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It’s Time to Define the ROI of Digital Health Tech for Patient Care

by David Lee Scher , MD 01/14/2013 7 Comments

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David Lee Scher, MD provides his insights on why it’s time to define the ROI of digital health tech for patient, particularly in the patient care industry

 Alere’s purchase of Medapps prompts me to discuss a question posed to me daily, “What is the ROI of digital health technologies?”  Discussions in the Digital Health Linkedin Group were surprised at the purchase price of ‘no greater than $22M’ for Medapps.  The real issue of these technologies in my mind is not as much what the potential market is as what the ROI is. I am not going to apply economic theory or formulas in this post, as I have no formal training in economics.  However, I will make this a qualitative discussion because it is a fundamental which is relevant to the adoption of such technologies, as well as furnishing some examples.

Some work has been done in estimating the ROI of remote patient monitoring by the  Center for Technology and Aging.  Components to be included are labor costs, technology costs, and the cost savings. Savings might be estimated based on lower readmission rates and lower technology costs among other things. According to a recently released report from IMS Research  “…InMedica, a division of IMS Research (now part of IHS Inc. (NYSE: IHS) attributes slow revenue growth over the last year to poor economic conditions leading to restrictions in healthcare funding particularly in Europe, and ambiguity on the impact of healthcare reform and readmission penalties on telehealth in the U.S…”  What is also discussed in the IMS report is the difficulty in establishing business models via the present reimbursement environment for the adoption of telehealth.

I agree with this assessment. What is not discussed in the summary of the report is the ROI of telehealth.  Much of what is reported in the sector of digital health by financial analysts consists of predictions of revenue, market share, and potential worldwide growth. This is predicated upon adoption rates, real or estimated. The article states in the opening paragraph that “From 2010 to 2011 usage of remote patient monitoring, or telehealth, increased by 22.2 percent as the number of patients enrolled worldwide reached 241,200. However, telehealth device revenues only grew by 5.0 percent from 2010 to 2011; and 18.0 percent from 2011 to 2012…” It highlights the disconnect between adoption and revenue in this new market.

It is interesting as well that ‘remote patient monitoring’ is used interchangeably with ‘telehealth.’  In different industry and scientific communities these might be very different.  Wall St.’s loose definitions of these technologies have significant ramifications and I would submit that all concerned should be more specific when referring to them. Increased adoption might be considered a surrogate for clinical utility by some. However some measurable outcomes, whether they be economic, clinical, or both need to be provided.

I am not advocating for traditional large, randomized clinical trials as some might think, but for some objective evidence, perhaps even examination of crowdsourced data. Adoption occurring even at a slow rate offers clinical experience to providers and increased awareness and education by all stakeholders. Early on, the ROI might not therefore be quantified but nevertheless significant in other ways.

Another perspective on ROI is given in a presentation by Enspektos, LLC examining the ROI of digital health content. It submits that a new metric should be the Return on Health Behavior (see slide 15 and beyond of the presentation).

David Shaywitz, in a recent interesting piece  notes that digital health technologies are behaving in the marketplace more like technology companies than healthcare companies. I believe that this is spot on. He notes that there is a paucity of clinical professionals (only 5% of CEOs of digital health tech companies are physicians, and other healthcare professionals like nurses are non-existent). This might explain the slow uptake of patient care-related technologies. I believe that the absence of clinicians in the development of some of these technologies is a critical error. It is well-known (and cited by Shaywiz) that there is a continuing trend of consumer wellness and fitness technologies dominating the sector. This aligns with the fact that clinical input is much more vital to technologies related to disease diagnosis and management technologies. Shaywitz notes that 20% of the investments made in the sector in 2012 were associated with just five deals.

[See also: Digital Health Funding Increased 45% in 2012]

Regarding the world of medical apps, certainly new business models which incentivize payers (including self-insured entities) and providers to recommend apps and patients to adhere to them will help create a measurable ROI. These apps would be purchased (valuation possibly determined on behavior or outcomes change) and incentives related to premium or deductible costs to the patient.  As a last note, the purchase of Epocrates by Athenahealth is a serious sign that mobile apps do have a significant role to play in healthcare.

[See also: 5 Common Threads for Success for Consumer Health and Medical Apps]

Perhaps it is time to define the ROI of digital health technologies, particularly in the patient care portion of the industry.

David Lee Scher is a former cardiologist and a consultant at DLS Healthcare Consulting, LLC.  He blogs at his self-titled site, David Lee Scher, MD where this article first appeared

Image credit: http://getpushing.files.wordpress.com

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