We at Razorhorse work with several market-leading healthcare IT vendors across medical imaging, data infrastructure and interoperability, pharma intelligence, and clinical trials. As the market has accelerated in both valuations and innovation in the past year, we’ve seen three main themes emerge. Here’s a glimpse into what we’re seeing, and what’s next in the space.
The “Consumerization of Health” Becoming Mainstream
Healthcare is a massive but slow-moving industry, which lags behind other industries approximately 10 years in digital adoption and transformation. Where healthcare especially lags is the patient experience, with outdated and illogical communication, documentation, and insurance practices rampant. The consumerization of health addresses how providers, hospitals, and payers modernize their services and IT systems into a much more consumer-friendly experience to enhance the user interface, create loyal patients, and improve revenue and costs. This ranges from the early stages of the patient experience such as searching for providers, their reviews, booking appointments, and seeking second opinions. It also extends to viewing reports and lab results, communicating with providers, improving messaging systems, and the overall telehealth experience.
As a patient, you have likely noticed your own providers and payers recently upgrade and modernize their website, telehealth abilities, and patient communication (appointment reminders, survey reminders) in the past two years. As healthcare becomes a more competitive, marketing-driven industry, we expect additional investment and acquisitions in this space.
Proactive vs. Reactive Hospital Management
Another interesting shift we are seeing in healthcare is hospitals moving from reactive to proactive monitoring and care management through the use of consumerization systems. Instead of hospitals being reactive, such as seeing staffing shortages or a surge of patients come in at once and then trying to slowly catch up to that surge, utilizing the “consumerized” infrastructure to know when patients will be coming and performing advanced prediction of bed capacity shortages, and other staffing issues is a theme that we see gaining momentum.
COVID was a big catalyst for a lot of these changes, in large part because hospitals suddenly had to cancel or postpone highly profitable elective procedures, like joint replacements, cosmetic procedures, and other low-priority preventative procedures. These procedures are typically high-cost and reimbursed by insurance or cash-paid by consumers, and are therefore big money-makers for these hospitals. Instead, with stay-at-home orders and hospitals focusing on critical COVID patients with unclear insurance reimbursement along with huge hospital staff shortages, led to a financial crisis for many health systems.
Today, preventing that crisis from happening again is at the top of the minds of hospital leaders. Utilizing new IT infrastructure to proactively monitor patient surges along with staff shortages will become commonplace as hospitals upgrade their technology.
Hospital Spend Optimization
There are several different ways of slicing hospital spend, with the main two being Clinical and Non-Clinical costs. Non-Clinical are the goods and services that are essential for hospital operations. This includes supply chain (medical devices, instruments, medicine, and supplies) along with purchased services (cleaning services, cafeteria services, maintenance etc.). These goods and services are very costly, and yet are only occasionally reviewed for spend optimization within a health system. One increasingly popular way that this can be achieved is supply chain prioritization and optimizing shipping spend to only receive goods as they are needed, and only using priority shipping for critical out-of-stock supplies. Another cost optimization area are preference cards, which are the items that surgeons require when performing an operation. These are frequently outdated and become a laundry list of everything a surgeon can possibly need in the world. It’s not very efficient and it’s very costly for hospitals to supply these and then either replace or clean them after every procedure. Reviewing preference cards is a big money-saver. In both supply chain and preference card optimization, new software is coming to market to establish consistently-efficient non-clinical spend.
Clinical-related costs are a large component as well. This includes payroll costs to staff technicians, nurses, and doctors (typically a hospital’s largest area of spend). As mentioned earlier, COVID created a huge staffing shortage forcing hospitals to incentivize and pay technicians and nurses at incredible rates. Many software companies are now emerging to help with staffing and forecast demand – what things patients will need, where, and what staff are needed, and therefore optimize a hospital’s spend on payroll.
What’s Next
It’s very clear that Healthcare IT has plenty of room for improvement and optimization. What we at Razorhorse and our strategic and private equity clients find highly interesting is the opportunity of merging several of these consumerization, optimization, and cost-saving point-solutions into a single platform and source-of-truth to manage everything at once. Instead of having these individual solutions, we envision combining several companies to create an entire infrastructure for managing a hospital and as a result create an all-in-one, holistic platform to simplify the IT stack and buying process for hospital leaders. We at Razorhorse and our clients are very excited by this proposition and expect this area to continue attracting significant investor and acquirer attention in the coming years.
