monitor group

The Future World

of Healthcare

KNOWLEDGE INSIGHT ACTION

KNOWLEDGE INSIGHT ACTION
 In October 2005, the Monitor Group sponsored a workshop
to discuss the implications of emerging innovations in healthcare.
The participants were prominent thinkers from a diverse group
of healthcare-related organizations including hospitals, research
centers, pharmaceutical, academia, insurance companies, venture
firms, and manufacturers of advanced technology products,
among others.

The workshop was a two-day event that kicked off with an introductory
presentation by the Global Business Network’s Steve Weber on the topic of
Future Scenarios in Healthcare (Global Business Network — GBN — is a part of
the Monitor Group.) His future scenarios were decidedly high-level,

BY 2010,
necessarily incomplete, and more conceptual than data-intensive.
CUSTOMIZED MEDICARE The presentation highlighted the overlapping boundaries of health-
OF SOME MEANINGFUL care, and introduced the environment of multiple intersecting uncer-
KIND, WILL IN ALL tainties that exist today. He laid out the future healthcare issues that
LIKELIHOOD, BECOME were likely to be relatively certain (pressure for transparency, account-
A REALITY ability, and responsibility; no shortage of demand and customers; new
understandings of biology and pathophysiology), and those that are
most subject to unexpected change.

Using scenarios as a platform to discuss the future of healthcare, Steve showed

the difference between planning for one future through forecasts, versus plan-
ning for multiple futures with scenarios using both “Knowns” and “Uncertain-
ties.” Then he reviewed some areas where predictions in the past had been
dramatically off. For one: that IT would be a major contributor to efficiency
in healthcare and that software would advance rapidly. The truth of the matter
is that things have moved much more slowly. The electronic medical record is
still a work-in-progress, “in silico” bio-pharmacology remains a very early stage
research tool, and a typical MRI looks like something from the Smithsonian
when compared to Playstation 3™ or Xbox™.

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 A word of caution, according to Steve Weber: “This is a world that tends
to move more slowly and incrementally than we expect. Every ‘brave new
world’ prediction tends to be off by a few decades, at least. And, the notion of
a ‘singularity’ in this space is just plain silly. Yet, there are some things that we
can say with certainty.”

For example, by 2010, customized medicine of some meaningful kind will

in all likelihood become a reality. There will be continuing increases in life
expectancy based on better healthcare and practices. Cloning and ethical impli-
cations will explode on the scene of public debate. Microbial genomes will be
used for the purpose of toxic clean-up.

THREE SCENARIOS

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Steve concluded his scenaric vision of healthcare with three alternative plau-
sible scenarios: a patient centric, a producer centric and a policy centric world.
The following lays out each of these scenarios, and our participants’ thoughts
on what emerging technologies and innovations will support them, as well as
their implications on various participants in the value chain.

Patient Centric World (“Patients”)

Imagine a world where personalized medicine means greater

individual information and control of healthcare decisions.
A world where risk is shifted from employers and govern-
ments to individuals, who have more diagnostic information
about themselves, including some understanding of disease
propensities and “programmed”
morbidity. As a result, they
create a segmented and
sophisticated set of demands,
which are addressed by new treatments, causing
a major set of challenges to the healthcare sector.
These challenges will emerge first from wealthy
patients, second from the governments, and
third from the global middle class. This creates
significant changes in sector priorities, more
highly targeted approaches, and a surprising set
of innovative financing and risk pools that are
organized around patient profiles, in part by new
intermediaries.

For patients, the driving forces will be: greater

accessibility of disease propensity information,
greater transparency of health data and practices
(including clinical trials), R&D priorities, and
the performance of various healthcare players.
Increasing costs to individuals, with governments

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 and employers pushing cost and risk out to them will be a driving force, as well
as, the psychology of empowerment. Patients will be asked to bear risk and sub-
sequently will want to be armed with more information and expanded decision-
making power. The middle class in both developed and developing countries
will join the wealthy individuals in a vigorous critique of the existing healthcare
business models. Technology will enable the linking of patient affinity groups,
and finance, and commercial creativity will arise from outside of
CONSUMER DEMANDS healthcare per se.
WILL HAVE A
Under the patient centric scenario, consumer demands will
SIGNIFICANT IMPACT
have a significant impact on the future of healthcare. Overall,
ON THE FUTURE OF
there will likely be a demand for more customized and readily
HEALTHCARE
available information, and more personalized healthcare. As
a result, consumers will experience more directive health and
risk analysis and more easily accessible, organized, and integrated user-friendly
medical information — they will demand this. Consumers in the future will
look for more alternative medical options such as: kinder, gentler home-care
models; and more economical, efficient options with access to experimental
treatments; and broader insurance coverage, as well.

Additionally, other stakeholders will have new demands. Payers may try to
limit the scope of coverage, while consumers will be looking for broader cover-
age. Privacy issues will need to be addressed, while the regulators will likely
be more risk averse. As a result, consumers and regulators will be in conflict.
There will be a need for government to prevent exploitation as more care
providers require access to information and patient profiles. Finally, pharma-
ceutical companies will shift to a consumer market.

There will be the emergence of a focused delivery system. An entirely new

performance measurement system with specialization networks for specific
conditions will evolve, as well as, a need for real-time reimbursement, and
more extensive diagnostic and surgical devices.

We will see one-stop shopping centers that combine prevention and treat-
ment. Google-types of search engines for medical advice will emerge, as will

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software to manage medical expenses, and technology that enables instant
home healthcare access, or telemedicine. Technology will evolve in medi-
cal education as well, with more multimedia channels for teaching. New
advances in medical technology will create “always connected”, implanted,
monitored devices. And, in the financial realm, a 401(K)-like medical savings
plan will become the norm.

In the future, four new healthcare-related technology clusters will enable

significant innovation and change. First, patient-centric information technol-
ogy will enable patients to obtain information and make choices through a
centralized database. This will also allow for information and care manage-
ment tracking. This information database will be used as the basis for financial
and medical decisions. The second technology cluster includes new imaging
equipment, diagnostic devices, wireless devices, and home care technology.
The third technology cluster that will impact patients in the future is public
health technology. This cluster will initially be centered on bioterrorism but
will have other implications for the healthcare system. In parallel, a national
identification system will be created to account for individuals and their
medical information. Provider centric information technology is the fourth
technology cluster that will emerge as a major factor.

Technology will serve patients in several ways. Hardware oriented services

will have more options, both low cost and high cost, depending on the target
audience. Expert consultations will be enabled by a more exacting diagnosis
of patient problems and better alignment of doctor and patient. Providers
will recognize and take advantage of the new open competition in the market.
In addition, more recruits will be needed for clinical trials by the pharmaceu-
tical companies.

The emerging technologies will pose risks as well. The inevitable disinterme-
diation of primary care doctors by technological advances will depersonalize
the healthcare experience for patients to some degree. On the other hand,
healthcare providers and producers who perform negatively will be punished
in the open market, enabled by technology and information flow. Insurance

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 companies will be threatened by the free and available consumer data. Privacy
issues and data protection issues will continue to run a risk for many years,
and fragmented or incorrect data could result from glitches in the technology
system and lead to further litigation.

Producer Centric World (“Producers”)

Imagine a world where healthcare producers experience incremental but

unrelenting pressure on pricing, which leads to aggressive globalization of the
value chain for drugs, devices, and services. Distributed centers
of manufacturing and marketing empower experiments
with new models around research, development, and
distribution targeting the currently under-served
emerging markets. This eventually has a ripple
effect creating new forms of pressure on the
more affluent country markets.

The driving forces behind “Producers” will

be that healthcare, while a global issue, is
remarkably unglobalized. That is, there will be
experiments with new business models in emerging
markets, where local players have a closer understand-
ing of, and more fundamental need to, serve the poorer
markets. Research, manufacturing, and process expertise will
spread and allow new players to move up the value chain, sometimes slowly
but sometimes surprisingly quickly. Commercial creativity and scientific
expertise is more widely distributed around the world today than people are
willing to acknowledge. The demand from the growing middle class in Brazil,
Russia, India, and China will become an economic magnet and a political force
that developing country governments will ignore at their peril.

Under such a scenario, producers will experience a number of consumer

demands that will require immediate response. One response will likely be the
creation of a “smart card”, much like that under the previous scenario, which
will have implications both in the product and the business model spaces, not

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 to mention policy . . . If every patient has a personal medical identification card
with all of her healthcare data, there will also be a greater demand for privacy
and privacy protection. Significant systems will need to be put in place in order
to protect patients. Banking privacy systems may be an interesting model to
look to for an example here; imagine a medical ATM someday. The smart card
will relay diagnostic results to help connect to healthcare providers anywhere in
the world. As a result, a decentralized and global system will empower families
that are remote.

Customers will also demand more wellness care, and producers

WE ALL KNOW THESE will need to create patient health maintenance and management
CHANGES ARE systems in order to provide a central system for prevention, screen-
HAPPENING … BUT ing, dietary counseling, and other health concerns. In this same
DECIDING HOW TO vein, a tiered healthcare delivery system will emerge with hospital
ADDRESS THEM IS care only for the most severe illnesses, treatment centers for mild
MORE CHALLENGING. illnesses, and doctor visits only on specific occasions. The new
technology may make some types of doctors virtually obsolete.

All of this will have financial implications as a more disaggregated structure

emerges. The low-cost facilities will open up a host of opportunities. Consum-
ers will ultimately be empowered to put their own healthcare management
plan together, which will allow for more granular and complex structures and
systems. The pricing pressures coupled with the ability to loosely connect other
global regions, will spawn new innovations.

Paradoxically, more specialized and more global companies will emerge. A

major disruption — such as a natural disaster — would now have a drastic effect
on the entire healthcare system since it would be more networked, both from
policy and economic perspectives around the world. Such networking implies
additional standards and inter-operability on the IT side.

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 The key technologies needed to support products and services of the future
will be classified in one of four categories:

These technologies include those responsible for connectivity, access and input,
transformation, and a “matrix” of complete medical data analysis and collection.
Specifically, these technologies will give information about the patient; provide
reliable systems for connecting patients with distribution channels; enable
high-tech public health; and connect individuals, organizations, and other
platforms around the world in an integrated system.

There are myriad risks and opportunities posed by this scenario for healthcare
products and services. Opportunities include accessible data, and an impetus
to accelerate change, along with a decrease in the uncertainty of specific thera-
pies, as the healthcare system achieves a better understanding of disease. The
changes in technologies will create immediate access to information on out-
breaks and an increase in objectivity. Risks, however, include complex issues
around privacy for the individual and legal liability for producers. Addition-
ally, the increase in data availability creates the risk of data overload, a delayed
response to natural disaster, and many bureaucratic policy issues.

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Policy Centric World (“Politics”)

Imagine a world where politics begin to overshadow science and, to a certain

degree, market forces. A latent but diverse coalition that includes: drug
access, social movements, business and state level healthcare providers, global
and national public health authorities, national security professionals, and the
“competitiveness” lobby come together to pull governments into a sustained
interventionist role. Transparency, value for money pressures, and govern-
ment contracting will lead to consolidation in significant parts of the healthcare
economy, and a relationship with the government that is reminiscent of the
defense sector will emerge.

The driving forces behind this scenario will be pressure for increased transpar-
ency in healthcare as it is in many high margin, salient industries, from music
to mutual funds. Cost escalation will eat up a greater percentage of the GDP
and private restructuring will prove insufficient again and again. Demography
will become less favorable, with support ratios declining just as chronic,
degenerative, disease profiles worsen. The concern about the global military
applications of life sciences and its impact on economic competitiveness will
increase. Finally, the underlying logic of market failure in this industry will be
profound, hard to fix, and a significant justification for political action.

Under this scenario, consumer demands will affect politics from a variety of
angles. First, policy makers will experience increasing demand from special
interest groups. Forming political cohorts based around a specific health issue
will have implications for health delivery policy. Internet usage across the
world will bring policy changes as well. For one, online drug purchasing will
create a market for best world-price drugs. In addition, the readily available
online medical information will create a more demanding and informed con-
sumer. As a result, the consumer demand for preventative, individual-specific
medicine will increase. This will pressure policy makers for greater innovation
in healthcare delivery, disease control, and lower cost for medical care.

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 Consumers in developed countries will demand that policy makers fund more
ambitious, information-driven research supported by new, cutting-edge tech-
nologies. For developing countries, there will be push for telemedicine options
and greater medical access. Overall, consumers will expect the demystification
of healthcare — simpler communication and information.

Other stakeholders will influence policy makers, as well. Privacy insurance will
likely emerge as a way to prevent identity theft. Insurance companies will in-
creasingly hedge by age. Physicians will divide into two camps, interventional
and cognitive. International groups of nurses and physician “extenders” will try
to take the cognitive portion. In terms of intellectual property, the government
and big pharma will capture more control, and generic medicines will be more
prevalent, with greater formulary control.

The healthcare systems and procedures that emerge under this scenario
will likely stifle innovation. Because systems will have more compatibility
requirements in this future scenario, they will not necessarily be faster,
cheaper, or better — at least in the short term. However, as major medical
centers become global, they will create an instant diffusion of innovations.
Central technology infrastructure will impact how medical records are kept
and impact how care is given.

Key technologies will include global cross-cultural disease management

systems and an electronic risk profile that is created for an individual at birth.
Broadband, remote diagnostics, remote sensing, tele-sensing, and tele-surgery
will become a reality, as will predictive diagnostics that link genomics to a
large database. We will likely see innovations in the area of novel therapies
like medical nanotechnology and stem cell therapy. Gene function detection,
device miniaturization, and regenerative medicine will have a host of implica-
tions on how healthcare is delivered under this scenario.

Consumers will drive the medical technology of the future. Innovations in

compliance management, mechanical mobility support, and wearable dispens-
ers will empower consumers in new ways. Information technology will evolve
in directions that allow for better data mining for disease management, and easy

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linking of genomes to disease state; thereby leading to earlier diagnosis, preven-
tion, and treatment.

These new technologies in healthcare will create different risks and opportuni-
ties. Take implanted sensors, as one example. These will create an opportunity
for real data on the performance of drugs and devices. In addition, they will
allow for continuous data tracking of individual patients, integration with the
delivery of multiple medications, and an active “alert” process for a network of
medical professionals. At the same time, these implanted sensors will create risk
in the area of privacy and face challenges in regulatory approval.

What the Future Holds

Some themes hold true for all three scenarios. Information technology will play
an increasingly important role, with customers being much more knowledgeable
about many of the healthcare options available to them. Customer empower-
ment seems nearly certain. Its consequences are less certain. Healthcare markets
will work more effectively when customers are able to select, with a reasonable
degree of confidence, the ideal healthcare option for them. But information
technology by itself will not solve all the problems of incomplete and imperfect

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 information, of opacity of data, and the judgment calls that are part and parcel
of medical practice. Issues of privacy and security will remain a critical ele-
ment for healthcare. A general trend toward wellness and preventative care
will likely continue, and a demand for high value-added services in particular
segments will impact the entire industry.

It is tempting to imagine that there exist technological fixes to the complex

problem of delivering healthcare to an increasingly interconnected and inter-
dependent global customer set. And technologies will play a central role in
how healthcare is delivered in the future. But there is a strong sense that it
is changes in the business models that will create a bigger impact. If the near
future is defined as year 2012, most, if not all, technologies that will create truly
significant impact already exist. What is needed are new ways of applying them
to solve real problems – and harnessing their potential in a way that delivers
benefits to patients in a cost-effective way. In the rapidly evolving world of
healthcare, there will be winners who can see through the complexities and
uncertainties posed by the intersecting trends and will act to “seize the mo-
ment.” Commercial creativity and the resourceful integration of technologies
into what is, and will remain for the foreseeable future, a very human practice,
point the way forward.

Many thanks to all of our participants who contributed

to the ideas in this paper:

Mitchell Adams, Vicki Amalfitano, Michael Baltay, Joseph Batista, Thorir Bjornsson,
Ashok Boghani, Paul Boni, Lynn Carruthers, Bhaskar Chakravorti,
Pravin Chaturvedi, Guy Danielo, Andrew Epstein, Valerie Fleishman, Sarah Fuller,
Alain Hanover, Gordon Harris, Robert Hughes, Ronald Jonash, Ralph Judah,
Kate Kane, John Lebbos, Michael Mathur, Jim McDermott, Chris Meyer,
Irvin Modlin, Gordon Moore, Cary Pfeffer, Jonathan Rosen, Abir Sen, Steve Spear,
Steve Weber, and Branda Wilhoite.

Additional thanks to: Ben Jonash, Karen Long, Erin McDonough, Michelle Medico,
and Mary O’Brien for helping to make this workshop a success.

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 monitor group
KNOWLEDGE INSIGHT ACTION

Monitor Group For more information, please visit: or contact:

Two Canal Park Nicole Friel
www.monitor.com
Cambridge, MA 02141 617-252-2197
617-252-2000 nicole_friel@monitor.com

KNOWLEDGE INSIGHT ACTION