I attended the Health 2.0 Conference in San Francisco earlier this week and, coincidentally, I also met with Piper Jaffray later in the week to discuss Healthcare IT (HCIT); they have put together a nice body of research on the market.
The HCIT market is very large and comprised of many large sub-markets. Overall, Piper Jaffray estimates the total HCIT market to be $15.7B comprised of clinical and non-clinical HCIT systems and they break it into the following submarkets:
- Hospital IT
- Ambulatory IT
- Hospital Revenue Cycle Management
- Physician Revenue Cycle Management
- Connectivity/Interoperability
- EDI
- Payor IT
- Outsourced Services
- Drug Development
Within each one of these markets, there are literally dozens of private and public companies. Many of them have been around a long time.
There are many drivers behind the HCIT market but recently the key ones seem to be: shifting payment for procedure to payment based upon clinical outcome, multi-provider/payor access to patient data, and radical reduction of overall healthcare costs in all areas for all participants – patients, physicians, hospitals, insurance companies and government.
As I took a fresh look at the current major application software providers in each submarket, unsurprisingly I found that virtually all of them use a traditional enterprise software model. However, I can’t think of a industry better suited for the SaaS model than HCIT.
Hospitals – IT staff is under tremendous pressure to reduce costs while simultaneously improving service levels; using SaaS-based solutions the hospitals can substantially reduce their capital and operational requirements. And, unlike corporate entities where competitive differentiation may lie in unique business processes and therefore require highly customized applications to support those processes, hospitals gain little by differentiating themselves this way. Instead, hospitals and all healthcare constituents benefit from economies of scale if the data and the processes are standardized. What about security? Yes, HIPAA/patient data is critical to secure but no more critical than financial data and SaaS has overcome this issue with flying colors in the traditional corporate world.
Physicians - Physicians don’t typically have IT staff and their concerns are far more about providing great patient care, not maintaining and operating patient management systems, EMRs, HIEs, etc. The SaaS model transfers the burden of managing and operating these systems (e.g. Patient Management, Lab, Prescriptions, Billing) onto the shoulders of the SaaS vendor thereby freeing the physician’s office to focus on patient care and outcomes.
Patients - Patients are becoming more and more interested in managing their own healthcare. High deductible plans, rising costs and looming tax legislation are forcing patients to better understand where and how they are investing their valuable health dollars. Having access to web-based applications that enable patients to consolidate and manage their interaction between insurance companies, physicians, hospitals and other healthcare providers will become increasingly more important. However, forcing a patient to interact with cumbersome master/detail list form-based applications is out of the question. By incorporating familiar UI (e.g. Facebook, Twitter, Blogger, etc.) into healthcare applications, users are far more likely to need little training and willing to use the applications thereby reducing support and operational expense for the providers. SaaS providers can easily provide role-based UI that shields the patient from the complexities of the application while providing other users (e.g. the physician’s office) with much more sophisticated UI for their needs.
Insurance Companies – Insurance companies also benefit from the SaaS model since it facilitates online connectivity and interaction between hospitals, providers and patients. Any time the process has to move from electronic to paper, which it does regularly now, there is operational overhead expense and the potential for error introduced into the process. If all participants are willing and able to participate electronically, costs and errors can be dramatically reduced.
While crowded, the HCIT market feels a lot like when we started Siebel Systems back in 1993. A lot of vendors – there were 300+ SFA vendors at the time. A very fragmented market – different companies solving different problems (e.g. SFA, Service, Support, Service, Marketing, etc.). No industry thought leader. Poorly-written applications without a comprehensive and extensible data model and application vision to address all functional business areas.
The Health 2.0 Conference reminded me of the SFA conferences held back in 1993 — lots of tiny booths staffed with people desperate to engage and sell their products. Keynotes and panels staffed with ‘experts’ who are well meaning and have domain expertise but without the experience and knowledge to create a multi-billion dollar industry, consolidate it and own it.
Based upon my recent observations, I think in spite of the hundreds of current HCIT companies there still exists an opportunity for an applications software company to emerge and own the HCIT market; one with a grand products vision yet with laser focus on solving a few key initial pain points using a SaaS-based model.
[...] Software as a Service (SaaS) – Healthcare IT and SaaS (tags: saas cloud healthcare HCIT) [...]
I agree, Bruce. The aggregator application software company of which you speak should buy Satori Labs and integrate it as the front end of the Healthcare SaaS system.
Imagine doctors using pen and paper, just as they do today…but everything they write is automatically transcribed and entered into the necessary back end systems. Now that would be a huge leap forward.
Any leaders emerginng in the payor / insurance side, an Athenahealth for HMOs?