Opinion

Changing Our View of Tech in Health Care

It’s popular right now to be a skeptic about the potential for large technology companies to drive dramatic improvements in efficiency and higher quality in health care. And that skepticism is understandable.

After all, there have been many disappointments and setbacks. IBM has had lackluster results from its investment in Watson. Verily saw its investments in many smaller health-tech companies meet the buzz saw of the realities of health care economics. And there’s a cottage industry of journalism documenting the many ways digital gadgets and other technology-based tools fail to deliver on their promise.

After nearly two decades of closeup work at the intersection of technology and health care, I don’t blame anyone for being skeptical that big tech will revolutionize patient care in the short term.

But I’m starting to believe in the potential for fundamental disruption — primarily due to the growth of public technology companies and the way that they are acquiring revenues. Large technology companies now dominate the market cap of American stock exchanges, and over the last few years, their growth has accelerated. Apple, Alphabet and Microsoft — all of whom are interested in health care — together have a market cap of $2.7 trillion, which is more than five times the market cap of the biggest insurers, UnitedHealth Group, Anthem, Cigna, Aetna and Humana, combined. 

That kind of scale gives large technology companies an enormously valuable currency with which to buy up revenues in other industries — where they can quickly gain efficiencies.

Why is that significant? Look at Amazon, which has steadily built profitability through disintermediation of other industries, such as consumer retail. And when Amazon deploys its team of managers and innovators, it’s remarkable what it achieves.

Is health care ready for this kind of change?  The impediments of the past are all still there, of course: the heavily regulatory environment, the reluctance of consumers to embrace change, and the outstanding political advocacy that health care companies apply at the federal and state levels. 

But technology companies are progressing in this and will ultimately want the revenues associated with nearly 20 percent of the U.S. economy. Witness the investment by Alphabet in Oscar Health — a new entrant into insurance markets that is focusing on leveraging technology to improve patient experience. Oscar will have to work within existing regulatory frameworks. But with Alphabet holding a 10 percent share of the company, it has an active and interested investor that will expect technological evolution in a target-rich environment.

Imagine what would happen if Apple deploys its own approaches to the challenge of telemedicine; its understanding of personal technology and application development would, by itself, force everyone to take notice of whatever it chooses to do.

Then there is the possibility of what Amazon could do in pharmacy assets; its understanding of consumer retail could revolutionize the drug-buying experience, helping consumers save money.

And what if Alphabet deployed its advanced approach to analytics to the development of new pharmaceuticals and biomedicals? That kind of brainpower can’t be purchased just anywhere.

These companies are also good at disrupting settled regulatory frameworks. If, for example, telemedicine does turn out to be a key aspect of an Apple strategy, you can bet that they will start to lead the debate in health policy, advocating for more open access to data and fewer regulations. If you’re not certain that technology can run circles around incumbent industries, just ask entertainment companies about Netflix, or taxi cab companies about Uber, or the entire hospitality industry about Airbnb.

Change in business often comes in spurts. After many years of slower-than-expected engagement by the large technology companies in health care, American consumers should expect to see a more rapid pace of progress. 

The next decade of digital engagement has the promise to not only bring new approaches to health care, but new voices to the regulatory debate over health care. This may threaten some incumbents, but it would be a healthy change of pace, especially from the point of view of both government payers and American businesses struggling with the ever-heavier costs of health care.

 

Dan Mendelson is the founder of Avalere Health.

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