A Different Kind Of Stagefright

On May 2nd I presented a keynote for the annual conference of The Hospital Association Of Southern California. This was my 3rd time I've been invited there, and it was no less daunting than the first two times. Not because of stagefright, but because the audience members are responsible for so much innovation in healthcare, in one of the most complex states to deliver it, that you live in fear of boring them by giving them information they already know. Happily, all went well. Thank you to Pat Wall and everyone at HASC. I can relax for the rest of the year now.

How WalMart Is Disrupting Healthcare In A Lateral Way

10 years ago when I first started covering Walmart, most people thought that Walmart would change healthcare by leveraging it's stores into healthcare centers/retail clinics. At the time Walmart had nearly 4000 stores, and 125 million people visited those stores every month, so if they were actually able to pull this off, not only would they be able to dominate the retail healthcare space, but indeed much of healthcare.

Today, Walmart is poised to change healthcare delivery, but not in the way we all thought they would 10 years ago. Now they can change healthcare by sending their nearly 2,000,000 employees to selected hospitals and clinics across the country. It's a program they call Centers of Excellence (COE). And if it catches on, and other companies adopt it, it could radically change healthcare delivery NBA real source of disruption two hospitals outside of the COE system.

I've often argued that Walmart is not really a store, it's a data company masquerading as a store. Over the last 10 years Walmart has studied healthcare data regarding its employees, and found that a large portion of their employee healthcare expense is the treatment of chronic conditions.

So Walmart set up a program to treat these conditions at hospitals around the country known for providing high quality/cost efficient care for these particular maladies. This includes heart, hip, spine, and knee surgery, but has been enlarged to treat other conditions.

Here is Walmart's own reasoning for the COE program-

"Walmart started offering this benefit in 2013 and our data tells us we are making a difference for our people, but we want to do more. That’s one of the reasons for adding more eligible medical facilities to the program. Other reasons these medical facilities were selected are that each facility:

• Fosters a culture of following evidence-based guidelines, and as a result, only performs surgeries when necessary.
• Structures surgeons’ compensation so they are incentivized on providing care based on what’s most appropriate for each individual patient and looking at surgery as a last option.
• Is geographically located throughout the country to provide high-quality care to participants in one of Walmart’s health benefits plans."

Mayo Clinic in Minnesota is a Walmart center of excellence. Mayo is providing healthcare for Walmart employees for several types of cancer, including breast, colon, lung, prostate, and rectal. On the Mayo website, they state the following:

"If you have received a diagnosis of breast, colon, lung, prostate or rectal cancer, you may be eligible for enhanced benefits including:

• Medical record review by Mayo Clinic cancer experts to determine if you would benefit from travel to Mayo Clinic
• On-site evaluation at Mayo Clinic, if recommended
• Travel, lodging and daily allowance benefits for you and a companion caregiver to make your stay as comfortable as possible"

In other words Walmart has determined that it is less costly for them to send an employee and a companion to Mayo Clinic for treatment, than it is for that employee to receive treatment locally. Walmart wouldn't do this if they didn't have the data to back this up. I've included a list at the bottom of this post of the procedures that Walmart will cover at a center of excellence.

For the last four or five years this program at Walmart has been voluntary. But at the beginning of this year it appears Walmart has made a change to at least certain types of treatments. From the Northwest Arkansas Democrat Gazette -

"Starting Jan. 1, Walmart Inc. will require employees needing spinal surgeries to travel at the company's expense to one of eight designated hospitals for the operations. Walmart, which is self-insured, says the program that has been voluntary since 2013 has cut down on unnecessary procedures.

The Bentonville retailer will pick up the tab for the surgeries and all related travel expenses for patients on the company's health insurance plan, including a caregiver.

The mandate is a change to a program that until now was completely voluntary. Under the program, covered employees may choose to have a number of procedures, including transplants, heart surgeries and knee and hip replacements, at one of the approved hospitals with all expenses paid. Participation in the program will still be voluntary for these other types of surgery.

Walmart spokesman Justin Rushing said the retailer chose to mandate travel for spinal surgeries after finding that about half of those who chose that option learned they didn't need surgery after all."

Not only is Walmart seeing higher quality outcomes at their Centers Of Excellence, they are also saying that sometimes surgery is not required at all.

Here is where things get interesting in a larger sense. Walmart currently employs about 2 million people. If Walmart has a great deal of success with their Centers Of Excellence program, other large employers will surely follow.

According to Fortune Magazine - "Fortune 500 companies represent two-thirds of the U.S. GDP with $12.8 trillion in revenues, $1.0 trillion in profits, $21.6 trillion in market value, and employ 28.2 million people worldwide."

So if just the companies in the Fortune 500 followed Walmart's lead, nearly 30 million people (and their families) would receive treatment for many of the "chronics" at someplace other than their home, or local hospital.

For example, let's say you live in Aiken South Carolina, and you work for a Walmart, and it is been determined that you need a herniated disc removed. Ordinarily, you would get that done at Aiken Regional Medical Center by a local orthopedic surgeon, and your health insurance would pay for it.

Under this new scenario, you and a companion would probably travel to Mayo Clinic's location in Jacksonville Florida, receive your treatment there, and then travel back home. Walmart pays for the treatment and the travel. And who is going to complain about receiving treatment at the Mayo Clinic?

The local hospital is cut entirely out of the process.

The center of excellence program by Walmart it Is clearly a priority for them and it's picking up steam. If it was just Walmart's 2 million employees we were talking about, this would be an issue that hospitals need to pay attention to.

But if this program is a success, and Walmart proves to other companies that it is easy to adopt and easy to scale, then this could be a real problem for local hospitals, as many people that they have traditionally treated in the past, for relatively high paying procedures, will now leave town for them.

Hospitals should take note and keep a close eye on the progress of this initiative.

List of Walmart Centers Of Excellence as of 3/1/19 -

Cardiac

• Cleveland Clinic - Cleveland, Ohio • Geisinger Medical Center - Danville, Pennsylvania • Virginia Mason Medical Center - Seattle, Washington

Weight loss surgery

• Geisinger Medical Center - Danville, Pennsylvania • Northeast Baptist Hospital - San Antonio, Texas • Scripps Mercy Hospital - San Diego, California

Spine surgery

• Emory University Hospital - Atlanta, Georgia • Geisinger Medical Center - Danville, Pennsylvania • Mercy Hospital Springfield - Springfield, Missouri • Mayo Clinic Arizona - Phoenix, Arizona • Mayo Clinic Florida - Jacksonville, Florida • Mayo Clinic Minnesota - Rochester, Minnesota • Memorial Hermann Texas Medical Center - Houston, Texas • Virginia Mason Medical Center - Seattle, Washington

Breast, lung, colorectal, prostate, or blood cancer

• Mayo Clinic Arizona - Phoenix, Arizona • Mayo Clinic Florida - Jacksonville, Florida • Mayo Clinic Minnesota - Rochester, Minnesota

Hip and knee replacements

• Johns Hopkins Bayview Medical Center - Baltimore, Maryland • Kaiser Permanente Irvine Medical Center - Irvine, California • Mercy Hospital Springfield - Springfield, Missouri • New England Baptist Hospital - Boston, Massachusetts • University Hospital - Cleveland, Ohio • Virginia Mason Medical Center - Seattle, Washington

Organ and tissue transplants (except kidney, cornea, and intestinal)

• Mayo Clinic Arizona - Phoenix, Arizona • Mayo Clinic Florida - Jacksonville, Florida • Mayo Clinic Minnesota - Rochester, Minnesota

Apple Sets FHIR To Healthcare

In June 2018 Apple made an announcement that had a bigger impact on healthcare than many people realize.

At their annual worldwide developers conference, Apple delivered an API for developers to help them write apps integrating EHR data onto iPhone apps. Apple basically cemented the fact that if you wanted to write an application for their iPhone that involved electronic healthcare records, it had to conform to the FHIR standard.

Apple had earlier said as much in January of 2018 with a press release stating “Apple announces effortless solution bringing health records to iPhone.”

“Apple today introduced a significant update to the Health app with the iOS 11.3 beta, debuting a feature for customers to see their medical records right on their iPhone. The updated Health Records section within the Health app brings together hospitals, clinics and the existing Health app to make it easy for consumers to see their available medical data from multiple providers whenever they choose.”

And the chaser –

“Apple worked with the healthcare community to take a consumer-friendly approach, creating Health Records based on FHIR (Fast Healthcare Interoperability Resources), a standard for transferring electronic medical records.”

FHIR is basically the follow-up to the HL7 interoperability standard, but up until this point no one had really forced the issue of making this the “standard.” It took a company as big as Apple to implicitly settle on a standard for EHR interoperability. And that standard is FHIR.

Part of the growing consumerization of healthcare is the desire on the part of consumers to be able to view their electronic healthcare records on their phone. More and more hospitals and hospital systems are realizing this, and with Apple having the immense market share and mobile that they do, hospitals need to prepare for the fact that consumers are going to want their records on their iPhone.

There are about 86 million iPhone users in the United States. If you own one of those iPhones, and pull up the Apple health app, you see a big shiny button there that says your “Health Records”. If they don't have it their health records on there now, pretty soon these consumers are going to want it there.

When Apple made the announcement about the FHIR standard they were only working with a handful of hospital systems, such as Johns Hopkins Medicine, Cedars-Sinai and Penn Medicine to integrate EHRs into the Apple ecosystem. As of today, February 19, 2019 it is 204. The list of hospital systems current as of this week that have decided to work with Apple in integrating their EHR data with Apple Health Records included at the end of this research note.

That 204 number is significant because that includes hospital systems with multiple facilities. So realistically Apple may be, after just one year, already working with 5% to 7% of all US hospitals.

There are roughly 5200 community hospitals in the United States, and with the momentum that Apple now has, I would bet that at least 20% the hospitals in the United States will be working on integrating their EHR data with Apple by the end of 2019.

Just this week this news was announced –

“Apple Health Records is officially coming to US veterans courtesy of a Department of Veterans Affairs partnership announced by Apple this morning in a blog post. Soon, veterans receiving their care through the government organization will have access to a portable aggregated record of their allergies, immunizations, lab results, procedures and other health measures that they can view from the Health app of their iPhone.”

That is 9 million new users for Apple Health Records. So the larger tech companies, such as Amazon, Google, Apple that are trying to shoehorn their data expertise in the healthcare, have all signed on to an agreement making FHIR the industry standard. As I stated, Apple forced the issue.

What is their motivation in doing this? Getting at the data.

Right now EHR data is “silo-ed” in whatever EHR system a healthcare organization is using. For example if a hospital is using Epic, then the data sits in Epic format in an Epic database, that is currently difficult to share with other platforms.

BTW, Apple has talked with EPIC about working together, but thus far EPIC is less than enthusiastic about opening up their HER wholesale to Apple. Cerner has a much closer relationship with Apple.

Well now, thanks to the government pushing its EHR focus from “meaningful use” to interoperability, Epic and all the other EHR vendors are slowly going to make EHR data compatible with whatever interoperability standard comes out the winner.

And right now that would appear to be FHIR.

This is fantastic for large tech companies such as Apple and Amazon because it gives them a unified data format to use once they get their hands on all this data.

And the data is where the money is. As I've mentioned before, the only reason Facebook has any value at all is because of the data it holds. Data that that people have voluntarily given it. Without this data it is worth nothing. With this data it's worth 478 billion dollars.

The amount of data we're talking about here is immense. About a year ago a study, funded by Google, used machine learning to examine the EHR records of about 200,000 anonymized individuals. Those 200,000 patients generated 46 billion points of data. That's nearly 230,000 points of data per patient.

The ability for tech giants such as Apple to work with this data, and make inferences from this data, is the next big wave in healthcare.

Up until the last few years patient data and hospitals might as well of being kept on 3 by 5 index cards. The technology was ancient. But now we are entering an era where companies will be applying the most advanced predictive analytics and the most advanced machine learning to this flood of data, which is gradually becoming available in a unified format under the FHIR standard.

And who finally tipped the scales towards FHIR? One of the largest technology companies in the world, Apple. A company that is making healthcare a primary focus of their future business activities.

One of Apple's primary goals is to prevent people from switching out of its ecosystem. For example that is why iMessage is such an important part of Apple's business model. iMessage, and the advantages it offers over ordinary text messaging, keeps people locked in to Apple. People want to be a blue bubble on your phone, not the shameful green bubble.

Becoming a de facto healthcare information platform is yet another way for Apple to keep people buying its hardware and software.

And regarding hardware and software, one huge advantage that Apple has held for many years is the tight integration of its hardware and software. On the iPhone, Apple developed the operating system but it also develops and manufactures the chip that runs the operating system.

What this means for healthcare is that Apple will not only be able to develop software to improve the user experience, but is also the hardware to speed up certain tasks as part of that experience. For example Apple's facial recognition software to unlock the iPhone exists primarily as specialized hardware built right onto the phone.

Apple is developing hardware to handle certain healthcare related tasks. The Apple Watch measures heart rate through its own hardware sensors, and now through clever use of two hardware sensors on the watch, it is able to provide an EKG. And this data flows across your Apple devices.

Throughout the day, when I want to look at my heart rate I have the option of looking at it on the Apple Watch, but more often than not I find myself checking it on my iPhone, where more sophisticated informatics can be applied to the data. There is even an app on my phone which compares my heart rate to the heart rates of thousands of other people who were also using the combination of the Apple Watch and the iPhone.

Everything is all about the data.

Apple also has the luxury of time to develop these healthcare related products in the most sophisticated manner possible. The reason is money. Their huge cash pile is going to allow them to outspend other competitors in developing products, and also simply outlast others through attrition.

And in typical Apple fashion, they're trying to create all this with a minimum of effort on your part. You won't have to enter your own EHR our data on the phone, it will automatically flow onto it through the FHIR standard and a connection to your healthcare provider. You won't have to enter your heart rate on your phone, your Apple Watch will do that for you. There is also other data that Apple may be able to gather from you in the future through a new version of its AirPods.

Apple is trying to make healthcare on their devices so invisible that you don't even know it's there, but you'll be glad it is.

The thing that fascinates me the most about all of this, is that none of this would be possible without a data interchange format that is able to decipher data from different electronic healthcare record systems.

The importance of this interoperability standard cannot be overstated. I think FHIR is as important to healthcare records and analysis as the HTML standard was to the browser. Without HTML, the Internet might still be just a nerdy side hobby for scientists and geeks. FHIR has that same transformative potential with healthcare data.

Then there is this from Healthdatamanagement.com -

The Office of the National Coordinator for Health IT, for the first time, said at HIMSS19 that it intends to make FHIR a requirement through a proposed rule. “While there are a variety of relevant healthcare standards for connecting labs, images, claims processing systems and other pieces of the provider world, when we look at the app economy and the clear trends in modern computing, one API approach seems to clearly emerge–Health Level Seven’s Fast Healthcare Interoperability Resources standards,” according to National Coordinator for HIT Don Rucker.

And Apple kicked off the FHIR era last June with a 500 word announcement.

The Amazon Effect On Healthcare

If you've ever dreamed of having a hospital room delivered to your front door, you’re in luck. For $285,000 you can now have a "smart hospital room in a box" delivered to your house by tractor-trailer. With free shipping. Thanks to Amazon.

When you are a company as large as Amazon, whose market value hovers around $1 trillion you need to enter really big businesses to make your earnings grow. Healthcare in the U.S. is a multi-trillion dollar business that plays to many of Amazon’s strengths.

Is healthcare next for Amazon?

Since it was founded in 1995, Amazon has slowly gained the reputation as a company whose reach and expertise are so vast that they can dominate any market they decide to go into. One reason for this is that they are something other than a normal retailer. They are something we've never quite seen before in American business. They are a black hole that sucks whole industries into an alternate universe of impossibly low margins.

Book stores now are basically coffee shops. Been to a toy store lately? Of course not.

10 years ago, everyone was worried about the scale of Walmart, and how Walmart was going to take over the economy, given the fact that it had 4000 stores, and was within a half hour drive of 90% of all Americans.

But Amazon has something that Walmart never did. At its heart the Walmart business model is the optimization of the shelf space within its stores, from curating the items that sat on the shelves to organizing the logistics of getting them there.

Amazon's business model is far more comprehensive. Amazon dominates the online retail market, and now information technology as well through its Amazon Web services. Their burgeoning logistics network now physically places it (it being and Amazon distribution center or a whole foods) within 20 minutes of 160 million Americans.

Amazon, more and more, is building out and controlling an entirely new infrastructure for all the moving parts of business. This is something we haven't seen in business before. And now it appears they are applying it to healthcare.

Let me use the Walmart analogy again. 10 years ago, healthcare providers were worried that Walmart would open clinics in its already existing retail locations and flatten out the healthcare delivery distribution curve that had previously been dominated by hospitals.

But with all of Walmart's reach, that never happened. For the most part, the biggest impact Walmart had on healthcare during the last 10 years was the introduction of the $4 prescription plan.

But Walmart doesn't have all the infrastructure tentacles that Amazon does. Walmart also pays much more attention to quarterly earnings then Amazon does. Amazon basically shows pride in its disdain for quarterly earnings. In its initial letter to shareholders in 1997, Amazon stated "we will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions."

They went on to say "we will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case."

So where as every other market participant who enters healthcare has to worry about making money as quickly as possible, Amazon doesn't. It can use its other businesses, particularly Amazon Web services, to fund its forays into new industries.

This gives Amazon a tremendous advantage over its other competitors. Their business model states that they will experiment and take their time.

So, Amazon has the advantage of time, limitless money, and extremely talented executives on its side.

What are they going to do with all this as regards healthcare? Let's take a brief look at a few areas.

PHARMACEUTICALS AND SUPPLIES

About two years ago, CNBC announced that Amazon was considering entering the pharmacy business, and a flurry of news coverage followed. Pundits breathlessly projected that Amazon would soon take over the entire industry. It was revealed that every year Amazon has an annual meeting to discuss whether or not they should break into the pharmacy market, and this year they're finally getting serious.

The Wall Street Journal reported that Amazon had been applying for pharmacy licenses. It was widely reported that Amazon was on a hiring spree for pharmaceutical talent.

It's interesting that Amazon is already in the pharmaceutical delivery business in Japan. Through Amazon prime in Japan you can get same-day delivery of food and medicine. A consultation is needed with a pharmacist before purchase; and said consultation can be initiated by reporting your symptoms and medical history via an online form on the Amazon Japan.

So, they are already doing it. Why is Amazon so intent on breaking into the pharmaceutical market? Well, a bottle of Lipitor weighs a lot less than that 1600 lbs. gun safe you ordered last week from Amazon with complementary free shipping.

But in the middle of all this noise Amazon went quiet on the pharmacy front, and it was assumed that they had decided the market might be too complicated to enter. But then in July 2018, it was announced that Amazon had bought PillPack for $1 billion, which in time I think will be seen as one of the great bargains in corporate history, right up there with Facebook's purchase of Instagram.

PillPack gives Amazon the instant ability, through their licenses, to ship prescriptions to customers’ homes in 49 states, along with a truly innovative way to package pharmaceuticals to seniors, a demographic that is growing in number and living much longer. And at least half of them are already Amazon prime members.

Amazon is already undercutting prices on over-the-counter pills on its website, and you can expect them to do that with prescription medicines as soon as they can.

Amazon is also methodically approaching the market for hospital supplies with the intention of creating a marketplace for hospitals to shop for their emergency rooms, operating rooms, and other inpatient and outpatient facilities. They've been inviting hospital executives to their headquarters to sell them on having a large portion of their purchases go through them. Amazon is positing to hospitals that the advantage they can offer is a way to simplify purchasing and to make the pricing of medical supplies more opaque.

As electronic healthcare record (EHR) software systems become less differentiated, and functionally more similar, I have often thought it would make sense for Amazon to simply give hospitals an EHR system for free, in return for a certain amount of hospital supply purchases.

AMAZON'S INTERFACE

Amazon also holds the advantage of having a purchasing interface that everybody already uses several times a month. The advantage of this interface should not be underestimated. Google already owns the universal interface for search, and we are fast approaching the time when Amazon owns the universal interface for purchasing.

As Amazon becomes the aggregator for all this ordering, it will just become second nature for people to order from them, as they will be the standard.

It's a bit like the Nook book reader, which was first introduced by Barnes & Noble. Yes, you can use it, and yes it works fine, but everyone simply reads everything on the Amazon Kindle. Because it has become the universal interface for books.

ELECTRONIC HEALTHCARE RECORDS

Amazon has made no secret of its intention to disrupt the market for electronic healthcare records. In 2017 they had a secret team called 1492 which was focused on medical records with several goals in mind.

• Making data more freely available to patients and doctors

• Building a platform for telemedicine that makes communicating with physicians easier

• Integrating Amazon's existing hardware such as Echo and Dash into the EHR process

• The extraction and utilization of EHR records to improve medicine.

It's this last area that holds the most promise, as well as the potential for the most profit. Hospitals and other healthcare providers are quickly morphing into becoming data-centered businesses––now that the data has become somewhat organized due to the (essentially forced) adoption of EHRs.

Do not underestimate the value of this data, both for clinical purposes and other purposes.

About a year ago, a study was released, which was funded by Google, that examined the anonymized healthcare records of about 200,000 patients. These 200,000 patients generated nearly 46,000,000,000 data points. By my math, that's 230,000 points of data per patient.

By applying machine learning to this data, researchers were able (with an high degree of confidence) to predict the length of the hospital stay of a patient, the chances they would be readmitted, and if they would even survive to leave the hospital. In a world of healthcare where payment is based on outcomes as opposed to services, this type of analysis is invaluable.

As is simply the data itself. Note that the only reason Facebook is worth tens of billions of dollars is because it has data on you that you have voluntarily given it. It has no other product. It makes nothing. It simply has data. Healthcare data has the potential to become some of the most valuable data there is.

This is why Amazon is placing an emphasis on the collection and analysis of electronic medical records. More on this effort, called Amazon Comprehend, will follow in a future issue. Amazon also has a project called HERA, which scans HER data for errors in diagnosis.

AMAZON, BERKSHIRE HATHAWAY & JP MORGAN

About a year ago, Amazon announced a joint healthcare project with Berkshire Hathaway and J.P. Morgan. Much ink has been spilled trying to determine the intent of this project.

Amazon has amassed healthcare data on its employees. J.P. Morgan specializes in finance. Berkshire Hathaway specializes in insurance. They each bring different things to the table that when combined could add up to something particularly interesting.

A trial is currently being held regarding Amazon’s hiring of a healthcare executive for this effort. A judge asked the defendant if the Amazon/JPM/BH effort was going to go large. He replied ““That’s not the near-term goal, it could be the great solutions are already out there and it’s about pulling out the right ones together.”

I think Amazon/JPM/BH may take the lead of Walmart and establish centers of excellence for employee healthcare across the country, to care for its employees with chronic conditions.

For example, if a Walmart employee in Arizona has a heart problem, Walmart will pay for that employee and a companion to fly to, for example, the Cleveland Clinic to receive healthcare, rather than receive that treatment locally. WalMart has amassed data from its nearly 2 million employees on where the bulk of its healthcare expenses lie, and they have decided it is more cost effective to look nationally, not locally, for certain medical treatments.

So, if Amazon and its partners do the same, and establish centers of excellence, then logically they and their partners would send their employees with certain chronic conditions to hospitals outside the areas in which they reside.

The reason this is particularly vexing for the 4,000 hospitals in the US, is that if this idea improves care and saves money, more and more companies in the Fortune 500 might implement it. I roughly estimated the numbers, and the total number of employees in the Fortune 500 is nearly 15% of the privately insured employees in the United States. If 15% of patients with good insurance are leaving home to get treated for chronic ailments, that could be a sub-optimal trend for healthcare providers.

CONCLUSION

This, of course, is all conjecture. But it is educated conjecture based upon the past actions of Amazon.

Blockbuster Video could've used a little conjecture when Netflix entered their market. Instead, they, quite literally, laughed them off, and Netflix went on to change not only video rental, but the entire business model of the entertainment industry.