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Out of the hospital into the home

  • For the past three decades care has been moving out of hospitals into peoples’ homes
  • This is a significant and rapidly growing shift positioned to accelerate over the next decade
  • Driving this change are significant structural, organizational, and social factors
  • An early wave of new entrant digital ‘pure plays’ started to take advantage of this move ~3 decades ago and developed innovative software health solutions and services for people to consume in their homes
  • Later, there followed a second wave, comprised of several giant diversified healthcare companies that created and marketed digital home health offerings
  • The majority of traditional MedTechs have not responded to this shift and continue to produce physical devices for episodic surgical interventions in hospital operating rooms
  • Could their failure to develop software solutions for care in the home be an obstacle to their future growth and competitive advantage?
  
Out of the hospital into the home
A bridge too far or one that traditional MedTechs must cross?
 
On 30th January 2023, England's state funded National Health Service (NHS) announced a two-year recovery plan to help restore emergency care and frontline services. The plan, backed by a £1bn (US$1.2bn) fund, will increase virtual hospitals where patients receive high-tech care in their homes. It also includes 5,000 new hospital beds that will boost capacity by 5%, and 800 new ambulances, which will increase the fleet by 10%. Currently, England has ~7,000 virtual ward beds in the community. By 2024, ~50,000 patients a month are expected to benefit from these, which shall provide care mostly for elderly patients with chronic lifetime conditions. NHS virtual hospitals will be supported by a range of wearables and medical devices to diagnose and monitor patients’ conditions and share the data with their physicians in real time. This is not a new phenomenon; in 2006, China responded to its shortage of health professionals by developing virtual (internet) hospitals, and by mid-2021 there were >1,600 of them providing convenient and efficient medical services to millions of patients in their homes.

The UK government’s NHS recovery plan is a response to a series of strikes by health workers, protesting about staff shortages and deteriorating hospital conditions. Currently, there are >130,000 vacancies in the NHS; a vacancy rate of ~10%. Last December (2022), 54,000 people in England waited >12 hours for an emergency hospital admission. The figure was virtually zero before the pandemic. The average wait time for an ambulance to attend a stroke or heart attack in December 2022 was >1.5hrs, while the target is 18 minutes. In September 2022, >7m people in England were waiting to start NHS hospital treatments, which is the highest number since records began in August 2007. Surgeons were reported to being frustrated because operating rooms were not being used due to a lack of beds and staff.

This is not simply a UK problem. Since December 2022, health workers in the US, and France have engaged in similar strikes to protest about deteriorating hospital conditions. According to the World Health Organization (WHO), such protests are manifestations of a global shortage of medical staff. “All countries face challenges in training, recruitment, and the distribution of health professionals”, says the WHO, and suggests that by 2030, the global shortage of medical staff will mount to ~15m.  To the extent that a significant element of the challenges facing healthcare systems is staff shortages, it is not altogether clear how the British government’s recovery plan to increase NHS hospital beds and services will work if there is a dearth of health professionals.
 
In this Commentary

This Commentary suggests that the movement of care out of hospitals to peoples’ homes is not just a passing political response to a temporary crisis. The shift is driven by significant structural, organizational, and social factors, which we describe.  Since the late 1980s these factors have been gaining momentum and are positioned to have a defining influence over the next decade. Two distinct ‘waves’ of medical technology companies have taken advantage of this shift. The first wave started ~3 decades ago with several digital ‘pure play’ new entrants, which included ResMed, Propeller Health, Teladoc Health, Livongo Health, and Masimo. These companies all developed and marketed software health solutions to be consumed by patients in their homes. Later, there followed a second wave, comprised of a few giant diversified healthcare companies that included Philips,Medtronic, and Johnson & Johnson, which successfully entered the digital home care market. Notwithstanding, the overwhelming majority of traditional MedTechs have not developed digital solutions and services for patients to consume in their homes. Is this “a bridge too far” for them, or a bridge they must cross if they want to increase their growth rates and competitiveness?
1st wave: digital pure plays
 
ResMed
An early pure play that developed digital health solutions and services to be consumed by patients in their homes is ResMed, (an abbreviation of ‘respiratory medicine’), which started life in the late 1980s in Australia. In 1981, Colin Sullivan, a Professor of Medicine at the University of Sydney, developed and patented a continuous positive airway pressure (CPAP) device, which was the first successful non-invasive treatment for obstructive sleep apnea (OSA). Before Sullivan’s invention, the treatment for chronic OSA was a tracheostomy, where a hole is made through the neck into the trachea so breathing can bypass the nose and mouth. Initially, Sullivan partnered with Baxter, a US multinational medical technology company, to help commercialize his technology. In 1989, Baxter decided not to enter the sleep apnea market, and Peter Farrell, a Baxter executive, led a management buyout to acquire the technology and established ResMed in Australia. In 1990, the company relocated to San Diego, USA, and today, is a world leading software-driven, medical device enterprise, traded on the New York Stock Exchange (NYSE), with a market cap ~US$32.5bn, annual revenues ~US$3.6bn, >8,000 employees and a presence in >140 countries. Its main product offering, the AirView™ telehealth platform, is a secure, cloud-based system, which enables patients with sleep-disordered breathing and respiratory insufficiencies to be treated in the comfort of their own homes. The device provides real-time patient data, personalized insights, and proactive alerts that allow physicians to remotely monitor and connect to their patients. ResMed has >10m, cloud enabled, home care devices in the market and has accrued ~5bn nights of medical sleep and respiratory care data.
 
Propeller Health
In 2019, ResMed acquired Propeller Health for US$225m, but the company continued to operate as a standalone business. Founded in 2007, Propeller developed a mobile platform that offers sensors, mobile apps, analytics, and services to support respiratory health management. It is now a world leader in providing digital health solutions that keep patients with chronic obstructive pulmonary disease (COPD) and asthma out of hospital. The company’s sensors attach to patients’ inhalers and through its app, users can track their medication use, record their symptoms, receive environmental forecasts, which could affect their conditions, and download progress reports to share with their physicians. The app allows health providers to monitor their patients’ progress remotely, adjust treatment plans based on objective data and intervene when necessary. Propeller’s clinically validated solutions have found favour with US health insurers because they have demonstrated ~58% improvement in medication adherence, ~48% increase in symptom-free days, ~53% reduction in hospital visits and lowered costs of treating COPD, a condition that affects ~24m American adults and costs ~US$50bn to treat each year. In 2017, Fast Company named Propeller as one of the “most innovative companies”. In January 2019, the company launched ‘My Pharmacy’ with Walgreens as an in-app feature that allows users to manage their prescription refills for COPD and asthma and to locate a nearby pharmacy. The company quickly expanded this feature to CVS, Kroger, Rite-Aid and Walmart;  five of the seven largest pharmaceutical providers in the US.
 
Teladoc Health
Another early digital pure play is Teladoc Health, an American enterprise founded 21 years ago to provide convenient home healthcare for those who have difficulty accessing traditional healthcare services. Initially, it provided telephone-based physician consultations and medical advice. In 2006, the company added a proprietary digital platform, which enabled patients to securely upload medical records, images, and notes and share them with their doctors. This allowed physicians to assess a patient’s medical information and provide appropriate treatment plans quickly and easily. Teladoc continued to expand its services, including the introduction of remote medical consultations and a suite of digital health tools. Today, the company is a multinational telemedicine and virtual healthcare corporation. Its offerings include virtual care services and digital health solutions, medical opinions, artificial intelligence (AI) and machine learning (ML) driven analytics, telehealth devices and licensable platform services. Its primary services, which have expansive clinical depth and breadth across >450 medical subspecialties, are available in 40 languages and 175 countries.
 
Livongo Health
In 2020, Teladoc acquired Livongo Health, another pure play, in a deal valued at US$18.5bn, which is the largest digital health transaction in history, and created a combined entity valued at ~US$38bn. Livongo was founded in 2008, with a mission “to make virtual care the first step on any healthcare journey”. In July 2019, the company successfully IPO’d and raised US$335m. Until its merger with Teladoc, Livongo traded on Nasdaq and reached a market cap of ~US$14bn. The company’s principal offering is a digital platform that collects data from connected devices, wearables, and mobile apps to provide users with personalized care plans, coaching, and support to help them accomplish their medical goals from the comfort of their homes. A joint statement from the two companies at the time of the merger said that the combination is expected, “to create substantial value across the healthcare ecosystem, enabling clients everywhere to offer high quality, personalized, technology-enabled longitudinal care that improves outcomes and lowers costs across the full spectrum of health".
Masimo
Masimo is a digital pure play founded in 1989 by Joe Kiani, an Iranian American with the mission to create innovative digital patient centric medical solutions that improve outcomes and lower health costs. Over the past three decades Masimo has helped to make in-home medical care more accessible and affordable. Its digital offerings help to automate processes, reduce costs, and streamline communications between providers and patients. The company’s first product was a digital stethoscope, a device, which enables doctors to monitor a patient’s heart sounds remotely.
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Kaini, an electrical engineer by training, has >500 patents or patent applications for advanced signal processing, optical sensors, and wearable technologies, and is the company’s current chair and CEO. Masimo became a Nasdaq traded company in 2007, and today is a global player with a market cap of ~US$9bn, annual revenues ~US$1.25bn and >5,300 employees. The company has grown to become a leader in the digital healthcare space by developing and marketing a range of offerings, including a clinical decision support and monitoring platform, which helps to provide convenient and cost-effective care in patients’ homes.  Its core offering, a pulse oximeter, is a non-invasive, medical device that can easily be clipped onto a finger or toe to provide accurate readings in just seconds and is used to diagnose and monitor the amount of oxygen in the blood of people with respiratory conditions, such as COPD and asthma. Previously, blood oxygen levels could only be determined in a laboratory on a drawn blood sample. The pulse oximeter is also used for monitoring newborns, the elderly, and athletes, and each year monitors >200m patients.
 
In 2020, in response to the COVID-19 pandemic, the company introduced the Masimo SafetyNet for smartphones. In addition to helping combat COVID-19, the device can also be configured to help physicians create, relay, and manage treatment plans for >150 other health needs. In 2022, the company launched its W1 Health Watch, which is a water-resistant and dust-proof consumer-oriented health monitoring device equipped with a range of sensors and sensor-based algorithms that are designed to give users a comprehensive overview of their health. The watch also has an emergency feature that can detect and alert specified contacts if the wearer is in distress.
 
Factors driving care out of hospitals into homes
 
Since this first wave of digital health pure plays, there have been several significant structural, organizational, and social factors that have gained momentum and together helped to drive care out of hospitals into homes. We briefly describe these.

(i) Demographics: aging populations and escalating chronic lifetime disorders
United Nation’s data on global population trends suggest that by 2050, one in six people will be ≥65, (16%), up from one in 11 in 2019 (9%). According to the US Census Bureau, in 2022, there were ~56m Americans ≥65, which is ~17% of the population. This figure is projected to reach >73m by 2030 and ~86m by 2050: ~22% of the population. In the US, ~60% of adults have chronic diseases. According to the Centers for Disease Control and Prevention (CDCP), 90% of America’s ~US$4trn annual healthcare costs is attributed to people with chronic lifetime diseases and mental health conditions.

Since 2000, in the US, 18% of healthcare professionals have quit their jobs. According to data published in June 2021 by the Association of American Medical Colleges (AAMC), the US could see a shortfall between ~37,800 and ~124,000 physicians by 2034, with the largest disparities being in specialty doctors. These data suggest that, over the next decade, there will be fewer hospital resources available to care for a growing aging population with complex healthcare needs.

(ii) Technological advances
Technological advances are changing how clinicians practice medicine, how consumers manage their own health, and how patients and providers interact.

Remote patient monitoring, video conferencing, telemedicine, and mobile health applications have enabled care to move out of hospitals and into peoples' homes. Remote patient monitoring allows healthcare professionals to monitor a patient's vital signs and other health data remotely. Video conferencing provides patients with the ability to have real-time consultations with their physicians. Telemedicine allows a patient’s medical information to be securely shared with a range of healthcare providers, which increases access to care, and enhances its coordination. Mobile health applications allow patients to track their health data and receive reminders for taking medications, scheduling appointments, and other health-related tasks. These technological advances have enabled healthcare workers to deliver care to patients in their own homes, reducing the need for in-person visits to a hospital. AI and ML big data advances have facilitated remote diagnosis and monitoring and improved communications between healthcare providers and patients. Further, AI-powered chatbots help patients navigate healthcare systems, make appointments, and answer medical questions more quickly and accurately than traditional methods.
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(iii) Regulations
The US Food and Drug Administration (FDA) has revised its healthcare regulations to include the acceptance of algorithms for use in the healthcare industry. Since 1995, the FDA has authorized >500 AI-enabled medical devices. By providing for the use of algorithms, the FDA is helping to move care out of hospitals into homes. Recently, the agency set up the Digital Health Center of Excellence (DHCoE) to “empower stakeholders to advance healthcare by fostering responsible and high-quality digital health innovation”.
(iv) Payors’ policies
In most nations, governments increasingly offer coverage for in-home health care services. We have mentioned government backed virtual hospitals in the UK and China. In the US, Medicare, and Medicaid [federal and state healthcare insurance programmes] have expanded their benefits to support home health care. The agencies' reimbursement policies are becoming more favourable in providing value-based healthcare for improved patient outcomes at lower costs. As a consequence, in-home care has become a modality of choice for treatment. Medicare now covers a variety of telehealth services, including remote patient monitoring, and the Medicare Advantage plans [Medicare-approved plans from private insurance companies] are now required to cover certain home health services, including skilled nursing, as well as medical equipment and supplies. Additionally, Medicaid programmes have implemented waivers that allow for some long-term health services to be provided in peoples’ homes. According to the US Centers for Medicare & Medicaid Services, spending on home healthcare services in America rose from ~$37bn in 2000 to >$97bn in 2018; an overall increase of ~161%.
 
Over the past decade, an increasing number of American private insurance plans have extended their cover for home health services. Research published in March 2022 by Deloitte, a consulting firm, suggests that over the next decade, as digital pure plays continue to grow and increase their capabilities, major health plans (government and commercial) will increase their partnerships with them. Deloitte suggests that by 2030, “>25% of health plans’ net profits will shift to digital health entrants”. According to a recent market analysis by GrandViewResearch, the global home healthcare market was valued at ~US$336bn in 2021 and is expected to expand at a compound annual growth rate (CAGR) of ~8% from 2022 to 2030.
 
(v) The rise of consumer power in healthcare
The rise of consumerism in healthcare has increased the emphasis on patient empowerment, convenience, cost-effectiveness, and home care. In 2018, Gordon Moore et al provided a compelling rationale of the significant rise of consumerism in healthcare in a book entitled ‘Choice Matters’. Moore, Professor of Population Medicine at Harvard University Medical School, identified the growing influence of patients, which previously had been largely overlooked. Over the past three decades patients have become more knowledgeable about health and this has empowered them to take added charge of their own health and seek out the best possible care for their individual needs. This has helped to drive care out of hospitals and into the home, where patients can receive personalized treatment in a comfortable, familiar setting. Moore argues that patients have more choices than ever before and increasingly demonstrate an ability to make informed decisions about their health. Choice Matters stresses the importance to understand both the medical and financial implications of patients’ decisions and how they help to shape technology, inform public policy, and trigger healthcare initiatives. Moore’s thesis discusses the growing implications of consumer-driven healthcare and explores how the marketplace is evolving in response to the changing needs of patients. The book outlines a variety of arguments that support the idea of healthcare decentralization, such as the need for care to be tailored to an individual's unique needs and preferences, the advantages of providing care in the home, and the potential cost savings associated with these changes. Moore also highlights the value of integrating technology into the home-based care model and the potential of this delivering increased efficiency and improved outcomes for patients. Today, consumerism in healthcare is challenging the traditional medical modality of diagnosis and treatment by putting a greater emphasis on lifestyles and prevention.
 
2nd wave: giant healthcare companies
 
The commercial success of the first wave of digital health pure plays, together with the factors we outlined above, made some giant diversified healthcare companies rethink their business models and employ AI and ML big data strategies to develop and market health solutions and services for people to consume in their homes. These companies include Philips, Medtronic, and Johnson & Johnson; together they represent a second wave of healthcare companies that have successfully gained access to new revenue streams by serving the large and growing home care market. Here we briefly describe some of their digital offerings.
 
The Philips HealthSuite digital platform is designed to help healthcare providers deliver patient-centric  care, reduce costs, and improve outcomes. The platform is powered by the cloud and includes a suite of AI big data analytic tools, which support the monitoring of patients in their homes, and allows physicians to access real-time health information and respond quickly to any changes in a patient’s condition. Similarly, Medtronic’s CareLink™ remote monitoring platform supports home care by facilitating patients to monitor and manage their health information remotely. The device allows healthcare providers to access a variety of patient data, including vital signs, weight, diet, sleep, activity, and medication adherence. It also provides two-way communication between healthcare providers and patients, allowing for more personalized care. Johnson & Johnson has built on its consumer health business that “helps >1.2bn people” and, in August 2019, launched its CarePath Solutions platform to provide patients with personalized health plans and support in their homes. It also helps healthcare providers to make informed clinical decisions, reduce costs, and improve patient outcomes.
 
Takeaways
 
The commercial success that digital pure plays and giant healthcare corporations have gained by providing solutions and services for patients in their homes should raise alarm bells for traditional MedTechs that continue to focus on providing legacy physical devices for episodic surgical interventions in hospitals. Patient centric health, emphasizing convenience and accessibility, shifts the focus of healthcare from the hospital to the home, from physical devices to digital solutions and services. To take advantage of this shift companies will need to invest in developing new digital health innovations. Patient centric healthcare also emphasizes the need for data-driven decision making, which requires the use of more advanced analytics and AI, ML big data strategies. Traditional MedTechs producing physical devices may not be able to keep up with the rapid pace of software developments in healthcare. Pivoting to develop and market software health solutions and services for patients to use in their homes might be a “bridge too far” for these companies. However, can traditional MedTechs afford not to cross this bridge?

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