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IoT in healthcare: Creating value through collaboration

Adarsh Adula,

Lead Consultant

Published: April 24, 2018

As the US Healthcare goes through a fundamental shift with policymakers and payers demanding to curb the costs, the focus is increasing on outcomes rather than on volumes for incentivizing the physicians. As a result, the payers and providers are working together more than ever to achieve the goal of reducing the costs by improving the quality of care, speeding up recovery, reducing re-admissions, etc.

If you combine this with the enormous amount of data that can be harnessed through the IoT in healthcare industry,wearables, ingestibles, remote monitoring technologies and many more of such latest innovations in the field of healthcare, it eases the path in achieving each one of the goals stated above.

One such area where big cost savings can be achieved through IoT applications is adherence to medication. The non-adherence costs are estimated to be ~$290 billion annually. According to McKinsey, in the U.S, 40-70 % of patients, by disease condition, are non-compliant. This cost is considerable and is quite visible through the following scenario:

Total annual health care spending for a diabetes patient with low medication adherence ($16,499) is almost twice the amount for a patient with high adherence ($8,886). Also, diabetes patients with poor medication adherence have a 30 percent yearly risk of hospitalization, as opposed to a 13 percent risk for those who accurately follow prescribed guidelines.

This thus becomes an attractive target for the payers and the pharma to identify IoT-based solutions to drive the adherence up.

The question now is of who will be the primary player in the value chain of providers, pharma and payors, and how will they realize the value of IoT solutions, are yet to be answered with clarity in the industry. Though the initial investments of tracking adherence through IoT would have to be borne by the pharma, the actual gains will only be realized in long-term with reduced re-hospitalization and medication costs, as the adherence increases. But the bigger issue is, these gains are mainly for the payors and thus the pharma (Medtech) might not see gains for themselves.

For example, the most use of the data on adherence habits of patients captured through connected devices is for the payors for gaining insights on patient behavior. This requires the data to flow from pharma to payors. Similarly, any non-adherence has to be immediately flashed to the consulting physician to direct corrective measures, if any, to minimize the effects. In both the cases, the real value lies in collaborative initiatives that require leveraging data from multiple sources. Organizations that don't have these capabilities to integrate data and share insights would soon be reduced to being low-value commodity players in the value chain, while the ones controlling the data will be the new kingpins.

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