Author: JP Pattanaik, Sr. Business Analyst & Akanksha Rajeev, Business Consultant
The article was first published in Express Healthcare, Feb 2016 Edition. The article is republished here with the authors’ permission
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Abstract
An estimate by the Economist Intelligence Unit (EIU) the regional healthcare spending during the year 2015 is expected to be as given in the table.
Globally, most nations have been challenged to improve quality of care while reducing the cost of healthcare by means of inventing cost effective methods for an optimal outcome. The challenges described above have led to adoption of healthcare IT solutions such as Electronic Medical Records (EMR)/ Electronic Health Records (EHR) for safe storage of healthcare information and to make more informed decision.Some of the major factors contributing to the growth of healthcare IT globally are listed below:
- The continuously growing pressure to cut healthcare costs
- Need for care coordination and management demanding integrated healthcare systems
- High rate of return on investment in healthcare systems
- Financial support and incentives from the government
- Growth of medical tourism
- Government initiatives, conducive policies for the sector
- The rise in the ageing population
- Growing demand of health IT products to reduce medication errors
- Rise in incidences of chronic and lifestyle disorders
- More informed and engaged patients.
Why do more and more Indian IT organisations want to venture into Healthcare Industry?
Healthcare has a huge addressable market. India as a country has witnessed a rather steep growth trajectory only in the last decade with the advent of the private sector. The influence of technology has been an important growth driver, with healthcare models based on IT intervention now becoming a reality. The accessibility of healthcare today is more than it ever was, consequently increasing the opportunity for new players. Emergence of new delivery models which are scalable, less capital intensive and yet promise better earnings is one of the major reasons the healthcare sector has lured the investors. Diagnostic chains, single speciality clinics, wellness centres, primary care set-ups etc. are all emerging models of healthcare and it is still evolving. In a nutshell, healthcare industry provides array of opportunities for new experiments at a promising return on investments. The penetration of healthcare IT is still in its infancy providing ample opportunities to all competent healthcare IT solution providers. With increased importance to healthcare needs, the adoption of modern healthcare IT systems is bound to grow.
Approaches for Go-to-Market
In order to tap the business opportunity presented by the IT enablement of healthcare institutions, the IT organisation should evaluate options and consider one that suits the best. A single approach may not fit all. In pursuit of quick success, often IT organisations opt for suboptimal options, which may not meet their long term objectives. Following are the three strategic options to realise the business opportunity presented by healthcare IT market:
- Approach 1: MODIFY Enhancing an open source software
- Approach 2: CREATE Building a greenfield system
- Approach 3: ACQUIRE Acquiring a licensed product
The table below provides the advantages and disadvantages associated with each of the approaches.
An organisation should evaluate the functional, technical and business capabilities while prioritising a strategic approach. Each of the approaches can be evaluated based on the following parameters:
Cost and effort
Total cost of ownership (TCO): Total cost of ownership refers to the cost to the organisation for sustaining a product line. This includes the license fee for the product and cost of the application maintenance and support.
Effort: This is the effort that needs to be put in by the organisation to meet the desired product criteria driven by Customer/ Market needs.
Potential Revenue: This refers to the revenue that would be generated by the organisation on entering the market with the stated product.
Market factors
Time to market: This is the time taken to launch the product in the market for customers.
Market acceptability risk: The risk that the product launched into the market is not accepted by the clients. This is particularly high for a new product launch.
System related factors
Customisability: The capability of a system to be easily customised for desired features. Creation of a greenfield system offers the highest amount of flexibility as it can be designed keeping product expansion in mind.
Scalability: The capability of a system to be easily scalable for larger implementations. While a greenfield system can be designed to be scalable an open source or acquired product may have limitations.
Skilled resource availability: The major constraint of a system is the technology stack that it is built on. Having technically sound resources trained exclusively on the same platform is one of the major factors for system selection.
Legal/ IP Risk: Enhancing and commercialising existing open source systems would give rise to potential legal risks. Some systems are covered under various public licenses which prohibit the commercial use for profit.
Security risk: With the ever growing population that is being catered through the IT enabled system, security of the healthcare data plays a vital role in the evaluation of a system. Many laws of the land mandate patient privacy and prohibit the transfer or usage of the healthcare data and thus require utmost authorisation and protection for the same. Any shortcomings in the system that compromises patient data security would pose a security risk.
The evaluation of each of the approaches based on the above mentioned parameters are summarised in Figure 2.
Key Considerations
A greenfield system though requires investments, is a safer approach as it minimises some the risks demonstrated in other two approaches. However, all organisations may not be in a position to have proprietary systems to exploit the immediate market opportunities presented. The pioneers always have the advantage to exploit the market opportunities with less competition. New players should carefully choose the market segment they want to make an entry. When an organisation lacks significant market presence and experience, it may be recommended that the organisation should take baby steps and stay profitable yet. A big bang approach may not support the ultimate objectives of the organisation. In this context it may be recommended to health IT vendors that the
Approach –‘MODIFY’ can be considered as a short term strategy with an objective of learnings, small scale implementations and R&D.
Approaches – ‘CREATE’ and ‘ACQUIRE’ can be considered as long term strategies with an objective of achieving the vision of the organisation.
Approach – CREATE demands investment in terms of time and ensuring the product exceeds expectations than a competing product while
Approach – ACQUIRE enables the organisation a quicker go-to-market for realising the opportunities. However, the risks associated with the approach must be given due consideration.
Conclusions
The lucrativeness of the healthcare IT market has received significant attention. It is an obvious choice to exploit the opportunities presented. The pioneers and the laggards are equally keen to make the best of the opportunities. An approach that works best for a pioneer may not be of same value to a beginner. In pursuit of quick success, organisations should not commit the mistakes of engaging in a wrong approach to make a foray in hurry. It has been rightly said, “There is no shortcut to success.” Organisations need to carry out a risk and return tradeoff before formulating and executing any strategies for the best possible outcome.
References
i. 2015 Global Healthcare Outlook. Common Goals and Competing Priorities By Deloitte, Whitepaper, 2015.
(http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-2015-health-care-outlook-global.pdf)
ii. Global healthcare IT market estimated to reach $56.7B by 2017 By Ashley Gold, News Article, FierceHealth IT, May 10, 2013.
(http://www.fiercehealthit.com/story/global-healthcare-it-market-estimated-reach-567b-2017/2013-05-10)
iii. 2014 Global health care outlook: Shared challenges, shared opportunities By Deloitte, Whitepaper, 2014.
(http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/dttl-lshc-2014-global-health-care-sector-report.pdf)
iv. Overview of International EMR/EHR Markets: Results from a Survey of Leading Health Care Companies By Accenture, Whitepaper, August 2010.
(http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_EMR_Markets_Whitepaper_vfinal.pdf)
v. Healthcare IT market in India may touch $1,454 million: Study
(http://timesofindia.indiatimes.com/tech/tech-news/Healthcare-IT-market-in-India-may-touch-1454-million-Study/articleshow/24142487.cms)
vi. IT spending by Indian healthcare providers may rise 7 per cent in 2015, Gartner says
(http://timesofindia.indiatimes.com/business/india-business/IT-spending-by-Indian-healthcare-providers-may-rise-7-in-2015-Gartner-says/articleshow/47295710.cms)
Disclaimer: The ideas and opinions shared in this article are personal views of the authors and have no bearing or impact on the official policy or position of United Health Group or its entities
JP Pattanaik
Akanksha Rajeev
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