How COVID-19 will remake healthcare in the Western world (ZS)
Locked in our homes and nervously refreshing the Johns Hopkins website to see the latest numbers on the global pandemic, we are living in truly historic times. Some of us are worried about ourselves and our loved ones. Others are worried about employment, or their freedom, choices and the vibrant economy they forgot to enjoy. As we stay inside, now our houses are too small and our spouses too close, and our bored children are slowly atrophying from the lack of sun, friends and stimulation. Only the dogs are happy with this situation.
But around us the world of healthcare is being transformed. Digital health technology is having its best moment. Diagnostics are providing the insights that allow us to parse the “good” pandemic days from the bad. As health systems creak under the tremendous pressure being put on them, they are remodeling as we speak.
How should we function in this environment? We look at the certainties and avoid talk of doomsday. We look to the future, identify our “no regret” moves and plot a course to move forward in order to emerge from this in a better state.
No matter where we play in medtech, all of us should be listening, adapting and anticipating the future. Our goal should be to minimize the damage and emerge on the other end stronger. Here are five trends to watch for and get ahead of:
Technology and remote care is here to stay
As someone working in the industry, the lack of adoption of virtual tools has always baffled me. A big part of the job of a primary care physician or a pediatrician has always been going through a basic algorithm easily deployed by a computer to direct anxious patients and parents to the closest and most obvious answers, and occasionally to tests and simple treatments. Patients who have no need to travel will trek into the doctor’s office to sit face-to-face with a doctor who breaks eye contact 90% of the time to read a computer screen or tap on a keyboard. The U.S. suffers from a general practitioner shortage while at the same time keeps reducing patient reimbursement for routine checkups. We have had ready-made solutions for home monitoring, for both healthy patients and sick ones, that can provide the vast majority of the information collected in a visit. Now we’re suddenly seeing the utility of all of this technology.
I believe that this is a transformative change, not a passing fad. Coming through this crisis will teach us some important lessons; a lasting one is the viability and benefit of digital health. Hastily adapting reimbursement mechanisms to care for patients during a crisis has suddenly given these solutions the air they need to thrive.
The bottom line for medtech: Tech companies may be a major part of the solution that frees us all from our homes and keeps the most dire predictions at bay. Pretending that regulation, privacy and provider relationships can keep tech companies out of healthcare doesn’t seem so smart anymore. Digital health and remote monitoring are not a passing fad. There’s a better way of doing things.
Within medtech, there’s also a huge opportunity to add value to the physician and patient relationship in a way that was previously more theoretical. It means that remote monitoring and engagement solutions and diagnostics are growing in importance, but they will also become essential table stakes. Many patient monitoring and telehealth attributes that had been embedded in traditional medical devices have finally moved from being features to benefits.
Diagnostics will get a home makeover
The U.S. was flying blind in the early days of the epidemic due to tactical mistakes and a lack of supply readiness. Also, tests cost money. One of the most important tools in fighting the epidemic, as taught to us by the East, was knowing where the virus was. But we decided not to prioritize that in the U.S. The diagnostic test could be expensive to the insured and especially the uninsured. In addition to the cost, there was availability. When we did have an approved test, it was in a very large, high-volume central lab with slow turnaround time.
Diagnostic testing that’s critical to tracking and managing an epidemic will need to be ubiquitous. How we achieve this ubiquity is where it gets interesting. There are really two routes: home testing or sampling, or localized clinics. This has been the vision of CVS for quite a while now, and with government funding for testing and a renewed mandate, maybe this is what really tips that strategy into relevance, or leads to new solutions for at-home testing and rapid answers. If local neighborhood clinics had the necessary diagnostics, a doctor could order tests to be conducted at the CVS MinuteClinic and then the routine consult could be handled entirely remotely.
The bottom line for medtech: In the future, testing or at least sampling will become ubiquitous, easily available and closer to the patient. This opens a whole new realm of testing needs for diagnostics companies and a new battleground for medtech to diagnose, manage and refer patients who need treatment for conditions much broader than just viral infections.
There’s another point here about spending more on prevention. Some might be cynical about how much we can truly reform healthcare so that we’re better prepared in the future, but hopefully at least the case for early diagnosis and prevention will be reinforced to payers.
We will treat healthcare infrastructure as a national asset
For years we have seen headlines about overcapacity in the healthcare sector. Too many beds, too many hospitals. However, as this crisis has taught us, there’s an important difference between having enough hospital beds and having enough ICU beds; ICU beds are a much more precious commodity. Moreover, we’ve looked at occupancy and thought about it like the manufacturing sector—as if hospitals should operate at 90% occupancy or else be remodeled. Investments in infrastructure have not been directed by a master plan but instead by foundations and donors who might like to see their name on a building. Going forward, I expect that the decision-making around healthcare infrastructure will be treated as a matter of national importance.
We have seen a lot written about “peacetime” and “wartime,” and while this analogy is not entirely fitting, it does provide a good context to review true national and local preparedness. In the relaxed summer of peacetime, we could afford for our resources to go into treating the rarest of rare diseases, adding months to cancer protocols, focusing on advanced features for hospital beds and extra modes to our respirators, and enhancing the patient experience on every visit to the hospital. We shut down excess capacity in the race for profits to propagate prestige. But the dark winter of wartime has shown us that those resources were misallocated. Images of makeshift rooms with draperies for isolation in a tent in Manhattan—while patients share a ventilator and volunteers sew donated masks—couldn’t be a more vivid and gruesome illustration of my point.
I expect that the trend of moving away from financially independent, stand-alone practices is likely to continue. The patient volume drops we are seeing will make independence a thing of that past. And if ever there was a reason for moving procedures out of the hospital to ambulatory or office-based settings, it’s now. We knew it was coming with the less-than-gentle nudges coming from United Health Care and CMS. I think COVID is going to be a hard shove to move out.
What’s less clear is what becomes of the bricks-and-mortar hospitals. Drained of the “profitable” procedures, reeling from the extremely challenging situation they just got through and, if you follow my earlier logic that they will receive a national mandate to preserve infrastructure as a strategic asset, hospitals look to be in a bind. To survive, hospitals and hospital systems will prize flexibility and could also see safety in size and vertical consolidation. While none of this is all that surprising, the stakes are high.
The bottom line for medtech: An acceleration in vertical consolidation for health systems and an acceleration of procedures to ambulatory settings is extremely consequential to medtech. Ambulatory surgery and office-based labs will have very different priorities and demand new products or value propositions from the traditional settings.
Preserving and investing in hospital infrastructure will be an opportunity for some medtech companies. There will be a premium on flexibility in preparedness in hospitals while ambulatory centers focus on throughput and utilization. This means a shuffling of priorities and opportunities for medtech to meet those shifting priorities.
Purchasing and supply chain management strategies will be rewritten across secondary care
When the dust settles, we will realize that we left our healthcare workers very poorly equipped with the most basic of protective equipment. Not enough ventilators might be more forgivable. Not enough ICU beds could be chalked up to incentives. But not enough surgical masks? Surgical masks are the one thing that’s used in every single hospital every single day without fail, in addition to saline, gloves and gowns. What could possibly have happened?
There has been a trend toward sole sourcing in hospitals, but it seems that this was a mistake. The warehouse is well-stocked with high-end medical devices but unfortunately doesn’t have a whole lot of the high-volume stuff needed to make the hospital run—or to deal with a crisis like this.
In the end, we will see a lot of scrutiny placed on the supplier consolidation programs, and I think hospitals will become more thoughtful with how they decide to invest their working capital. Interestingly, this may also open up an opportunity for a consolidator or middleman, especially with supplies—a single source who is responsible for service levels, PAR levels, etc., and guarantees supply without the hospitals needing to contract with everybody. One of my colleagues thinks that this could lead hospital systems to take matters into their own hands and start their own manufacturing. I’m not ready for that, but I do think there’s a business opportunity for tier-one suppliers like in the auto industry to drive supply chain management in a direction that provides much better protection from future PPE debacles.
The bottom line for medtech: Supply chain priorities are changing. It’s time to pay more attention to logistics and celebrate the simple over the complex. It’s also time to roll back some focus on sole sourcing, but don’t allow that to take the pressure off because new players are coming.
Governments stand to learn the most from COVID-19, and we should expect change
A lot of ink has already been spilled on the cultural acceptance of government intervention in daily life, the demographics of a population, the impact of generations living together, the prudence and clarity of politicians when we need it most, and a whole host of factors to explain why some countries are suffering more than others. But what interests me is how the setup of healthcare systems contributes to that performance. This reckoning is important because it may give insight into the inevitable reforms that will follow. It will be a long time before we can come close to parsing out the impact of testing on infection rates in order to put mortality into perspective, but I do want to put forth some speculative hypotheses.
In China, Taiwan, Singapore, South Korea and the U.K., central control has proven very useful. While the jury is still out, is it possible that the strong degree of central control in these countries allowed for rapid triage, load balancing, thoughtful deployment of resources and an all-hands-on-deck mentality?
Two of the hardest-hit countries, Italy and Spain, are also the two countries with a highly regionalized healthcare system. When dealing with this global pandemic that’s resulting in local hotbeds of infections, how well does a system fair when it lacks central control and is fractured by geographic lines?
Germany seems to be doing very well; their system is perhaps the best equipped in terms of testing infrastructure, ICU beds, ventilators, staff, etc. Doctors are largely employed by the facilities in which they work, which puts more control in the hands of the hospitals. While they have a federated system with multiple payers and many private interests in delivery, they also have fairly strong central standards. Is this the right mix of central control and local flexibility?
Moreover, the marginal dollar in U.S. healthcare has recently been in end-of-life care and rare disease, but the most vulnerable in this epidemic turn out to be those with generally poor health, like patients with diabetes, obesity and uncontrolled blood pressure. It seems reasonable to expect a shift in priorities.
The bottom line for medtech: We need more consistent standards. I don’t think we need central control to get better control over where the marginal dollar is spent, but as priorities shift, value propositions need to shift and opportunities will form.
I expect to see a reprioritization, with funding moving from rare diseases toward addressing chronic conditions with poor outcomes. But would it be naïve to assume that this won’t also force a reexamining of value in the device purchasing process? If so, medtech companies would be smart to ensure that they’re clearly aligned with these shifting priorities.
For more ZS insights on the impact of COVID-19, visit zs.com/COVID19.