IT revolution coming to local health care

Is health IT the beginning of a revolution or just another bubble?

That was the question that Marcus Chandler, an attorney at Barnes & Thornburg LLP, put to me Tuesday during a panel discussion at the Life Sciences Lunch, an event hosted each month by the law firm and the Indiana Health Industry Forum.

It’s a good question. With $1.2 billion in venture capital flowing to health information technology companies last year—more than double the amount invested the year before—it’s natural to think back to the dot-com bubble that burst in 2000. I told Chandler that it’s plausible—perhaps even likely—that health IT is oversold.

But in spite of that, I still think we’re at the beginning of a health IT revolution, for three reasons: economics, demographics and the state of technology, itself.

The economic case for hospitals and doctors—who account for more than 50 percent of all health care spending—is clear. Health care costs have risen at twice the rate of inflation for about 40 years. Now, employers and governments are finally crying “Uncle!” and blocking attempts by hospitals and doctors to boost their revenue. Hospital systems know they’re going to get less money per patient, which is why they’re trying to slash their expenses 20 percent.

I told the audience at the life sciences lunch that IT has a pretty good record of achieving efficiencies in most other industries. So that makes IT the obvious candidate for helping the health care industry tighten its belt.

Closely related to the economic case is demographics. The federal Medicare program faces insolvency in the not-too-distant future because the Greatest Generation is living longer than any before and the baby boomers are reaching retirement age, when their health care needs go up.

At the same time, lots of boomer doctors and nurses are retiring or soon will be. So health care providers need to care for more people with less money. Technology, such as that provided by Indianapolis-based VoCare Inc., is one way to extend the reach of health care providers without the need for a thousand fancy new buildings.

“We’ll be able to increase productivity without adding people,” said Raul Zavaleta, CEO of Indianapolis-based Indigo BioSystems Inc., which is selling software that automatically reads slides in pathology labs.

“We are automating analytical labs," he added. "They don’t have enough people doing this, they can’t find them, reimbursement is going lower, and they have to automate.”

There’s also strong evidence from technology itself that it’s ripe for revolution. In December 2011, two PricewaterhouseCoopers consultants, including local boy Brian Williams, wrote a fascinating article drawing distinct parallels between the state of medical technology now and the state of information technology in the early 1980s—on the cusp of the IT revolution.

There had been plenty of IT development from the 1950s to the 1980s, but it was big, expensive and not well connected. The industry competed on new features, but in the '80s those features began to lose their pricing power in the marketplace.

“Like health care today, information technology a generation ago was part of a classically maturing market that was about to enter an extended period of disruptive innovation,” Wasden and Williams wrote in In Vivo magazine.

Consider health care today. Drugmakers have been stymied because the FDA—and increasingly payers—are simply saying no to “me-too” products. Device makers, too, are being pushed to go beyond the small iterations they produce each year.

The same is true among hospitals. They’re still set up to provide acute care, but the health plans that are their customers are far less interested in paying more for the latest surgical equipment or high-end imaging technology.

What customers want instead is for the health care system to help keep patients healthy.

“There’s going to be more focus on the health and less on the care,” St. Vincent Health CEO Vince Caponi told me in an interview last week.

One of the only ways to do that is to use IT to track patients when they’re not in a health care setting and to give them mobile tools, like the WellDoc diabetes intervention system, to help them manage their diseases.

The established health care companies that figure out how to offer an entire service package to consumers will win in the end, contend Wasden and Williams. And the health IT companies that help them do that will win, too.

So those are my thoughts. How would you answer Chandler's question about health IT?