Becker's Hospital Review

Register Today! Becker's Hospital Review CEO Strategy Roundtable - Nov. 5, 2014 - Chicago 8 by high-deductible plans, are becoming more price-sensitive. Additionally, tra- ditional healthcare delivery is not efficient. "When you look at that $2.8 trillion, about 30 percent can be seen as waste," says Mr. Kauffman. Much of the waste in the healthcare industry currently can be attributed back to consumers — patients not adhering to their medication regimens or skipping appointments with physicians, leading to worse outcomes and higher costs. This is why the successful new entrants to the industry will do what the banking, retail and other industries have been doing for years — develop new ways to engage consumers in their own healthcare by providing al- ternate or at-home services or products, often at a lower cost than tradi- tional healthcare. Because regulations and providers' inertia has kept the healthcare industry behind other industries in terms of innovation, many of these companies already have a tested formula that, aided by growing consumer embrace of technology and new service models, is ready to be applied to healthcare. Many of these companies also enjoy a more positive association in consum- ers' minds, or at least a larger presence. "The average individual sees a doctor for 60 minutes a year, but they spend 40 minutes a day in a retail setting," says Mr. Kauffman. "They have an opportunity to engage consumers on a whole different level." One of the most well-known new entrants into the healthcare industry is Nike, which already had a significant presence in the $267 billion fitness and wellness market. The new Nike FuelBand, a wearable activity and fitness monitor, not only gives users a comprehensive, easy-to-understand view of their activity level but also has features designed to engage them in their own fitness. Automatic reminders prompt users to exercise, and the band provides an estimate of calories burned to help users meet preset fitness goals. Right at launch, Nike's online store sold out of FuelBands in four minutes, and the product continues to remain popular with 28 million active users on the platform. The device's success has shown Nike's ability to success- fully tap into a market that wasn't being served by the traditional healthcare industry. "People who use this want to be healthy," says Daniel Castro, senior IT policy analyst at the Information Technology & Innovation Foundation. "And they're not going to a doctor [for weight management help] because the Nike service is a more convenient, more affordable solution." Apple has plans to take Nike's success one step further. In June, Apple intro- duced HealthKit, a mobile platform that combines data from other health- tracking apps and displays composite information in a dashboard format, both partnering with and building on Nike's success with consumers. "With your permission, each app can use specific information from other apps to provide a more comprehensive way to manage your health and fit- ness," according to Apple. "For example, the Nike+ apps using NikeFuel will be able to pull in other key HealthKit metrics such as sleep and nutrition to build a custom user profile and improve athletic performance." Similarly, Walmart is taking a popular technology — telemedicine — and bringing it into retail stores and under the Walmart brand. Through a partnership with Oakland, Calif.-based Kaiser Permanente, the megachain opened microclinics in two California stores. Equipped with basic diagnos- tic supplies and a secure video connection to Kaiser physicians, the clin- ics provide a low-cost, convenient care option for Kasier beneficiaries or Walmart employees. Similar clinics have since popped up in two San Antonio Walmarts through a Humana program. "Each one [of these new entrants] has some common factors," says Mr. Kauff- man. "They're relatively low-cost options and they certainly provide conve- nience and accessibility, which is something healthcare is not known for." However, these new entrants into the industry may not come at the expense of providers. "We're seeing the new entrants be able to do things that were never really the core competency of providers," says Mr. Castro. "For ex- ample, [Nike's FuelBand] is more of a threat to Weight Watchers than to a hospital system. It just isn't what a hospital is focused on. It's not where they make their money." The biggest opportunity, then, is for hospitals and health systems to deter- mine the high-value services they can provide better than anyone else. "It will be a transition," says Mr. Castro. For example, a hospital may want to slim down its nutrition program if most diet and fitness services can be more efficiently rendered through an app or fitness tracker. However, the hospi- tal might decide to keep a slimmed-down nutrition center for unusual or special-needs cases, he says. "Focus on what you can do that no one else can," he says. "That's where the value will be." n When healthcare organizations implement soft- ware and it does not perform as promised, they are often only able to recoup the purchase price of the product. Because of that, hospitals need to take steps to help ensure they are not implement- ing bad software and to help protect them if the product does not live up to marketing promises. Vetting the vendor Before entering into contracts with software ven- dors, hospitals should always ask for a list of other healthcare organizations that are using the same product. This should be taken with a grain of salt. Although this information is beneficial for the hos- pital to have, "vendors are only going to tell pur- chasers the names of other organizations where using the software has been a huge success," says E. Andrew Norwood, a partner with Waller Lansden Dortch & Davis in Nashville, Tenn., whose practice focuses on licensing and contract issues. To help avoid references to only software success sites, hospitals should ask vendors for a full and complete list of organizations that have imple- mented the software. It is important healthcare organizations "choose the other software users they speak with and not be steered by the vendor, because some vendors will provide financial in- centives to be a demonstration or reference site," says Michael Dagley, an attorney who special- izes in software disputes at Nashville, Tenn.-based Bass, Berry & Sims. By asking vendors for references, hospitals and health systems are also able to identify if they are one of the first to use the software. Hospitals need to stay competitive, but they also need to exercise caution with software that has not proven itself. "Healthcare providers need to do due diligence before entering into a contract," says Mr. Dagley. They need to know how long software has been on the market and every implementation the ven- dor has attempted. For example, if a vendor says it has 48 customers, "with some digging, a provider might find 28 of those were failures, and the hos- pitals have quit using the software," he says. Asking the right questions Once a hospital decides to purchase software from a vendor, traditionally, the vendor dictates the terms of the contract to hospitals and health systems, says Mr. Dagley. This presents problems: Contracts are often too complex, do not include language to protect hospitals and the terms can change after the contract is signed. Girard (Kan.) Medical Center had firsthand expe- rience with a complex vendor contract. In 2012, the medical center filed a lawsuit against Cerner in U.S. District Court in Kansas City, Mo. According to the lawsuit, even though the medical center paid Cern- er $1.2 million, it still did not have an electronic health record system a year and a half later, which it claimed Cerner promised to provide. How Some of America's Largest Companies Are Poised to Shake Up Healthcare (continued from cover) Health IT and Liability: How to Protect Your Hospital When Software Fails (continued from cover)

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