Aging and Chronic Care are a Global Issue
In the United States, chronic conditions consume two-thirds of total healthcare expenditures and affect 120 million Americans. In Canada, more than two million people have diabetes, and the total cost of chronic diseases (including lost productivity cost) has reached C$80 billion annually. The EU spends approximately €74 billion each year on treating cardiovascular disease. Chronic diseases account for 70-80 percent of health care expenses in Denmark and comprise eight of the top eleven causes of hospital admissions in the U.K. In Japan, the proportion of the population aged 65 years old or over hit 20.8 percent in 2006, and this age group consumed more than 50 percent of the national health expenditure. As this population is to increase to around 40 percent of total Japanese population in 2050, their share of the healthcare expenditure will go up much high by then. In China, the world’s biggest developing nation, more than 88 million people are seniors. Their aging and chronic disease problems pose a serious threat to the already fragile social welfare system.
Care Model Migration: From Institution to Home
The current care delivery models are unsustainable over the long run. The acute care model pays for quantity, not quality, and directs too many resources to hospitals instead of more cost-effective alternatives. As a result, it is error-prone, costly, and inconvenient. At the same time, the long-term care model is fraught with its own problems. In the U.S., a shortage of care workers, the threat of rate reduction from the insurance industry, the high cost of institutional long-term care, and a lack of quality standards have plagued industry growth, threatened care quality, and distorted consumers’ perceptions. The care system must shift from acute to preventive care. The preventive approach promotes consumer awareness of personal health risks, encourages clinician-assisted wellness and lifestyle-changing programs to prevent or delay the onset of chronic diseases, and strives to reduce hospital stays and emergency room visits. The system must provide consumers with easier, less costly, and more convenient access to healthcare services and allow them to select the type of access that meets the needs of their lifestyle, personal schedules, and values.
Consumers’ homes thus will be at the center of this new care model, which will run parallel to existing systems in the near term and play an increasingly bigger role over time. This new model emphasizes wholesome diets, frequent exercise, and routine self-checkups and self-monitoring of vital signs such as weight, blood glucose levels, blood pressure, and respiratory conditions. For severely debilitated patients, home monitoring provides a more cost-effective approach than hospital stays or rehabilitation in a long-term care facility. Delivery of such care will rely heavily on modern communications infrastructure and applications such as broadband and wireless, on home medical technology and telemedicine applications, and on databases and software that provide critical decision support to clinicians and consumers themselves. This care model is what we call “e-Health.”
New Business for Global Service Providers
What Does e-Health Mean to Service Providers?
e-Health first and foremost is an infrastructure boom to service providers. This type of infrastructure investment opportunity comes along about once every twenty years or so for service providers, and their expertise in service provisioning, bandwidth management, and technical support give them a unique advantage in the e-Health space. They can add new customers such as hospitals, integrated health systems, and large physician groups to their list of business clients as these entities look to upgrade their telecommunication infrastructure, revamp clinical information systems, and digitize their medical records. Providers could even tap into government money or contracts. State governments invest in regional health information organizations (RHIOs) to enable information archiving and sharing. Remote clinics receive federal government grants to build telemedicine networks. In September 2007, the FCC announced a $400 million program to help rural clinics and hospitals get wired for broadband. The EU governments are also investing heavily in e-Health infrastructure and focusing on electronic health records (EHR), clinical information systems, cross-border care connectivity and coordination, and telecare and telehealth technologies.
But a potentially bigger opportunity looms in the consumer market, where more than 90% of households in developed countries own a telephone landline, 89% of consumers in the U.S. have a wireless account (some European countries have even higher numbers), and more than 60% of U.S. households subscribe to pay-TV services. Service providers have a tremendous opportunity to leverage the touch points that they have with their subscribers and introduce new care services that are more convenient, less costly, and of the same quality as in a clinic.
Service providers have every reason to think about such opportunities. e-Health will be another value-added service in their portfolios and has the advantages of consuming low bandwidth and earning high ARPUs (Figure 1). They also need to do more than offer a “dumb pipe” to their subscribers. After all, bandwidth will sooner or later hit the commodity mark (Figure 2), as is happening in Japan and South Korea already. To avoid the commodity trap, providers have to come up with innovative services that build a long-term relationship and provide an enhanced level of service and value to their customers. e-Health service fits nicely within these requirements if deployed and targeted correctly.
Value-added Services
Average Monthly ARPU
Current Value-added Service Offerings
Internet Security
Free or $5.00
Converged PC-TV Applications
Free with equipment rental
Caller ID on TV
Free or $2.99-$3.99
Digital Home Support Service
$5-$20
Home Security Monitoring
$9.99
Online Storage and Backup
$5-$10
Games-on-Demand
$10-$15
Examples of e-Health Services and Current Market Prices
Personal Emergency Response System
$29.99
Vital-sign Monitoring/Tracking
$79-$200
Figure 1 Value-added Services and ARPU Potential
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Figure 2 The Commoditization of Bandwidth
What Should A Service Provider Know About e-Health?
For starters, consumer e-Health represents a different service type from traditional broadband value-added services. Not only are customer motivations and needs different, broadband service providers would require external help from home care agencies, physician groups, or pharmacists for clinical expertise. On top of these challenges, they would need to figure out the most appropriate pricing models and financing schemes, and they would likely also have to engage insurers at some point as part of the revenue model.
These requirements may sound tricky and even overwhelming at first glance, but service providers have had success in the past in forging business partnerships and rolling out innovative services just as complex as e-Health. The telcos’ foray into digital TV, although still in the early deployment stage, exemplifies their ability to acquire content from rights owners, settle city franchise issues, and launch aggressive marketing campaigns to educate and inform consumers. In the future, once their subscriber numbers for DTV reach a satisfactory level, they will court advertisers into business arrangements that leverage advertising to subsidize the services. Such an undertaking would be similar to the task of engaging insurers in the e-Health case.
Of course there are some unique characteristics of the healthcare industry that providers must consider when planning their business. Here is a list of do’s and don’ts.
Do
1. Understand your subscriber base, solicit their healthcare needs, and segment them based on geographic locations
2. Understand local healthcare resources and identify care providers with the resources and motivation for long-term partnerships
3. Press hardware manufacturers to improve design and user experience and lower costs
4. Start slow, build a replicable model, and refine it as the rollout expands
5. Encourage users and providers to get health insurers interested and build good ROI cases to entice insurers
6. Conduct more viral marketing and targeted advertising than mass-media advertising; leverage care provider relationships to get referrals
7. Ensure patient data security and respect patient privacy
8. Foster standard interoperability discussion and implementation
Don’t
1. Don’t assume anything; base your decisions after consulting with care providers and not on past experience
2. Don’t try to lock patients into a long-term contract, instead give them options and experience first
3. Don’t try to sell patients a complete package up front, instead give them options to buy in incrementally at first and get comfortable with the e-Health experience
4. Don’t over-engineer hardware or service components; most patients are not tech-savvy
5. Don’t discount patient noncompliance issues; unlike TV or broadband services in which nonusage will not reduce revenues for providers, noncompliance will result in clinical consequences and low ROIs that will slow down the adoption of the care model among consumers and insurers
6. Don’t treat patients the same way as normal customers of broadband services; healthcare is personal and patients need a personal touch from service providers
7. Don’t assume payers will be automatically interested: they are a tough crowd to please; don’t assume they will move fast: they are resistant to policy changes in the short term
8. Don’t expect technology vendors to agree on a common set of standards in a quick manner; interoperability is as complex in e-Health as in the digital home
Quantify e-Health Opportunities
The e-Health infrastructure market offers service providers short-term revenue opportunities. Those with a great vision, however, should start drafting business plans, forging partnerships, testing hardware and software, and conducting field trials for the consumer market. In fact, major service providers in the U.S. have held some discussions with healthcare partners on service concepts, business models, and care delivery details. In Europe, incumbent telcos and wireless operators are more active than cable and satellite TV providers in exploring home-care opportunities. Figure 3 highlights several wireless operators’ moves in Europe and Canada.
Wireless Carriers / Vendors
Wireless Health Monitoring Initiatives
Vodafone
1. Exploring a short message service to send health-related reminder messages to improve patient compliance with treatment regimens, medication intake, and disease prevention
2. Exploring the use of mobile phones as a reminder system for Type I diabetes care
Orange
1. Business Service unit announced in February 2007 a partnership with Ottawa-based VaaSah, Inc., a wireless healthcare application developer and monitoring service provider
2. Formed a partnership with IgeaCare System in August 2007 to develop health monitoring solutions for the home care market in Canada as well as in the U.S.
Ericsson
1. Its German subsidiary is involved in the EU’s HS24 project. Funded through the EU’s eTEN program, the project developed an innovative mobile healthcare system that consists of body-area networks (BAN), 2.5/3G wireless broadband communications infrastructure (GPRS/UMTS), and wearable medical devices. Two project trials were reportedly successful – one in the Netherlands and one in Spain
Qualcomm
1. Supports software development on its mobile BREW platform
2. Invested in a personal health Mobile Virtual Network Operator (MVNO) called LifeComm in August 2007, and the service is expected to go live sometime in 2008
TELUS
1. Working with Research In Motion (RIM), the BlackBerry maker, to support a pilot study launched in February 2007 and orchestrated by two academics to monitor 130 diabetic patients’ daily activities and collect their physiological data – these data are transmitted live via the TELUS network and presented through a Web interface to caregivers, patients, and their relatives
Figure 3 Wireless Carriers’ e-Health Initiatives
According to Parks Associates’ estimates, 7.2 million consumers will use home health monitoring solutions in the major countries of North America and Western Europe in 2012, up from less than 500,000 in mid-2008. They are either fragile seniors with or without debilitating chronic conditions or younger consumers with a strong desire to self-manage their personal health.
2
Figure 4 The Number of Users of Home Health Monitoring Technology (2008-2012)
Not all users will sign up for a home health monitoring service from their broadband service provider, but the healthcare industry represents a new market opportunity for providers and the demand could last several decades as the global population ages. The e-Health model will evolve, and consumers will continuously expand their role in their own personal health. As one of consumers’ touch points for many home-based services, global service providers will have to make this strategic investment.
About the Author
Harry Wang studies the consumer electronics and entertainment service industries with a focus on portable and mobile CE hardware, software, and associated applications and services. He is also the lead analyst for Parks Associates’ digital health research program. Harry has presented his research in numerous industry events including CES, Digital Hollywood, Photo Marketing Association Annual Show, American Telemedicine Association Annual Show, World Health Congress, and CONNECTIONS™.
Harry earned his MS degree in marketing research from the University of Texas at Arlington. He also holds an MBA degree in finance from Texas Christian University and a BA degree in international business from Guangdong University of Foreign Studies, P.R. China.
Industry Expertise: Digital Health Products and Services, Digital Media and Advertising Technologies, Connected Home Software and Hardware Requirements, Fixed and Portable Consumer Electronics, Digital Imaging Products and Services
About Parks Associates
Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions.
The company’s expertise includes new media, digital entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, consumer electronics, and home control systems and security.
Each year, Parks Associates hosts executive thought leadership conferences CONNECTIONS™, in partnership with the Consumer Electronics Association (CEA®), and CONNECTIONS™ Europe. In addition, Parks Associates produces the online publication Industry Insights in conjunction with the CONNECTIONS™ Conference series.