Parks Associates: Connected Medical Devices: Oportunities for Service Providers

Harry Wang, Director, Health & Mobile Product Research, Parks Associates

Connected Health and the Role of Connected Medical Devices

Connected health solutions, often implemented along with connected medical devices, are expanding the traditional means of practicing healthcare. Connected medical devices include durable medical equipment (DME) and personal health devices as well as the emerging mobile medical apps that care providers and consumers are using on their smartphones and tablets. These technologies are designed to deliver more efficient care, provide better doctor-patient communication, and enable innovative care services such as remote patient monitoring, disease diagnosis, and independent living solutions.

By doing so, connected medical devices meet the needs for multiple industry players:

Care providers want better efficiency & accountability

Payers wants to bend the cost curve

Consumers want high-quality, convenient care at low cost

What is driving connected health market growth?

One of the main benefits of connected health solutions is the ability for periodic or continuous patient monitoring. Remote monitoring can give physicians better insight into a patient's care and provide daily monitoring of a patient who is struggling to manage a chronic health condition. In-home care will be an important aspect of these solutions, especially as the baby-boomer generation ages, not only to reduce unnecessary and avoidable hospital visits but also to align with consumers' preferences to live healthy while maintaining their independence at home.

More formally, current reforms in healthcare are promoting the coordinated care model to reach these goals. The two dominant models are the Patient-Centered Medical Home (PCMH) and Accountable Care Organization (ACO), and the number of patients enrolled in either a PCMH- or an ACO-recognized physician practice will experience a dramatic increase from 2012 to 2017.

Both care models rely heavily on technology to realize their potential in improved outcomes and cost savings. Connected medical devices in particular can enhance self-care options, capture early warning signs of health problems, document patient engagement, and collect health-related "big data," all of which can assist these healthcare organizations in reaching these goals.

For example, if a device can shift the focus of care from a medical facility to a home-based solution (e.g., performing a sleep apnea test at home versus in a hospital), it creates substantial savings for payers and patients.

The Role of Service Providers

The network-connected medical devices being used generally require fixed or wireless broadband Internet connection either directly or indirectly through a data gateway solution, which means broadband service providers will play a crucial role in supporting connected health deployments. In many instances, they will make ideal partners in the healthcare market as they have the expertise to deliver the reliable connections necessary to ensure the success of these solutions.

The U.S. has reached a point where households have access to broadband connections in almost all regions of the country. Mobile devices, specifically smartphones and tablets, are also assuming a larger role in the digital health space, as these platforms serve up thousands of apps that consumers can use to manage their healthcare, coordinate caretaking activities, and track their progress in efforts such as weight loss and smoking cessation. Already nearly 20% of U.S. smartphone and tablet owners use an app to track or manage their fitness activities.

These technologies create a foundation for healthcare innovations, especially in form factors for medical devices and services that are becoming more consumer-centric. Service providers have the relationships with customers to help provide incentives toward healthy behaviors.

They are also seeking new sources of recurring revenue within the broader smart home market, which includes networking-based solutions in security, controls, and energy management as well as video and broadband services. Digital health is emerging as one part of the smart home market, and broadband/telecom service providers have been eyeing the connected health market for more than five years. In that time, broadband/wireless service providers have joined drug companies, CE retailers, and even home builders and installers to support deployment of connected health products and services.

However, early trials, such as Sasktel's LifeStat service, Orange's GPS tracking service, and Comcast's home monitoring service, fared poorly with end users. These high-profile failures highlight the challenges faced by broadband service providers due to a lack of brand power, consumer trust, and established expertise in distributing health-related devices and services. Providers are not naturally associated with the healthcare area, and as a result, they will need partners in order to build their business and reputation.

Device Form Factors and Technology Expertise

These early failures will prompt caution in future partnership efforts, but overall broadband and mobile service providers will continue to seek inroads in the digital health space. They are first and foremost providers of the network upon which independent living and health monitoring services are built and offered.

On the health side, device form factors in medical devices are evolving to become more consumer-centric, intensifying competition between market incumbents (e.g., Philips, Medtronic) and start-ups. As the reimbursement processes shift - and device makers compete to get on approved reimbursement lists - the expertise providers have in evaluating technologies will be valuable in designing devices that provide the right outcomes on cost savings and improved care.

Providers have experience in evaluating and supporting different networking technologies, which is a valuable asset in this early market for connected devices. Many of the health-based sensors rely on networking protocols to share and transfer data; however, as is typical with an early and developing market, there are multiple solutions vying for dominance in this area. In local-area networks (LAN), WiFi is the dominant technology, but in both personal-area and wide-area networking (PAN and WAN, respectively), several different solutions are in place.

The candidates in PAN include Bluetooth, ZigBee, NFC, ANT+, and newcomer IEEE 802.15.6, which need to be evaluated based on power consumption, latency, throughput, and level of immunity to interference. Devices would use WAN protocols to communicate with the gateways connected to the network, where the candidates include GSM, CDMA, UMTS, and LTE, and makers must also decide between a physical, virtual, or hybrid gateway solution.

From an application perspective, broadband service providers' interest crosses all major health service categories, with a strong focus on chronic disease management and senior independent living services. There is a broad spectrum of households and consumers that will benefit from connected medical devices, from the 68 million households with hypertension to the two million with arrhythmia.

Already there is a strong installed base for connected medical devices, with 32% of U.S. broadband households (32 million households) with a digital weight scale, 26% (23 million households) with a blood-pressure meter, and 12% (11 million households) with a glucometer. As device design and usage shift from the clinical setting to the home, there will be a steady increase in the number of households with medical devices as well as an uptick in the average number of medical devices within the average households.

To capture market share, service providers are actively pursuing partnerships with solution providers, platform enablers, and service renderers. In other areas, such as GPS location tracking, medication monitoring, and chronic condition diagnostics, they are taking the role of backend infrastructure service providers, collecting revenues from their partners for use of their network.

In one prominent example, AT&T and its partner WellDoc started to offer the DiabetesManager® application to commercial health plans in 2010. DiabetesManager®, developed by WellDoc and hosted on AT&T's network, is a mobile diabetic care solution that doctors can prescribe to their patients. It analyzes the vital stats and dietary information of a diabetic patient and provides feedback to patients and their healthcare providers to encourage positive behavioral changes. Alere, one of the reputable providers of chronic disease management services, joined the initiative in 2012 to help AT&T and WellDoc market the solution.

AT&T is also working on a prototype fall-detection device called Smart Slippers: wireless sensors built inside a pair of slippers can capture velocity in acceleration and measure changes of insole pressure. Both types of data will be processed through computer algorithms to predict a fall event and activate the alert system.

Conclusions

Telecommunications service providers with voice, broadband, and mobile services have shown strong interest in connected health products and services. For now, they are focusing on building broad alliances with all kinds of health application and solution providers, and connected medical devices, both medical devices and health-based apps, will be key platforms where the end users will interact with health services and applications.

As the connected health market evolves, service providers will leverage their managed service platforms and application partnerships to capture revenue streams from whatever business models their customers prefer. Parks Associates believes the healthcare industry, and the connected health market in particular, represents a long-term market opportunity for national and regional telcos alike - and many of these providers will soon be developing health-based services and partnerships that will bring them very close to healthcare customers.