Albion News v3

The Doctor will Facetime you now
Dr. Andrew Elder, Partner, Head of Healthcare Investment
and Christoph Ruedig, Partner
How healthcare services are slowly but surely being changed by
technology
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Clayton Christensen in his seminal book The Innovator’s
Patrick Reeve, Managing Partner
Dilemma describes how industries were being disrupted
and companies forced out of business by new entrants that
were using superior technology. While Christensen focused
on manufacturing, his observations hold true for services.
Software and the rise of the internet have revolutionised the
way we look for, book and consume services. Industries from
travel to hospitality to banking are being turned upside down
by new entrants that are providing transparency, convenience
and lowering costs.
At its core, healthcare is a services industry (the majority of
healthcare expenditure goes to staff looking after patients).
The healthcare industry is slow to change. The reasons for
this are well rehearsed: complex stakeholder dynamics,
regulation, vested interests, and so forth. However, these
constraints aren’t unique to healthcare. They exist in other
service industries as well, for example financial services and
education. Why, then, has healthcare been slower in adopting
technology than others – why is it not being disrupted?
In order to better understand the unique characteristics of the
healthcare industry, it helps to examine the 4 key elements of
a service transaction: (1) offering / searching for the service,
(2) booking the service, (3) consuming the service, and (4)
paying for the service. Applying these elements to the taxi
industry as an example, one can see that Uber is able to
disrupt traditional taxi hailing by using mobile technology
to improve 1, 2 and 4, thereby lowering costs and improving
choice and transparency for consumers.
When applying this framework to healthcare services, a few
things become apparent. Firstly, the patient, essentially a
consumer of healthcare services, is often not free to choose
their provider. Secondly, the patient is typically not the one
paying for the service. Thirdly, and most importantly, the
service provided is complex and requires highly specialised
skills – think of a diabetic patient with kidney problems and
foot ulcers. It is therefore more difficult to standardise. One
of the reasons Uber has been so successful is that the service
provided doesn’t require a lot of skills and can therefore be
easily standardised – two different taxi drivers will get you to
the same point equally quickly.
So is it all lost for technology in healthcare? The short answer is no. The cost and quality pressures
Patrick Reeve, Managing Partner
that led to the disruption of other services industries are no different in healthcare, and technology
should have the same positive impact. At the end of the day, it comes down to the interplay between
these pressures, technological progress and the inertia of the system. Healthcare is more inert than
other industries, but that doesn’t mean it can’t change.
Albion has been investing in healthcare services for almost 20 years and in digital health for the last
10 years. Over that time we have seen a slow but steady increase in the use of technology to deliver
healthcare services. In particular, we’re seeing start-ups that are changing various care delivery
models with the use of technology. Take GP video-consultation services for example, which have
received lots of publicity and funding lately. These services connect patients with doctors over video
calls on a phone, tablet or personal computer. Their main advantage is patient convenience and they
tend to be used by younger people but have the potential to deliver strong population-wide health
benefits in countries where patients struggle to access healthcare such as China.
Another example is our portfolio company Oviva, which is delivering weight management services
to patients with chronic illnesses using a mobile platform that enables more frequent and data-rich
interactions between healthcare providers and patients. Rather than just selling the mobile software
platform to dietitians, the company employs the dietitians, which enables it to offer an end-to-end
service. Offering such a “full stack” solution allows it to bundle complexity and, through the use of
technology, process optimisation and standardisation, control quality and efficiency of the service
provided. The result is a better patient experience, improved outcomes and lower cost. It is these
types of technology-led service models that will revolutionise healthcare delivery in the future in our
view.
Clayton Christensen said that disruption can only come from new entrants. Many start-ups have tried
and failed to disrupt healthcare. But they won’t go away.