Health Information Technology (health IT) has been a burgeoning space in the past several years. Partly spurred by federal incentives to clinicians to adopt Electronic Health Records (EHR), investment in companies in this field has flourished.
In addition to EHR companies, which are numerous, and which will very likely experience significant shake-out over the next couple of years (see a market analysis of this sector), other areas of health IT have also grown rapidly. Consumer-facing products have emerged, both with EHR-tethered portals, as well as sites where people can gather their own data (both web-based and mobile device-based).
And, as health care delivery transforms itself from one dominated by individual, small practices, to one dominated by coordinated delivery systems (ACOs, Medical Homes, IPAs, Integrated Delivery Networks, and other forms which have not yet taken shape), the technology for supporting the needs of coordinated care is also emerging.
The challenge for health IT companies
Because this has been a growing field, many of the companies in this market are new, small startups – though large, established companies are certainly very prominent, and lead the way in terms of usage (especially by larger groups and institutions).
Smaller companies, however, tend to start with a very specific focus, but if they become successful, may have “migratory vision.” This also happens within larger companies, which can make forays out of their core competence into adjacent fields, and potentially lose their focus (and therefore their value to their customer base).
Given that it is tempting for health IT companies to become confused as to their core market focus, especially if they become successful (the short attention-span “ok, now what’s next?” tendency of Silicon Valley companies both inside and outside health IT), perhaps it is useful to paint the picture of health IT as falling into roughly 3 general areas: EHRs, PHRs, and Connectivity. Of course there is overlap and interplay between each of these spaces, but it is useful to be clear on each one. They each have different target audiences, different value propositions, and different monetization strategies.
This category of health IT is focused on physician practices (and hospitals) – it addresses workflow issues “behind the font desk’s window,” internal to the practice. As such, EHRs and Practice Management (billing) system fall into this bucket.
Target audience: physician practices, practice groups, hospitals
Value proposition: help improve internal efficiency, reduce overhead, facilitate revenue and cash flow, identify inefficiencies and manage all the workflows inside a clinical office or inpatient setting. Low-barrier learning curves, leading to a quick path to adoption, as well high usability are important here.
Monetization strategies: These have traditionally been charged to the-practice (up-front cost, or subscription cost, or transaction cost) and thus become overhead. A newer model (successful, especially among smaller, financially-strapped practices) is free-to-the-end-user (the physician), subsidized by advertising in the product.
This category of health IT focuses on external, patient-facing (consumer-facing) products – those workflows outside the “front window.” They include patient portals (Personal Health Records, or PHRs) into a practice’s, clinic’s or hospital’s internal EHR system. They also include consumer-facing Internet applications for tracking one’s own health status, not necessarily connected to a tethered PHR (one that is connected to a given EHR). Sometimes this data is shared socially with friends (e.g. RunTracker apps on Facebook), sometimes the data is private (but in a silo).
This patient-facing area of health IT is likely to see tremendous growth, particularly as mobile health (mHealth) products flood the market.
Target audience: individual consumers/patients
Value proposition: these products need to address a real issue for the public, and be sufficiently engaging to attract adoption. Easy connectivity with other sources of one’s own health data is important – for example, connecting one’s FitBit pedometer data with one’s PHR, or a next-generation PHR that can be directly signed up, and linked in a tethered way to one’s doctor’s EHR, but detachable and portable. Consumer and game-oriented user interfaces help improve engagement here, but the products need to be more than mere games, diversion or entertainment – they need to demonstrate actual value to the individual.
Monetization strategies: consumer-facing technology is expected to be free to the user. The Internet is based on this presumption. “Premium” services (the “freemium” approach of a free basic product, with additional features available in a paid-for premium version) have a role. In-product advertising is very commonplace, with targeted ads in a consumer-facing portal being the norm. Sometimes advertising and freemium are combined – an ad-containing free version with full (or near-full) functionality, and an ad-free premium version available for pay.
Perhaps a better moniker for this category will emerge, but for now I would include all those health IT technologies whose focus is to tie pieces of the health ecosystem together. This includes technologies that support public and private Health Information Exchanges (HIEs), Accountable Care Organizations (ACOs), Patient Centered Medical Homes (PCMHs), and other coordinated networked ways in which health care functions.
Discharge planning and transition-of-care technologies, which tie hospitals, doctor’s offices, nursing facilities, and home health agencies together would fall into this category.
There is certainly overlap with the broader vision for EHRs, but this is actually a distinct space. It does not address the internal workflows of a practice (like an EHR should), but instead addresses getting messages and data back and forth between distinct healthcare settings (which may all be using different technology platforms).
Needless to say, third-party payers (health insurance companies both private and public) are an element in every one of these workflows, and must be taken into account when such systems are designed.
Value proposition: technologies in this category are all about integrating disparate data sources and presenting unified dashboards to different users within the healthcare ecosystem. Data about a given patient, pulled from multiple places (doctor’s offices, hospitals, laboratories, etc.) are one kind of value. Another is population-based reporting (clinical quality measures, performance measures), also pulling from multiple data sources, which are necessary in a competitive pay-for-performance environment.
Monetization strategies: A way of sustainably monetizing HIEs has been a subject of debate for some time, although a recently published study shows that an annual-fee approach (rather than per-patient or per-transaction fee approach) works better. The question is largely who should pay the fees needed for health information exchange to flow. Hospitals and academic institutions are already paying for their own in-house private HIEs. Health plans (who benefit from the efficiencies in the health system resulting from data sharing among practitioners) are also potential sources of monetization. Small doctor practices, especially those accustomed to free (ad-supported) technology, are very unlikely to adopt something that involves anything more than a nominal cost.
As health IT has expanded in the past few years, the kinds of products in the marketplace are falling into a few categories. It is helpful to think in these terms, as the target audience, the value propositions, and the monetization strategies are different depending on the kind of product being considered.
Of course, these categories are not separate from each other – they necessarily must connect and facilitate each other. But it is important not to get lost in the ever-expanding forest. A company that may be successful in one category should be careful and deliberate when moving into another one, perhaps building new expansion areas as separate divisions within a growing company. The main thing is to be clear on vision, and not get overwhelmed or distracted by the vastness of the healthcare ecosystem.