Emergence of the “Smart Hospital” and beyond: What’s next for providers?

Today, many big healthcare systems are starting to move care out of the hospital and into the home, for example, by automating routine services and providing remote monitoring and telemedicine. As pressure mounts to reduce costs and improve patient outcomes, health systems are also experimenting with creating new revenue-generating verticals, such as commercial genomics, big data and digital health startups, as well as pursuing direct-contract relationships with local employers.

But what is the next step in this evolution? A review of the recent history of provider investment in with technology, along with recent trends, may offer a path forward to discover future models.

Stage 1: The “Digital Hospital” concept (2000 to 2007)

When the concept of the Digital Hospital first emerged, the main goal was to move all hospitals and physician practices from paper-based systems and processes to electronic health records (EHRs) and shift clinical and back-office processes to these systems. The Office of the National Coordinator for Health Information Technology (ONC-HIT) was established in 2004 with the explicit goal of widespread deployment of health IT.

The main focus of EHR companies at the time was to combine electronic scheduling and billing with EHRs to increase efficiency in the back office. Billing was based on the fee-for-service model, using loosely standardized claims to multiple payer organizations and the government, as well as including a certain percentage of uninsured and/or uncompensated care. Care was still delivered through hospitals and offices, and was not designed for patient or provider convenience. Then, the financial crisis of 2007-2008 led to a "capital crunch" for hospitals, making it more difficult to finance technology investments and operational changes for new services, and delayed the overall implementation of EHR’s and other technology-based health services. 

Stage 2: The “Smart Hospital” concept (2007 to present)

As the health community’s acceptance of EHRs increased and hospitals began to re-invest in technology, many started to see the possibilities flowing from the massive amount of clinical and financial data being generated. EHR adoption increased exponentially after enactment of the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009, which allowed the ONC to give incentive payments for transitioning and training to a specific level of use (“meaningful use”) over several years.

The “Triple Aim” concept, developed by the Institute for Healthcare Improvement around 2007-2008, summarized the goals of any healthcare organization (or “integrator”) as having the responsibility of improving the care experience and the health of populations and reducing the per capita cost of health care.

With the advent of the Affordable Care Act and the shift to value-based care, new risk-sharing arrangements were formed, where clinical outcomes as well as cost savings were determined to be the requirements for reimbursement. Hospitals and physician groups began merging, creating standalone “provider” groups with the idea of improved cost management and standardization within a combined group.

The Smart Hospital aims to balance clinical outcome excellence, operational/supply chain efficiency and strong patient/provider experiences using technology. It encompasses and overlaps other constructs, such as the continuous learning healthcare system, connected care and other technology-enabled care paradigms that extend the reach of hospitals beyond their four walls. Underlying the Smart Hospital concept is the ability to take data collected through claims, EHRs, wearable devices and unstructured data (such as social media) and perform robust analytics on this information.

By adopting the Smart Hospital, providers are essentially offering "healthcare as a service, creating new, blended services using digital mobile technologies, existing services and analytics to bundle consumer-friendly health services with differential pricing and the optimized use of healthcare professionals in each offering. This combination has been referred to as “high tech, high touch.” To allow for all of this, providers must change their fixed costs —  both front- and back-end — into variable costs.

The Smart Hospital concept encompasses multiple elements, including:

• Patient experience: Patients can navigate through the system using a combination of digital and human services that extend outside of the hospital. Beyond simply extending the EHR, the entire patient experience in the health system ensures that patients get the proper, affordable level of care at the right time.
• New workplace models: Provider workflows must also change and be optimized around the patient, while allowing for workforce flexibility. Doctors, nurses and other healthcare professionals can and should deliver care beyond the four walls of the hospital. Digital workflow solutions should lead to higher job satisfaction and retention, as well as a stronger provider-patient relationship.
• Provider-patient collaboration: With a growing commitment to their own care, patients work with an entire care team, not just a doctor or nurse, and contribute to building and improving their health. Providers start to recognize patients as partners, not just customers, and work together toward shared incentives in value-based care.
• Population health management: This is a data-driven approach to cost-effectively managing the health outcomes of a specific pool of patients.
• Supply chain management using radio frequency identification (RFID)/real-time location system (RTLS): Automated/remote tracking of medical devices, materials and predicted inventory needs to optimize control and reduce costs.
• Home monitoring/remote care: Bluetooth-enabled devices, U.S. Food and Drug Administration (FDA)-approved mobile apps, and telemedicine solutions — as well as patient-generated health data — allow for low-acuity care delivered at lower cost and lower risk. Home monitoring requires a strategy that leverages platforms with variable costs, such as cloud and a consumption-based model, and this will require a significant shift in how devices are procured, deployed and managed. The development of monitoring command centers lets doctors and nurses monitor patients both in the hospital and remotely.
• Focused hospitals/micro-hospitals: Smaller, more focused centers of excellence, designed around patient flow, and focused on key revenue-generating areas (e.g., cardiology, oncology). Leveraging highly specialized data used for analytics, departments can be collocated around workflow, thereby realizing improved process flow and ultimately cost-efficiencies.  Similarly, micro-hospitals and small-scale inpatient facilities – typically with emergency medical care, labs, imaging, pharmacy services, etc. – are put in to fill in gaps in markets that can’t support larger hospitals. Data for analytics and efficiencies are also necessary for such facilities to function as well.
• Data life cycle management: As new digital health technologies and remote monitoring devices, as well new regulations, become available, the provider must have a standardized approach to handling these new data streams and determining whether and how they will fit into the data pipeline. Seamless access to this data has become important because it’s the source of all data flowing into analytics, which the Smart Hospital and its services are built upon. Moreover, once data has been collected, it’s a permanent asset. The data must be used and/or stored and archived for future use, and handled with care so as not to violate relevant privacy statutes.
• Security: Often an afterthought in the past, security has become part of the design of all processes as the system is built. Access controls, encryption, governance and monitoring must scale up as connected devices send in data from outside the four walls of the hospital. Cyber security measures and contingency planning are developed to combat ransomware and cyber attacks.

As one would expect, for many providers, this stage is still a work in progress, uneven at best. Many struggle with managing financial risk, although recent surveys say they are more willing and able to take on financial risk. Interoperability, data gathering and storage, and data governance have received woefully little investment, since most of the focus has been on front-end analytics. And many organizations have not structured effective change management to include physicians, nurses and other care practitioners in reviewing data and preparing for process change. Instead, much of the change has been forced on the practitioners, leading to decreased job satisfaction.

Stage 3: What’s next?

The next stage should be a learning healthcare system in which science, informatics, incentives and culture are aligned for continuous improvement and innovation. In such a system, best practices are seamlessly embedded in the delivery process and new knowledge captured as an integral by-product of the delivery experience. Providers are becoming data companies, offering services to improve the health of their patients. Indeed, providers are entertaining new revenue streams, such as creating genomic libraries based on pathology specimens to test new business models and continue to fund innovation.

Providers will need to manage business model change along with implementing new technologies. According to IDC, this will require delivering “a new business model, new governance and a new organization supported by new technology.”

There’s still much uncertainty about the course this stage will take as the traditional lines between different stakeholders blur. Today, payers are purchasing providers and each other, pharmacy benefit managers are purchasing payers, and providers are banding together to create generic pharmaceutical companies. CVS announced its intent to acquire Aetna, combining it with its 9,700 retail locations and 1,100 clinics at this time to become “the new trusted front door to healthcare in the U.S.”

Moreover, now even nontraditional players such as social networks and online purchasing sites are circling healthcare with the same goals in mind, and with much more experience in customer engagement. Healthcare companies have always lagged behind other traditional companies by about a decade with regards to investing in customer/patient engagement and innovation, focusing more on business process and record-keeping.

For example, in recent news:

• Amazon has announced a joint venture with J.P. Morgan Chase and Berkshire Hathaway to create an organization “free from profit-making incentives” that will cost-effectively manage employee health and satisfaction.
• Apple recently announced that they are opening AC Wellness, hiring doctors to work in an independent medical practice dedicated compassionate, effective healthcare to the Apple employee population.  This, in combination with their new Health Records app they have released, gives them pieces to build a better customer experience in healthcare
• Verily, Alphabet (Google)’s health arm, is offering to enter population health or care management insurance – by offering a payor (government, employer or private insurance) to reduce costs and assume some of the financial risk.