significant payoff” in anyone’s book. Efforts to standardize EHRs, however, have yielded a status quo in which EHRs are bulky, consume a disproportionate amount of doctors’ time (see the exponentially growing medical scribe industry), and are not particularly transferrable. In other words, doctors’ workflows have been increasingly disrupted by a technology-enabled solution that has yet to bear tangible fruit. Situations like this serve to entrench a preference for tried-and-true best practices, not radical change.
Such roadblocks to change consequently create an HCIT environment marked by evolutionary, not revolutionary, change. Strategic and private equity investors in this space, then, stand to gain from investing in firms that apply technologies whose viability has been established in less-sensitive markets, like consumer technology, to healthcare’s information infrastructure. Recent consolidation in cloud-based healthcare applications, like HMS’s recent $170 million acquisition of Eliza Corporation, exemplifies this trend. When enterprise cloud solutions began to gain prominence in the late 2000s, healthcare providers responded with tepid interest because of the highly sensitive nature of their data and questions surrounding both uptime and connectivity. After several years of cloud technology refinement in both consumer and enterprise domains (that were not without high-profile failures), cloud-based applications have gained major traction with healthcare providers throughout the nation.
Today’s HCIT investment boom, then, is the manifestation of years of iterative improvements upon technological innovations, not the “move fast and break things” mentality often associated with information systems’ improvement. Investors are betting on firms that utilize established technologies to clear the healthcare industry’s high safety and workflow hurdles to deliver better outcomes for all parties involved. In the short run, that means few of the sci-fi innovations that crowd the media will be commonplace in health systems’ technology infrastructure. In the long run, though, AI-enabled assistants may be as ubiquitous with practicing physicians as pagers were 20 years ago—as long as their shortcomings can be quickly and concretely worked out in consumer markets first.