The healthcare applications market is attracting a new class of players vying for a slice of the multi-trillion-dollar opportunity.
In recent months, enterprise applications vendors including IBM, Salesforce.com and SAP have made significant inroads into the healthcare market, which could top $10 trillion in healthcare spending around the world by 2020.
While enterprise applications vendors have generally refrained from committing themselves to a single vertical, their newfound enthusiasm for healthcare may well be based on factors both altruistic and all business.
IBM, for instance, has been moving in that direction since 2011 when its Watson supercomputer won a high-profile contest over TV game-show Jeopardy’s champions and stepped up its cognitive computing messaging to help solve such healthcare problems as suggesting treatment plans for lung cancer patients with its advanced analytics capabilities.
In February 2016, IBM paid $2.6 billion for Truven Health Analytics, a 2,500-person company previously owned by PE firm Veritas Capital. In 2012 Veritas bought Truven – formerly Thomson Reuters Healthcare, for $1.25 billion in cash. The rich sum IBM offers underscores the strong performance of Truven and its peer group including rivals like Optum Insight of United Health Group and Verisk Analytics, both of which have benefited from the increased demand for Healthcare Big Data by carriers and providers. The stock price of Verisk has doubled over the past few years.
Truven, which serves 8,500 customers including payers and providers, specializes in integrating large amounts of patient data for decision support throughout the health benefits, quality of care and compliance continuum.
The move followed IBM’s acquisition of Merge Healthcare for $1 billion in October 2015, enriching the Big Blue with a range of clinical and imaging solutions to hospitals. That came after IBM’s purchases of healthcare analytics startups Explorys and Phytel in April 2015. All these healthcare assets now operate under the IBM Watson Health umbrella.
With these four purchases, IBM is beginning to realize the vision of building out IBM Watson Health Cloud by combining clinical, research and social data from different sources into a data-sharing hub in order to help physicians make better patient care decisions.
IBM said the vast repository of images from Merge customers could be used to cross-reference the 315 billion data points already stored in the Watson Health Cloud, including lab results, electronic health records, genomic tests, clinical studies and other health-related data sources. The addition of Truven gives IBM Watson clinical data sets on 150 million lives, another 215 million de-identified patient lives, 45 million patient registry as well as Health Information Exchange data for 30 million individuals.
Salesforce Health Cloud
In September 2015, Salesforce.com, which has made its name selling Cloud applications primarily for Sales Force Automation to a range of CRM users including armies of salespeople working for drug and insurance companies, took a new turn by launching Health Cloud, its first major foray into the healthcare industry.
By focusing on applications that improve patient engagement, Salesforce.com aims to contribute to and profit from the huge healthcare system that is on the cusp of structural changes in light of government policies such as Affordable Care Act, growing use of Electronic Health Records as well as tumbling costs of crunching massive amounts of genomic data.
At its Dreamforce event in September, Salesforce.com partnered with UCSF and its Breast Care Center Director Laura Esserman on a 100,000-woman study with the goal of improving breast cancer screening by establishing and identifying the link that connects genetic makeup, family history and risk factors to a more personalized approach over the conventional use of annual mammograms.
In addition to UCSF, Salesforce.com is working with existing customers including Centura Health, DJO Global and Radboud University Medical Center to help design new products for Health Cloud. Partners such as Accenture, Deloitte Digital, MuleSoft, Persistent Systems, Philips and PwC will be responsible for extending Health Cloud’s functionality as well as integration capabilities into products from healthcare vendors like Epic, Cerner, and GE.
SAP’s Health and Sports Medicine Push
Then there is SAP, which hosted a transatlantic event in December 2015 to unveil SAP Foundation for Health. With journalists and analysts attending the press event in Frankfurt, Germany and New York City, SAP affirmed its interest in becoming a serious player in the healthcare vertical.
Built on the SAP HANA in-memory database platform, SAP Foundation for Health and its first product SAP Medical Research Insights extend the possibilities of data integration, real-time analysis and reporting into the realms of staggering amount of patient data from genomic testing to electronic health records and clinical trials, ushering in personalized medicine and better outcome for patients along the way.
Already SAP is working with American Society of Clinical Oncology under an initiative called CancerLinQ, which will harness Big Data from millions of de-identified patient records to deliver personalized care to people with cancer and cancer survivors. SAP has embarked on a similar Big Data study with National Center for Tumor Diseases in Germany, which has helped co-develop SAP Medical Research Insights.
Another strategy SAP has in mind is to put sports medicine through its paces by using biomedical data to advance precision health. Working with Carlos Bustamante, director of the Stanford Center for Computational, Evolutionary and Human Genomics, SAP is eager to help facilitate medical breakthrough in such areas as sustaining peak performance of professional athletes by reducing sports injuries.
Bustamante expects greater use of products like SAP HANA to help his team better understand specific genes from elite athletes as well as those that are native to high-altitude living, while identifying traits such as oxygen consumption that could be replicated.
At the same time, pharmaceutical firms are mining genomic data for clues that could help them develop new drugs faster and cheaper. Crunching billions of data sets used to take considerable time and resources and tools like SAP HANA have radically simplified those tasks by lowering the computing costs to unprecedented levels. Bustamante likens the drop in costs of conducting large-scale analysis of DNA sequencing to the equivalent of getting a $400,000 Ferrari for as little as 10 cents.
David Delaney, chief medical officer of SAP, said while the vendor has had a long history of partnering with healthcare applications vendors like Epic and Siemens Health Services(now a part of Cerner), the growing momentum of SAP HANA – now with more than 7,000 customers including many in health and life sciences – has driven it to expand in the healthcare vertical.
Another catalyst has been the personal directive of SAP CEO Bill McDermott, who recently lost one of his eyes after an accidental fall and now is on a mission to put SAP technology to good use in all kinds of health-related endeavors. Apparently months of treatment have given McDermott a different perspective on whether technology could do more to help patients like him navigate the cumbersome and often manual procedures, an ordeal exacerbated by the entrenched healthcare bureaucracy.
Meanwhile, McDermott, who also sits on the board of sports apparel company Under Armour, is leveraging his position to ensure that not only technology, health and sports could coexist and complement one another, but also thrive and benefit everyone involved for years to come.
Steve Lucas, president of SAP Platform and Analytics Products including HANA, also speaks openly about his reliance on wearing a sensor to monitor his Type-1 diabetes on a minute by minute basis in order to remind him of the next insulin injection that he has to take – about 3,000 in total in a given year.
“I am absolutely amazed by how technology is continually changing and improving the way we treat, and in some cases prevent, diseases based on the analysis of personal and aggregated medical data collected on a global scale,’’ Lucas writes in his blog post.
It’s one thing to have good intentions to reinvent patient care, but it’s something else altogether for SAP to make a business case for its healthcare push. Compared with verticals like energy and consumer goods, healthcare is estimated to contribute to a low single digit as a percentage of SAP’s total revenues, which could top €20 billion for 2015.
However the allure of owing a slice of the huge market(more than $3 trillion in US healthcare spending alone, or 17.5% of its GDP in 2014 vs. 9% in 1980) has convinced SAP and others that one cannot be truly successful in enterprise applications in the long run without at least gaining a foothold in healthcare.
Barring any major acquisition especially in areas like clinical and Electronic Health Record(EHR) software, both SAP and Salesforce.com appear to be content with attacking the healthcare market by doing what they do best – a horizontal solution that comes with healthcare-specific analytics wrapper.
The next pot of gold in healthcare may have little to do with the transaction piece, which is still mostly done using legacy systems for such functions as revenue cycle management mostly to speed payments from carriers to hospitals and integrated delivery networks. Advances in healthcare technology as in growing use of EHR have done little to improve patient care.
Incumbents may be vulnerable as they continue to derive the bulk of their revenues from maintenance revenues largely coming from years of selling on-premise applications. After surpassing McKesson as the No. 1 healthcare applications vendor, Cerner, which specializes in both clinical and EHR systems, has already experienced revenue misses in recent quarters following its $1.3-billion purchase of Siemens Health Services in February 2015.
Instead of competing head-on with hundreds of clinical and EHR vendors, the new class of players are banking on advanced analytics – propelled by innovation in in-memory database, open-source technology, cognitive computing and Cloud delivery – will result in better treatment, higher quality of care and more successful disease and injury prevention to achieve precision health and quite possibly a more predictable outcome for patients and care providers.