Several technology firms are making attempts to dominate the digital health market. However, healthcare is very different from platform dominated markets in other sectors.
Platform domination is a feature of several industry sectors, especially ones where there is a winner-takes-all outcome that is hard to replicate or compete against. Google dominates search. Amazon dominates e-commerce. Facebook dominates social media. And so on. In several industries, dominant incumbent firms have also developed their own platforms to get in front of disruptive innovation. Research by consulting firm McKinsey suggests that across sectors in developed economies, a single digital platform prevails 75% of the time, citing examples of Daimler, Nike, and Unilever.
So, how far away is healthcare from a platform-dominated digital business model ? Over the past few years, several healthcare focused cloud-based digital platforms – or health clouds – have been announced by big tech firms such as Salesforce, Microsoft, and Google. These platforms are intended to emulate the winner-take-all models that we have come to see in social media or search advertising. The McKinsey report notes that industries with lower digital maturity, such as Pharma and healthcare, see a lower level of prevalence of platforms, citing the lack of network effects, which require a large section of market participants to elect to participate in a single dominant platform, as one of the primary reasons. In a recent conversation on my podcast, John Sculley, former CEO of Apple, stated that platform technologies have revolutionized industry after industry with one big exception – healthcare. Let’s explore a few of the reasons for why that is the case.
Most platforms fail, regardless of the sector they operate in
A study of 250 platforms, published in the Harvard Business Review, provides a sobering view of the prospects for platforms in general. For every VC-fueled Uber and Airbnb that goes for world-domination through first mover advantage and network effects, there are several that do not make it past their fifth anniversary. The reasons range from late entry to mispricing, lack of trust, and not paying attention to competition. Healthcare has historically been a low-trust economy, with payers, providers, and pharma companies in largely adversarial relationships in a zero-sum game. For platforms to succeed, market participants must share data and invest in collaborative initiatives to improve healthcare outcomes and reduce costs for the sector. The closest we have come to this ideal in healthcare is in health information exchanges (HIE), and even those have failed to gain traction due to a variety of issues.
Users are slow to adopt digital health platforms
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For a platform economy to succeed, consumers have to use the platforms. Even telehealth platforms, seen as a transformative way to deliver healthcare, are seeing relatively low adoption rates among physicians (the American Hospital Association has documented the key issues – including coverage and reimbursement by Medicare for telehealth visits). Analyst Mary Meeker’s widely read annual Internet Trends Report suggests that consumers are using digital health tools primarily for basic activities such as online health information and for researching provider ratings. This suggests a gap between the billions spent by big tech firms on building platforms, and the market’s readiness for the platforms.
It is all about the data, and who owns it
Healthcare IT has been bedeviled by interoperability challenges, as everyone knows. For now, the custodianship of the data rests with health systems and their electronic health record (EHR) vendors. There is growing activism about handing over the ownership of the data to consumers (including a proposed CMS rule that will make it mandatory for consumers to be provided access to all their medical information), but we are still in early stages. Even if we were to get to grips with secure and seamless data exchange among participants in the health IT ecosystem, there is growing realization that the fundamental building block for driving innovation, namely a universal patient identifier, does not exist (recent legislative action could change that). Big tech firms, for their part, have to overcome a general lack of trust by consumers for sharing personal medical information on their platforms.
Notwithstanding their relative lack of digital maturity, healthcare enterprises are choosing their own pathways for adopting digital platforms. Health systems are choosing a combination of best-in-class point solutions and enterprise-scale platforms, sitting alongside their core EHR systems, to reimagine patient and caregiver experiences. Health insurance companies have firmly adopted consumerism as the focus of their digital efforts. They are providing the emerging marketplace with pricing information, health and wellness counseling, and treatment alternatives. Pharma companies are looking hard at digital therapeutics to extend brand revenues by building digital “wrappers” around their products, and to develop new drugs-as-software that cost a lot less to develop and monetize compared to traditional drug discovery models.
So far, one thing is clear. No single tech firm seems positioned to dominate healthcare in the short term. The market seems to have plenty of room for companies – incumbents, innovators, or startups – to carve out a role in the digital transformation of healthcare.
For all these reasons, platforms are only just gaining significance, and it may be early days yet. John Sculley, who is an advisor to RxAdvance, a company looking to disrupt the PBM industry with a PBM cloud offering, thinks that healthcare industry platforms are probably the greatest examples of digital health enablement. He also believes that we are going to see more and more success stories by 2020 and beyond. Perhaps the new players will demonstrate that healthcare is just as important an opportunity for platform technologies as all those other industries have been.
Date: July 10, 2019