Opportunity RX: Healthcare Vertical Market

Transcription

1 Opportunity RX: Healthcare Vertical Market Authored by: Stephanie Atkinson, Industry Analyst What is A Vertical Market Approach? Frost & Sullivan is seeing a transition from technology or service sales and marketing to more of a focus on core industries contributing to growth in telecommunications revenues or expenditures. With the telecom industry facing various economic hardships, it is becoming more important for telecom carriers to focus on the customer or the potential customer. Differentiation is highly critical By creating specific products and services targeted to a certain industry or around specific industry applications, carriers can create higher profit-margin products and at the same time provide total solutions on a more personalized level. When discussing vertical markets, Frost & Sullivan is referring to top industries that are contributing to the revenues in the telecommunications industry. Horizontal markets are more concerned with internal departmental areas within a business or organization such as customer care, sales, research and development, operations, etc. As vertical market solutions become more sophisticated, horizontal solutions will be even more crucial for industries that need special services in specific departments. A Definition of the Healthcare Industry The healthcare vertical market is comprised of private and public hospitals, government hospitals, nursing homes, home healthcare, managed care, laboratory services, health insurance, pharmaceuticals and drugs, medical devices and equipment, and any other medical or healthcare organization in the U.S. There were over 6,000 hospitals in 2001 and the trends are showing a decline because of mergers and acquisitions and the growth of home healthcare. Home healthcare is increasing as personalized medical services become more attractive for heart disease, cancer, diabetes, hypertension and other specific medical problems or ailments. Health Insurance is another segment of the healthcare vertical, and it is seeing great restraints on payouts for medical coverage. The pharmaceutical industry is transitioning, as the expiration of certain drug patents increase global communications from increased exports and increased outsourcing. The threat of terrorism has also increased the cost of drugs and medications in the U.S., showing the need for increased telecommunications services to lower operating costs that will aid in spending on more important areas. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 1

2 Figure 1 displays a breakdown of the healthcare industry and the associated subsectors within each segment. Figure 1 Healthcare Vertical: Market Breakdown and Top Subsectors (U.S.), 2001 Hospital & Surgical Outpatient Nursing, Elderly and Home Healthcare Laboratory and Diagnostics Pharmaceuticals & Insurance Public Medical and General Hospital Physician Practices and Ambulance Nursing Care Medical Laboratories Pharmaceutical Development Private Medical and General Hospital Dentistry & Chiropractic Retirement Medical Imaging Drug and Pharmaceutical via Hospitals & Clinics Government and Veterans Hospitals Optometry and Podiatry Residential Mental Retardation Facilities Diagnostic Pharmacy Management Psychiatric Hospital Emergency and Ambulatory Home Healthcare Workers and Providers Blood Bank Insurance Management Substance Abuse Hospitals Physical, Speech and Occupational Therapy Residential Community Health Organ Donor Insurance and Third Party Insurance Mediation HMO Offices and Family Planning Insurance Communications (HIPPA) Source: Frost & Sullivan & Census Bureau From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 2

3 Sprint s Role in Healthcare Telecom Solutions Sprint, Making The Connection to Good Health Sprint provides one of the broadest and deepest portfolios in the industry from which to build a solution to meet an individual customer's needs, from midsize companies to enterprise size companies. Sprint is leveraging their current enterprise and business offerings and working with healthcare organizations (HCOs) to tailor solutions aimed at improving the quality of healthcare in the U.S. and to help HCOs meet HIPAA requirements of privacy and security. Primary solutions for the healthcare industry include the following: LAN/WAN Connectivity Solutions, along with Voice and Data Security Solutions for HIPAA and Healthcare Networks Collaboration Solutions: Audio/Video Conferencing Web Hosting/Contact Center Solutions Managed Network and Security Emergency Communications and Preparedness Solutions Sprint understands the complexity of HIPAA (Health Insurance Portability and Accountability Act of 1996) regulations and how the changes are and will continue to affect the healthcare providers in the nation. Solutions to aid in meeting HIPAA requirements are offered around three core areas including: Security and solutions to address HIPAA data security requirements, including IP VPN, firewall, intrusion detection, authentication and protection. Contingency Planning and Disaster Recovery Sprint Data offer the highest level of certification (SAS70 Type II) and services to address HIPAA contingency planning and data backup requirements. Transmission Secure data transport over any type of network (IP, Frame Relay, ATM, wireless). Sprint maintains some of the top healthcare industry clients throughout the United States. Recent healthcare customers include Bayshore Hospital and Health, Kindred Health Care, and Truman Medical. Sprint also offers customized solutions for other verticals such as finance, manufacturing, retail, and government. Sprint continues to build partnerships with various equipment and technology vendors to better service vertical markets. Industry partners include Cisco, Polycom, Nortel, Nokia, and many others. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 3

4 Healthcare s Role in Telecommunications Telecommunications & Network Healthcare Technology The healthcare vertical market is one of the strongest contributors to revenues in the telecommunications industry. The growing competitive environment and the need for a comprehensive list of medical services in healthcare systems across the U.S. is requiring the need for more sophisticated telecommunications and networks. Many healthcare organizations (HCOs) are consolidating by buying out other hospitals and independent clinics, due to the need for improved healthcare services and to streamline healthcare organizations. The healthcare market remains in a fractured state which means communications services are even more important, yet more of a challenge to implement. The importance of this trend is, as newly formulated healthcare organizations expand across the U.S. there will be a need for security, the sharing of patient and medical information, and more sophisticated and integrated voice and data networks, be it wireless or wireline. Many industries are feeling the effects of the declining economy, yet the healthcare industry is seeing lower decline than most. The healthcare industry contributed to roughly 14 percent of the GDP in 2001 and is continuing to be a major factor in governmental expenditures and reform. A national healthcare plan is one initiative by the U.S. government for reforming healthcare in America. Increased spending in the biomedical industry, and research and development within the discovery of new molecules and formulations has increased since last year as well. Total healthcare expenditures from the government will increase over the next several years according to Frost & Sullivan forecasts. The Health Insurance Portability and Accountability Act (HIPAA) is the most important business issue for many healthcare providers and organizations. HIPAA regulations have changed the way the healthcare community communicates patient information, stores information, secures the physical grounds, and transmits and accesses data. Security and reliability of information to improve the patient healthcare system is a key goal of HIPAA reform. Discussed throughout this study is how the healthcare industry will be impacted by the changes, as well as the business processes and technology needed to reform the way healthcare services are conducted. Telecom carriers, including wireline and wireless companies, are beginning to see the effects of becoming more customer and industry focused, not only on the product development side but also the regulatory compliance, application, and total logistics side of the healthcare industry. By understanding current and future regulations, healthcare applications, protocols and procedures, and healthcare communications challenges, carriers like Sprint can target product and service development efforts to satisfy the healthcare market and increase enterprise revenues. Understanding key end users, personnel, and medical professionals in the healthcare vertical will be important for carriers in planning and building partnerships to better healthcare services. Chief information officers, directors of communications and technology, chief technology officers, and other key executives within the healthcare industry are key parties to partner with in determining the healthcare networking, communications, and technology needs. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 4

5 Highlights of Healthcare Expenditures and Trends U.S. healthcare telecommunications expenditures reached $18.2 billion in 2001 and are forecast to climb to $24.1 billion in Telecommunications for this study includes the use of both traditional circuit-switched and packet-based voice and data services for wireline and wireless services. This includes local, long distance, enhanced local and long distance services, data transport and access services. Figure 2 displays the current and forecast healthcare total telecommunications expenditures in the U.S. from 2000 to 2005, with the base year being The expenditure compound annual growth rate (CAGR) is expected to be a moderate 7.3 percent and year-to-year growth rates remain fairly stable throughout the forecast period, holding steady between 5 and 8 percent. Wireline data services and wireless voice and data services present the greatest opportunities for carriers because of the revenue potential in these services - this will be presented in detail in the forecast analysis segment. The healthcare vertical contributes to roughly 6 to 7 percent of total telecom revenues in the U.S. This study includes wireline voice, wireline data, and wireless data and voice expenditures in the healthcare vertical. Figure 2 Healthcare Vertical Market: Telecom Expenditure Forecasts (U.S.), Healthcare Vertical Market: Telecom Expenditures, U.S. (Billions) Note: All figures are rounded; the base year is Source: Frost & Sullivan The total healthcare industry generated over $300 billion in revenues in the U.S. and this number is expected to increase over the next several years despite the economic climate. More than $1 trillion dollars in the U.S. was spent on healthcare last year, which is roughly 13 percent of Gross Domestic Product (GDP). With wireline voice expenditures declining in all markets, healthcare expenditures in wireless voice/data and wireline data services are From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 5

6 expected to displace the loss of wireline voice service spending. Despite the decline in wireline voice service spending, wireline voice services will continue to contribute to over two-thirds of the total expenditures within the healthcare vertical throughout the forecasted period from 2001 to Key Applications that are aiding in the growth in telecom expenditures include: HIPAA Health Insurance Portability and Accountability Act Telemedicine and Telehealth Patient Data & Information Storage, Access and Transmission Mobile Workforce Remote Access Network Healthcare Branches and Locations Internet Healthcare Information and Customer Service Pharmaceutical Management Healthcare Insurance and Clearinghouse Communications From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 6

7 Key Trends for Healthcare Telecommunications Growth of IP Technology Creates New Opportunities for Telemedicine and Telehealth The migration from ISDN (Integrated Digital Network) services to IP (Internet Protocol)- based services will be slowly transitioning over the next several years. Past analysis predicted IP services to take off, yet Frost & Sullivan believes that IP services will be more of a gradual transition into the enterprise networks. The opportunity for IP exists in the equipment side, services side and applications side in the healthcare industry. IP services will compliment the telemedicine market by providing cheaper long distance and greater access from various mediums that will be incorporated into the telehealth initiatives. Growth of Next-Generation Broadband (DSL, Cable Modem) Networks Creates New Market Opportunities The broadband market is still only emerging, but the next generation broadband networks are being developed in many areas and will benefit the healthcare vertical. Next generation networks that are sponsored by state and local governments provides great opportunities for telemedicine and telehealth services. Areas in which a broadband network is already in place will have the added benefit in fast deployment, yet rural areas may find less access to broadband facilities. Other healthcare telecom applications can be added to fully utilize the network. Therefore, the opportunity to sell healthcare telecom services into areas where these broadband networks are being built is becoming significant for vendors that are able to successfully monitor the network build-outs. Healthcare Providers Have Historically Under Invested in Technology, Yet in The Younger Generations Spending Will be Necessary to Meet the Demands of Service Technology spending is necessary to meet the demands of today s consumers. The use of the Internet to review health records, view patient information, pay bills, customer service and more is becoming more common and in the future will be expected by many of today s younger generation. Customer service in the healthcare industry is highly motivated by the Baby Boomer consumers, and is more of a norm in the younger generation. Customer service including web access, 24 hour toll-free access, Internet billing, and direct access to personal account representatives are becoming more common and will soon be expected by many. Call centers and interactive websites are very commonplace for communication between the HCO and the end-user. This generation is highly dependent on the Internet, web services, computer to telephone integration (CTI), and easy access to healthcare institutions by various means. Consolidation in the Healthcare Market Will Increase Demand for Integration of Communications Including Both Voice and Data The healthcare industry is continuing to consolidate with mergers and acquisitions. Many of these healthcare organizations (HCOs) have established buyouts that are positioned all over the U.S. Healthcare telecommunications systems, the converging of patient databases and the streamlining of telecom equipment and services will be needed to meet the newly formed HCO integrations. Consolidation in telecommunications services and systems will require carriers to fully understand each location's infrastructure and to understand the HCO's use of telecommunications across the organization. Overlapping services will need to be streamlined and configured to work more efficiently for the whole organization. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 7

8 Growth in Telemedicine, Telehealth, and Teleradiology Will Increase the Need for Converging Technologies Such as ATM, Frame Relay, Wireless Local Area Networks, IP, Streaming Video, and More Telehealth technologies demand more sophisticated telecommunications services such as advanced data services, faster two-way transmissions, metro and long haul networks, and more. The advancements in telehealth compliment the telecom market because of the need for these types of services. Less than 5% of private practice clinics have a cable or a DSLbased connection, with over three-quarters of urban hospital facilities that do. Urban hospitals are a great place for advanced telecommunications because many are already hooked up to broadband or have a corporate Intranet. Newer technologies will aid in customer service and IVR such as speech-to-text recognition and text-to-speech recognition. The speech recognition technologies are being used by many service oriented call centers and applications. As Home Healthcare in the U.S. Increases, Mobile Communication Devices and Will Be Needed for Patient Monitoring and Medical Communications Home healthcare is one of the fastest growing sectors in the healthcare market. Home healthcare will require mobile communications services to meet the needs of the mobile healthcare employees. Tele-nurses and doctors must be connected to their hospital or clinic of employment, as well as have communications devices and access for their patients and other resources. Wireless communications services will benefit from the growth in home healthcare because of the fit to provide communications for the mobile health worker. HIPAA Regulations are Increasing the Need for Reliable Security and Data Transmission Solutions Health Insurance Portability and Accountability Act (HIPAA) requires an excessive overhaul of all healthcare providers, payors, health insurance companies, and health related companies. It is requiring new transaction standards in the use, transfer, and storage of electronic data, to be kept private, secure and portable. This is one the highest expenses relating to IT and telecom spending. This is requiring extensive overhauls of legacy telecommunications and database systems. This is a big driver for security services being provided by telecom providers. Legacy Telecom Systems Make Advancements in Healthcare Systems Difficult The legacy healthcare telecom systems are making the integration of voice and data networks more difficult to implement. Also, the consolidation of HCOs with multiple legacy networks is also posing difficulties in integration. Carriers that understand the legacy communication and information systems will be advantaged because they will be able to solve inefficiencies and converge complex overlapping legacy systems. It will be crucial for telecom service providers to communicate with healthcare executives and layout the full network to better consolidate the networks and prepare for future telecom needs. The consolidation in the industry is a key restraint in improving telecommunications in the healthcare industry. The more players, locations, networks, and providers involved in the total healthcare telecom system, the more difficult to streamline and converge telecom systems and services. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 8

9 Findings on the Healthcare Vertical in Telecom Benefits to the healthcare vertical through the use of telecom include the streamline of business processes, decrease of time on projects and procedures, decrease costs, lower inefficiencies, and better communications with patients and business relationships. The opportunities for carriers will also be the added industry trust and closer relationship in providing total solutions to the healthcare industry. Some of the following conclusions were made from the research conducted on healthcare telecommunications: HIPAA must be a focus for telecom carriers offering services and consulting to the healthcare market Telemedicine will be important for the availability of healthcare throughout the U.S. Wireless technologies, devices, and services are becoming more accepted through the younger generation of healthcare employees and the proven results of data accuracy, reliability, and security. The need for mobility in the healthcare industry will aid in the adoption of wireless services Wireline voice will continue to be a major source of revenue for carriers and a major source of expenditures from the healthcare vertical Healthcare providers will slowly increase their telecommunications spending as the economy betters Consolidation in the healthcare market will offer opportunities, as well as create complexities within telecommunication systems Inefficiencies and the paper-intensive healthcare industry provides great opportunity for communications to improve business processes and lower costs Partnerships will be important for service providers wanting to be "near" the customer and become subject matter experts (SMEs) Departments (Sales, Marketing, and Product Development) will need to be continuously trained on the healthcare market to be able to become a solution vendor By creating specific products and services targeted to a certain industry or around specific industry applications, carriers can create higher profit-margin products and at the same time provide total solutions on a more personalized level. From Report # , Healthcare Vertical Copyright 2002 Frost & Sullivan 9