Andy Castonguay, Principal Analyst, Machina Research
March 2016

Video technologies provide key backbone for new generation of IoT telemedicine services

Telemedicine solutions are gaining increasing traction and relevance due not only to their core ability to extend existing medical resources to meet demand from underserved communities, but also due to the advances in video and remote diagnostic technologies which can deliver faster access to medical care and at lower costs. Whether facilitating the growth of new medical service models for new players or creating new directions for conventional players, connected IoT healthcare solutions are poised to radically change the nature of the traditional visit to the doctor’s office or clinic. In this article, I will highlight some of the promising new directions in which telemedicine is evolving due to Internet of Things (IoT) capabilities.

Evolving IoT and telemedicine solutions are disrupting traditional medical business models and expanding geographic reach

While providing the means for new competitive business models, IoT devices and technologies are also becoming a vehicle for radical changes in traditional hospital service delivery architecture and organization. One of the more prominent examples of this transformation is the recently launched effort by Mercy Hospitals in the US, which is using remote monitoring, connected medical equipment and video/audio services to create a real-time patient monitoring hub for patients in other Mercy hospitals in diverse locations.

With the development of this “Virtual Care Center”, or a centralized hospital monitoring center, Mercy is aiming to provide more thorough support for on-site nursing and physician personnel. Leveraging connected care devices and equipment data, the Mercy platform allows for secure video conferencing between patients and medical personnel at the Virtual Care Center to provide medical evaluations and check-ups. Most importantly, the new approach appears to be yielding some promising early results. For example, by combining detailed health record analysis and around-the-clock patient monitoring as part of its “Telesepsis” initiative, Mercy Hospital in St. Louis, MO, reported decreasing septic shock-related deaths from 46.7% to 18.5% and reducing the average length of stay in the intensive care unit from 8 to 3.4 days, within the first 11 months of the program. Having gained some early successes in internal deployments, Mercy has also begun marketing the facilities capabilities for other medical facilities as a service to complement and potentially supplement existing staffing levels and programs. In addition to leveraging M2M and IoT solutions to improve patient outcomes and gaining operational efficiencies, Mercy is looking to establish first market mover advantage through its virtual care center strategy and become a regional leader among medical facilities.

Beyond extending health services into the home, new IoT telemedicine solutions are expanding the geographic reach of medical services to include remote communities and even international consultations. Historically, conventional telemedicine solutions allowed patients living in remote regions to gain access to medical providers through telephone, video conferencing and remote diagnostics. Through improved, secure video conferencing and lower cost, connected diagnostic equipment, telemedicine is permitting physicians to reduce travel and in-office patient appointment cancellations. This combination is allowing doctors to greatly increase the number of patients they can “see” in a day and facilitate a more convenient experience for their clients. Some doctors interviewed by Machina Research report doubling their patient loads while also opening up their practice to other geographies, both domestic and international. For Stanford Medical in California, high-definition video conferencing and remote diagnostics have not only allowed specialists to treat more patients in more remote Northern California communities, but has also become a vehicle to serving affluent Chinese in Shanghai, leveraging the facility’s reputation and technology adoption to attract new clientele.

New players face risky future introducing technology to gain strategic advantage in medical access

One of the more recent efforts to challenge the traditional medical access model was centered on a connected health kiosk designed by HealthSpot. Headquartered in the US, HealthSpot developed a large format kiosk that offers a private booth for medical consultations, utilizing secure video conferencing and on-premise diagnostic tools that can facilitate a real-time medical exam. The kiosk design format was modern and comfortable, as I witnessed at 2015’s American Telemedicine Association conference, and represented the first phase of HealthSpot’s effort to locate their kiosks inside partner pharmacies (Rite Aid pharmacies and the Cleveland Clinic were the primary early partners). The kiosk service was structured to provide pre-scheduled access to medical professionals through a dedicated video conferencing line, supported by secure video partner Vidyo. Conversations with HealthSpot’s CEO revealed a more ambitious on-demand structure in future iterations. Given the common payment structures for medical services in the US, patients were asked to provide health insurance details prior to connecting with a nurse practitioner or physician. The relative immediacy of the interaction with medical professionals represented a unique feature of the service compared to the more delayed response times available through conventional medical practices, which often require weeks in advance to schedule appointments for non-emergency consults.

While the availability of the kiosks was limited to a few dozen of locations with Rite Aid and Cleveland Clinic, the longer term goal was to expand installations at pharmacies and other convenient locations to provide easy access to consumers. The co-location with pharmacies established a referral-based business model for patients needing a prescription. Following a consultation in the kiosk, the patient’s doctor can electronically send the prescription details to the associated pharmacy for immediate provisioning. The combination of quick, real-time access to medical professionals and subsequent pharmaceutical availability was structured to provide patients with an unparalleled level of convenience compared to conventional medical practices. However, given the still nascent level of the public telemedicine business, efforts like HealthSpot face the enormous challenge of generating sufficient consumer awareness as well as ensuring that the service has adequate medical staff on hand to respond to demand as well as creating business models that benefit all participating parties in a sustainable manner.

As innovative as HealthSpot’s efforts were, in a surprise announcement, the start-up shut down its operations in late December 2015. While the company’s leadership has not made public their specific reasons for shuttering the business, HealthSpot’s demise reflects the highly complex nature of introducing innovative technology and new practice models into the healthcare sector. Despite raising more than USD40m in venture capital and financing, the company clearly didn’t crack the code on reaching a sustainably profitable and scalable healthcare business. HealthSpot’s strategy, while unique in the market, faced increasing competition from pharmacies like CVS Health that offer conventional “retail” health clinics in their own pharmacies, without the $15,000 overhead necessary to build a kiosk. A recent Robert Wood Johnson study found that pharmacies’ retail clinics now number more than 1800 locations in the US and provide 10.5m consults annually, representing 2% of the country’s yearly primary care medical visits. By expanding consumers’ access to medical services through the growing number of retail clinics, the study estimated that retail clinics could save $4.4b in healthcare spending by helping treat patients avoid unnecessary visits to the emergency room. In this manner, new medical service access models can have a positive impact on healthcare delivery. For connected kiosk models like HealthSpot, the pharmacy landscape offered ample opportunity for expansion, but obviously not without significant risk. HealthSpot’s trajectory can be taken as a cautionary tale for healthcare start-ups still attempting to disrupt the status quo of the healthcare delivery system. The long-standing and durable culture of medical services and patient access model may correctly be seen as dysfunctional, but even flashy and effective new approaches will still face the gargantuan task of reprogramming patients’ long history with conventional medicine and convincing them that new alternatives are not only equal to conventional practice models, but are actually superior in convenience, price and convenience.

Conclusions

While the US has been battling soaring healthcare costs for many years, even in countries with well-established state controlled health systems, rising healthcare costs are becoming a key concern. Many countries are also facing aging demographic trends that will challenge the ability of healthcare systems to meet these changing demands without significant restructuring of their healthcare infrastructure and personnel. The evolution of medical IoT solutions such as diagnostic telemedicine represent a compelling case study in how IoT technologies, paired with new medical service access models, can effectively extend existing healthcare resources to reach substantially larger populations. In addition to this financial and logistical benefit, healthcare providers report that their patients appreciate the improved “user experiences” with telemedicine thanks to the added convenience and reduced disruption to daily life compared to conventional medical consultations. Healthcare systems and facilities are notorious for having fragmented and laborious decision making processes when contemplating new technology adoption. However, the global rise of healthcare costs combined with new demographic challenges makes the adoption of new IoT healthcare solutions a primary tool for healthcare systems to meet the growing and diverse needs of their populations with lower costs and even better outcomes. Technology innovation can play a prominent role in changing the status quo of medical practice for the better, but new entrants to the healthcare space must be prepared for a lengthy and tricky battle with the medical establishment to convince physicians, health insurers and patients that new approaches are more efficient, equally as profitable or more so, and that they provide strong financial benefit to all partners.

About Machina Research

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