Good Prognosis for Digital Transformation in Healthcare

Transcription

1 BLACK & WHITE PAPER Good Prognosis for Digital Transformation in Healthcare AUGUST 2017 PREPARED FOR COPYRIGHT RESEARCH. ALL RIGHTS RESERVED.

2 About this paper A Black & White paper is a study based on primary research survey data that assesses the market dynamics of a key enterprise technology segment through the lens of the on the ground experience and opinions of real practitioners what they are doing, and why they are doing it. About 451 Research 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to over 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. NEW YORK 1411 Broadway New York, NY SAN FRANCISCO 140 Geary Street San Francisco, CA LONDON Paxton House 30, Artillery Lane London, E1 7LS, UK +44 (0) BOSTON Federal Street Boston, MA

3 INTRODUCTION This report is part of a study designed to explore the extent that digital transformation is playing out worldwide. The report series assesses how efforts are playing out within organizations in key vertical markets and geographies that are planning or actively applying digitization to strengthen competitive differentiation. This report focuses on the healthcare sector. We have identified four key organizational pillars operational efficiency, customer/patient experience, agility and risk management as drivers for digital transformation. We have also assessed how strategies are being shaped by business imperatives and priorities within the healthcare sector. The objective of this report is to highlight some of the shared learnings of strategists and practitioners with a working knowledge of digital transformation across the healthcare domain. This report aims to provide insights, directional indicators and recommendations about the state and status of digital transformation, drawing on interviews with more than 250 healthcare sector decision-makers in key markets across the globe. We thank each and every one for their participation. 3

4 KEY FINDINGS Healthcare professionals recognize the potential for cutting-edge digital technologies such as artificial intelligence (AI) to make a difference in the way healthcare is delivered and administered, with more than half (54%) identifying AI and machine learning as one of the three most disruptive technologies in healthcare. Data protection along with exploitation and aggregation of new data sources are key challenges in healthcare. Securing patient and customer data was identified as the most important element in managing risk as part of digital transformation, with 49% of respondents citing this as an imperative. Pent-up demand to aggregate and exploit new sources of data such as those that can be derived from personal fitness and health trackers and monitors must be balanced against the potential security and operational challenges they might bring. Modernizing IT infrastructure for better availability, speed and resilience was cited by 53% of healthcare providers as the key way to increase their organization s agility, laying down a strong but flexible infrastructure for delivery of services to new and existing patients. Acknowledging that IT departments in the healthcare sectors are typically stretched quite thin and that there are aspects of digital transformation that are best left to partners, cloud services are deemed a crucial underpinning of digital transformation in healthcare, with 74% of those with a formal digital transformation strategy saying cloud is very important to their strategy. And assistance with cloud migration is the top service they re looking to outsource to a partner. The biggest barrier to digital transformation in healthcare is one that is part of the cost of doing business in the healthcare industry compliance with security and privacy regulations. Although 38% of respondents cite it as the main barrier to success, they identify other constraints such as a lack of interoperability (35%) as barriers. Electronic health record (EHR) adoption in the US has been rapid, and can be expected to accelerate in other geographies, but it doesn t solve the interoperability problem and, in part, contributes to it. Geographical variations exist between healthcare companies based in Asia-Pacific and North America, especially when it comes to how innovative they see themselves, their willingness to spend on proactive risk mitigation and their desire to have a telecom or IT service provider to help them on their journey. On all three counts, respondents in Asia-Pacific were markedly more positive than their US counterparts. 4

5 HEALTHCARE DIGITAL TRANSFORMATION: MORE DATA, MORE CHALLENGES, MORE OPPORTUNITIES Healthcare organizations operate in a fragmented world of individual physicians, physician practices, hospitals and hospital systems, insurance companies and government agencies (which, in the US includes the largest healthcare system by revenue, the Department of Veteran s Affairs). As such, interoperability of systems and the secure transfer of data between connected parties or those that are constituents of the overall ecosystem are considered vital issues that enable the provisioning of patient-centered longitudinal care and ensure those that need to get paid, are paid. Healthcare is perhaps the sector where digitization of information has already had the most dramatic effect. What was once a very paper-driven industry has been upended by the digital revolution. There have been huge increases in the volume and variety of data generated by new devices and systems. Technology has long played a key role throughout the care continuum; medical devices and various specialist machines have been deployed, transforming the way healthcare is managed, delivered and administered. Somewhat paradoxically, however, the more that technology has been applied, the more costs have risen for patients (although rising costs are not due to technology alone), which is the opposite of what has occurred in most other industries. Large and expensive MRI machines, CT scanners and various types of patient-monitoring devices are just part of the overall digital transformation of healthcare. These provider-side devices are being augmented by smaller, more personal and connected patient-side devices that are capable of collecting vast troves of data from a patient s day-to-day activities and interactions. This data, along with new machine-learning-driven applications, can give medical professionals a significantly deeper understanding and a more detailed, longitudinal view of patients. Many people who consider themselves healthy are now using wearable technology to collate data and measure their own well-being, thus expanding the reach and role of technology in healthcare. One consequence of this is that there is a growing divergence between how providers are running their organizations and how technology-enabled consumers want to interact with them. Electronic Health Records and Interoperability The adoption of electronic healthcare records in hospitals driven in part by the 2010 Affordable Care Act (ACA) regulations in the US has exploded over the past 15 years, to the point where at the end 2015, 87% of office-based US physicians were using EHR (up from 21% in 2004, according to the Office of the National Coordinator for Health Information Technology in December 2016). The figure is much lower in other regions of the world, but the general trend is likely to head in the same direction. Whether the ACA survives in its current form, EHR adoption is only going to increase. The flip side has been a huge increase in the accessibility of patient data to patients themselves in 2015, 95% of US hospitals enabled patients to view that data electronically, and 87% enabled them to download it (compared to just 24% and 14%, respectively, three years earlier, according to data from the US Office of the National Coordinator for Health Information Technology and the American Hospital Association). But important as they are, EHRs only contain part of the healthcare data needed to make clinical decisions, and interoperability is much more complex than focusing on one system. Most large hospitals pull data from more than 50 sources, so the focus needs to be on providing a single coherent view of data to clinicians, regardless of where the data resides. Therefore, a patient-centered approach (rather than an EHR-centered approach) is needed so that all the data is gathered around the patient, regardless of its source. Doing so dynamically (think how an online travel-booking service works) is far from easy, however, and even though emerging standards such as Fast Healthcare Interoperability Resources exist to facilitate lightweight integration between systems, much work is usually required to make that patient-centered view a reality. Care data is being generated in many areas EHRs, other provider-side devices and labs, and patients devices but it exists in silos that are difficult to integrate. This data clearly has the potential to provide the longitudinal depth of view that providers need to improve care, and to drive the cost for the care down, but integration challenges prevail. 5

6 How Far Along is Your Digital Transformation? This progressive digitization of the healthcare industry is reflected in our survey of healthcare professionals. The overall focus of the survey was on digital transformation (see Figure 1), defined as the result of IT innovation that is aligned with and driven by a well-planned business strategy with the goal of transforming how organizations serve customers (patients), employees and partners, support continuous improvement in business operations, disrupt existing businesses and markets, and invent new businesses and business models. As is the case in other industries, healthcare organizations are at various stages of digital transformation. When asked at what stage they were, 53% said they had a formal strategy in place and were actively digitizing processes, while another 24% said they were engaged in siloed digital transformation projects. Just 3% said they had no ongoing digital transformation strategy, which was lower than in other industries we surveyed (financial services, retail and government). The remaining 20% placed themselves at the planning stage. Figure 1: Healthcare organizations status with regard to digital transformation (n=258) 3% We currently have no ongoing digital transformation strategy 53% We have a formal strategy and are actively digitizing processes 20% We are in the planning stage researching to form our digital transformation strategy 24% We have started on siloed digital transformation projects, without an overarching digital transformation strategy A digital transformation program provides some healthcare organizations an opportunity to set themselves apart from their competitors. For example, those with formal digital transformation strategies already in place see themselves as more innovative: 62% of respondents said they believe their companies are fast to innovate as a result of their programs (as Figure 2 shows, this compares with 40% among early-stage digital transformers). There s a large geographic disparity here, though: 60% of Asia-Pacific respondents regardless of digital transformation stage described themselves as faster to innovate, versus only 36% in North America. The nature of IT spending changes as digital transformation programs progress, too, with 62% of those engaged in a digital transformation project expecting their IT spending to become more strategic to the organization as a consequence (versus 42% for those in the early stages). 6

7 Figure 2: Comparison of healthcare organizations with formal and early-stage strategies for digital transformation (n=196) Early Stage Digital Transformation Formal Digital Transformation Strategy Fast to innovate 40% ABILITY TO INNOVATE 62% Fast to innovate Very strategic 42% FUTURE SPEND 62% Very strategic Reduce costs through operational efficiency 52% Improve overall spending and costs 47% IT/Telco service provider 50% TOP DRIVERS EFFICIENCY GOAL 51% 44% TRANSFORMATIONAL PARTNER 54% Improve customer experience Use data for better decision-making IT/Telco service provider Those in the early stages of digital transformation tend to be more focused on reducing costs to operate more efficiently, while those further along with their formal plans are aiming to improve patient experience. This, perhaps, reflects a shift in ambition. This is also prevalent in their top goals for improving efficiency: 44% of respondents with a formal plan are focused on using data for better decision-making, while those in the early stages are still focused on improving overall spending and costs. And whether they are in the early or latter stages of their digital transformation projects, respondents put an IT or telecom service provider at the top of their list of partners helping them execute on that digital transformation. Four Foundational Pillars of Digital Transformation There are, generally speaking, four main reasons why organizations undertake a digital transformation program and these cut across all industries. We call these common objectives the four pillars of digital transformation, and they are focused on: Enhancing customer (patient) experience Improving operational efficiency Increasing the organization s level of agility Better managing business risk We asked healthcare professionals about the pillars they prioritize by asking them to allocate 100 points across these four organizational goals as they relate to digital transformation. Overall, healthcare respondents put more emphasis on improving operational efficiency, followed by enhancement of patient experience, agility and better managing risk (see Figure 3). 7

8 Figure 3: Healthcare organizational goals of digital transformation (N = 258) Improve operational efficiency 29% Improve customer (patient) experience 25% Improve the level of agility 24% Better manage business risk 22% As a means of driving improvements in these four pillars, different organizations will be targeting different priorities with different initiatives. Figure 4 shows that when addressing agility, 53% of healthcare respondents worldwide see modernizing their IT infrastructure as one of the most effective ways to improve that pillar. In another pillar, 49% of respondents believe better security around patient data is one of the top ways to improve their overall posture to risk. Figure 4: How healthcare organizations are seeking to prioritize transformation in the four key pillars (n= 258) OPERATIONAL EFFICIENCY Make better use of healthcare data to improve decision-making CUSTOMER (PATIENT) EXPERIENCE AGILITY RISK 44% 45% 53% 49% Improve customer (patient) service (e.g., self-service) Modernize the IT infrastructure for availability, speed and resilience Better secure patient data We will look at how organizations are striving for improvements in each of these pillars in more detail. AGILITY: Agility takes many forms for healthcare providers, but when it comes to technology, the most fundamental is a strong foundational infrastructure. The majority (53%) of respondents say modernizing their IT infrastructure for availability, speed and resilience is the most important factor in enhancing their agility. That s true whether the organization is a small rural healthcare association or a large integrated hospital group. With so much reliance on digitized processes and systems, having the infrastructure in place to ensure fast communications, 24/7 availability and secure access is a crucial building block to a responsive patient-centered operation. But true digital transformation is much more than simply applying new technology to existing processes. In part, it s about changing the way processes are done, because new types of technology whether applications or infrastructure can enable healthcare providers to run their organizations in new ways, which means changes to workflows. One area targeted for change and improvement is collaboration both across distributed health and social care teams and separately, between providers and payers. Here, many will look to service providers for help, and business consulting services featured among those services healthcare providers would look to partners to provide (see Figure 7). CUSTOMER (PATIENT) EXPERIENCE: Improving customer or patient service rated the highest in terms of the overall customer experience pillar, with 45% of respondents identifying it as the key element overall. Although they often face limited competition within their geographic area, hospitals, clinics and medical practices are still in the business 8

9 of attracting patients and serving them as best they can, and some patients will travel long distances to be treated by the best doctors in their field or those with access to the best technology. Hospitals and clinics can differentiate themselves not only on the quality of their patient care, but also on their reputation for excellence, patient safety and customer service. Offering patients better self-service options featured highly in this regard, with 36% of respondents choosing it as one of their top customer experience priorities. One might think that good patient experience is all about becoming well and the quality of care. But studies have shown that satisfaction with their experience may not actually be related to whether patients received quality care or whether they had good clinical outcomes. Other aspects matter just as much, such as good communication between the provider and patient, especially between visits. Technology has a part to play here in making that communication as simple as possible, particularly with those in remote areas. Technology can also help with patient engagement, such as providing online portals to give patients access to their personal health records, something undertaken by the US Department of Veterans Affairs, for example. One of the goals of the ACA has been to improve the quality of care in a broad sense, guided by the triple aim of improving the experience of care, improving the health of populations, and reducing per-capita cost of healthcare, developed by the Institute for Healthcare Improvement. Those goals cannot be achieved without some fundamental transformations in how healthcare providers and the population as a whole embrace technology. OPERATIONAL EFFICIENCY: The explosion in healthcare data is changing the way clinical and operational decisions are made. Healthcare providers recognize that while the volume and variety of new data could be overwhelming, it opens up huge opportunities to operate more efficiently. Thus, 44% of respondents said that making better use of healthcare data to improve decision-making was the top objective when it comes to improving operational efficiency. Digital transformation has a role to play in operating rooms, for instance enabling real-time decision support to avoid adverse events and help prevent errors, or in emergency rooms to enable clinicians to ascertain who is in most need of immediate care, what beds are available, and even bringing genomics into the mix to identify the right treatment for a particular patient. All of which demonstrates how important data has become in the newly digitized world of healthcare both inside hospitals and in the patients own hands. For example, being able to collect data remotely and regularly from a patient, rather than patients having to travel to see a nurse or clinician, frees up resources that can be used in more acute scenarios. Healthcare delivery is often based on poorly synchronized and inefficient processes that rely on costly manual labor and expensive care venues. The fact that 41% of respondents said they consider optimizing the use of human resources, infrastructure, and goods and materials as another key driver for digital transformation is, therefore, no surprise. RISK: Regulatory constraints can slow or inhibit innovation, and many healthcare providers struggle to maximize the value of the data they have access to because of uncertainty surrounding its use. Managing risk looms large as a key pillar for digital transformation projects in healthcare. Data breaches in healthcare are a huge issue should they occur, given there is no more personal data than personal healthcare data. Therefore, it s perhaps not surprising that securing patient data was voted the most important element in managing risk as part of digital transformation, with 49% of respondents citing this as a key objective. Meeting privacy requirements and proactive risk mitigation were the next two most popular, cited by 44% of respondents. The WannaCry attack that badly hit the aging computers of the UK s National Health Service, and the NotPetya malware that impacted several pharmaceutical companies in Europe and the Far East, as well as hospital care facilities in Pittsburgh in the US, demonstrates that healthcare providers are routinely being targeted by malicious hackers. Cyber threats are now a global phenomenon, so vigilance and multi-layered security are essential due to the sensitive nature of medical data. Respondents in Asia-Pacific were markedly more in favor of investing in proactive risk mitigation than their counterparts in the US and Canada, with 54% of those in that region selecting it as one of their top three priorities versus 27% in North America. Aside from the healthcare providers risk, patients themselves face numerous risks in hospitals medication errors, hospitalacquired infections, overexposure to radiation, false alarms leading to alarm fatigue on the part of nurses, complications from anesthesia and so on. As part of any digital transformation project, healthcare providers should look at how technology applied in the right way can mitigate those risks. For example, technology can be applied in more efficient ordering systems for medications and supplies, barcode medication administration systems and electronic health records, as well as the aforementioned multi-layered security to help prevent data security breaches. 9

10 APPETITE FOR DISRUPTION CHARTED As more aspects of the healthcare continuum become digitized, there is a vast increase in the volume of digital information that needs to be managed both structured data in electronic health records and less structured data in images, physicians notes, call center records and data from wearable devices. Healthcare professionals recognize that they cannot respond simply by hiring more people to analyze the data because that simply does not scale. One answer is to adopt cutting-edge technologies such as artificial intelligence and machine learning to augment the work of human specialists whether in clinical or operations roles so that certain repetitive tasks can be automated to make processes more efficient. When asked about the three most disruptive technologies (specific to the healthcare industry) that they expect their organization would consider adopting, the majority (54%) of respondents said artificial intelligence and machine learning. Machine-learning-driven applications can ingest vast quantities of disparate data and identify objects, patterns and trends and then under supervision of domain experts get better at detecting patterns, including looking for previously unseen anomalies. Already, machine-learning-powered medical image-recognition systems can process more images in a day than any clinical technician can, and do so more accurately. Use cases include spotting eye diseases such as macular degeneration using an AI-powered eye scanning app on a smartphone, or identifying skin cancer via the phone s camera. Such things are already possible using AI-powered image recognition. And besides these cutting-edge applications, there is a great deal that machine learning could do with more mundane, repetitive tasks such as appointment scheduling and claims management. As populations expand and become older, AIpowered technologies in the form of robotic companions could help provide new forms of care for people in their old age, and potentially help counter some of the mental health issues that come with being older and having fewer social interactions. Also on the horizon, augmented reality (AR) and virtual reality (VR) have a lot of potential uses, especially in healthcare training scenarios and remote treatment 41% of respondents included AR/VR as one of top three disruptive technologies they would consider adopting. Solutions such as these that are highly dependent on connectivity and data processing could be viewed as the next generation of telemedicine, which has been held back by a lack of adequate network infrastructure. But in many regions around the world, those problems are being tackled, and care is now being delivered remotely across secure, resilient wide-area networks either to patients at home, or to smaller hospitals or remote clinics that don t have sufficient physicians on-site. With medical devices of all types increasingly connected via the Internet of Things (IoT), healthcare providers face both new challenges and new opportunities because the full ramifications are only just starting to be understood. Roughly 44% of respondents said they consider IoT a top transformative technology and it s not hard to see why. The opportunities are vast, in particular the remote monitoring of patients wearing IoT-enabled devices. This enables the collection of data about their condition, and potentially helps spot problems before they become more serious using monitoring devices to spot early-stage or potential heart problems, for example. Of course, the downside of accessing and accumulating such data lies in the potential for compromised medical devices and theft or leakage of medical data, which pose huge risks for both patients and healthcare providers, who would have to deal with the consequences of regulatory and data privacy violations. To mitigate this risk, many healthcare providers are looking for third-party expertise to help them build security into their systems, and formulate policies for handling data and preventing data breaches. We expect to see such approaches increase as the volume of data-collecting devices connected to the internet starts to increase more rapidly. In industries where cyberattacks are part of the daily landscape most notably in financial services and in retail outsourcing cybersecurity has become commonplace, and we can expect the healthcare industry to go down a similar route. 10

11 Figure 5: Top three most disruptive technologies specific to the healthcare industry that organizations would consider adopting (n=196). Artificial intelligence and machine learning (e.g., data discovery for healthcare issues, research) 54% Internet of Things (IoT) e.g., sensors, connected devices & wearables 47% Augmented or virtual reality (e.g., assisting surgeons, nurses and patients) Virtual assistants to provide online advice/ services with minimal human intervention Biometrics (e.g., appointment and screening) Biometrics (voice, iris and fingerprint recognition) and 3D printing (e.g., orthopedic implants, medical devices, human tissue) Robotic assistance during surgery 41% 41% 41% 39% 37% DATA PROTECTION, EXPLOITATION AND AGGREGATION Regulations Help Steer the Best Course Protected health information (PHI) is just about the most sensitive data that exists. Nobody wants to see their personal health data end up in an online marketplace on the dark web, or subject to a ransomware attack. In the US, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) was established to safeguard PHI. However, HIPAA is now more than 20 years old, and while it was a pioneering regulation for protecting healthcare data, it may not be sufficient in the era of big data, social media, wearable devices and machine-learning-powered analytics. That s because the entities covered by HIPAA are restricted to traditional healthcare organizations, such as hospitals, insurance companies and their associates. It doesn t apply to manufacturers of fitness trackers or social media sites set up to share health and well-being information, for example. Large cloud storage providers make sure their systems are in-line with HIPAA, but they can t actually earn a HIPAA certification. And all the while, regulations are getting tighter globally. The European Union General Data Protection Regulation, due to become law in May 2018, will apply to any international healthcare provider that processes personal data of EU citizens. It places strict limitations on how personal data is used and enables citizens to know what data about them is collected, how it is used, and gives them the right to access, review and even delete it. There is a pent-up desire to access healthcare data to improve services, track widespread health trends, develop drugs more quickly and improve insurance claim processes, and regulatory obligations need not be seen as obstacles. For example, included in the US Affordable Care Act is a Qualified Entity Program to mine claims data from federal healthcare programs as long as patient identities cannot be detected and the entities are all HIPAA-compliant. Because gathering a large enough volume of PHI that patients have given their consent to be used will be difficult, the early opportunities to exploit patient data to gain insight are likely to be in smaller datasets contained within individual hospital systems. However, a machinelearning technique called generative adversarial networks is being tested that can be used to create fake, but realistic, healthcare records to train machine-learning models without infringing on patient privacy. Information Security for All Situations Although healthcare organizations need to be highly vigilant about their handling of PHI, they don t want information security challenges to block digital transformation. Indeed, targeting an improved level of information security as one of the specific goals of a digital transformation project is the best way forward. Organizations need to build a composite picture of their security needs finding the best way to identify threats and vulnerabilities, encrypt data at rest and in transit, and secure endpoint access devices and then integrate security policies, processes and technologies into a cohesive approach. Where on-premises technology isn t sufficiently secure, there are other options using managed security services. 11

12 In addition to virtual private networks, intrusion detection and managed firewalls, services such as threat management, vulnerability assessment and compliance management are becoming increasingly common in many industries as specialist security products become infrastructure components that are as vital as servers, storage and networks. Data Aggregation at the Ready The use of digital technologies and data stores to better manage health is becoming more common. People are starting to collate data on their diet and exercise and integrate it with personal fitness readings to make more informed decisions about their lifestyle choices and well-being. Similarly, across the broader healthcare industry, data aggregation (integrating disparate data held in medical records, drug histories, billing information, diagnostics and test results, and even readings from personal health trackers) can help turn the myriad of patient data points that are available into meaningful and actionable information for that patient. This could transform healthcare, but it s a major challenge both in terms of the technical integration itself and then the ability for professionals to be able to act upon that data within regulatory guidelines. Certainly, it is incumbent upon healthcare providers to put the infrastructure in place to link all these sources because the data they provide is just too valuable to ignore, especially for preventative medicine. However, that infrastructure need not all come from within; outsourcing key parts of infrastructure to enable healthcare providers to focus more on clinical matters is seen increasingly as the best option. Partnering to Overcome Legacy Infrastructure Barriers Whether they are at the early stages of digital transformation or have a formal strategy in place, healthcare organizations see cloud services as being absolutely critical to any healthcare digital transformation project. When asked how important cloud services are in this context, 74% of those with a formal strategy said cloud is very important, while 52% of those in the early stages of digital transformation said the same. Figure 6: Perceived level of importance of cloud services in the context of digital transformation (n=196) 52% 74% VERY IMPORTANT 32% 44% IMPORTANT 17% Early Stage Digital Transformation SOMEWHAT IMPORTANT 3% NOT VERY IMPORTANT Formal Digital Transformation Strategy As in other sectors, organizations in the healthcare industry are learning that they can operate with agility and perhaps more securely in the cloud than they can out of their own datacenters. Not only are organizations seeking relief from the burden of running their own IT operations, but they are looking at cloud as a means of providing the scale, the reliability, and the level of support they need without having to invest in building up internal systems, software and skills. It is well known that IT departments are typically stretched quite thin in healthcare, so this is an acknowledgement that there are aspects of digital transformation that are best left to partners service provider partner specialists that can focus on delivering cloud-based services reliably, securely and cost-effectively. 12

13 In terms of what healthcare professionals are looking for from service provider partners in particular, assistance with cloud migration came out on top in our poll. This reflects the urgency healthcare organizations feel to use cloud-based services as an accelerator or enabler of digital transformation projects. The need for end-to-end IT support and network infrastructure were also high on the list, as well as some of the more specialist areas of risk management (see Figure 7), which indicates that there is a clear desire for a lot of help at the infrastructure level. Figure 7: IT services healthcare companies would be willing to outsource to a partner in support of a digital transformation project (n=258) Cloud workload migration, onboarding and management services Network infrastructure services (e.g., managed bandwidth, network diversity, etc.) End-to-end IT service support (e.g., infrastructure to applications) Threat prevention and managed cybersecurity services Specific managed IT services (e.g., helpdesk, database apps, web hosting, infrastructure management) Service capability for multi-cloud infrastructure (public and private cloud) Disaster recovery Colocation / hosting services (physical hosting of servers/business applications) Specialist data science services (e.g., big data, advanced analytics) Business process reengineering/ transformational consulting services 53% 51% 51% 50% 49% 49% 47% 46% 43% 38% When we asked healthcare companies about the kinds of service provider partners they wanted to support their digital transformation efforts, a telecom or IT service partner came out on top, with 53% of respondents choosing that option. There were some differences between regions, however: 41% of North American respondents chose a telco/it service provider as the preferred option, compared to 58% of those in Asia-Pacific. Notably, while only 3% of respondents from Asia-Pacific said they would handle the whole digital transformation program in-house without the support of any external service partner, 12% of those in North America said the same. DIGITAL TECHNOLOGY IMPACT: DISRUPTIVE FOR SOME, LESS SO FOR OTHERS We asked respondents to rate the extent to which digital technology (such as cloud, mobile internet, IoT, collaborative software, robotics and automation, intelligent software, etc.) has disrupted the healthcare industry over the last three years and the level of disruption they expect in the next three years (see Figure 8). Although 30% of respondents said that they have seen major disruption in the past three years, 39% said they see even more disruption coming in the next three years (interestingly, these numbers are lower than from those polled in other industries). And roughly 15% think technology has been and will continue to be in the next three years only a minor disruption, which is a higher figure than in other industries, such as financial services, retail and even the US federal government. However, those are the average response rates. Respondents from Asia-Pacific organizations think digital technologies are much more of a disruptive force than US healthcare professionals do. About 34% of Asia-Pacific respondents said digital technologies had already been highly disruptive in the last three years, and 42% said they will be in the next three years, versus only 21% and 32% answering the same question from a North American perspective. 13

14 Figure 8: Perceptions of levels of disruption playing out in the healthcare sector (N=258) Q: On a scale of 1-10, rate the extent to which digital technology (such as cloud, mobile internet, IoT, collaborative software, robotics and automation, intelligent software, etc.) has disrupted your industry over the last 3 years, and the level of disruption you expect in the next 3 years. 30% 39% MAJOR DISRUPTION (8/9/10) 55% 45% NEUTRAL 15% 16% Past 3 Years Future 3 Years MINOR DISRUPTION (1/2/3) WHAT S HOLDING HEALTHCARE BACK FROM DIGITAL TRANSFORMATION? Compliance with security and privacy regulations is part of the cost of doing business in the healthcare industry. With regulations governing the way medical information is handled and the risks of security breaches from an increasingly connected set of devices and applications mounting, healthcare organizations have to be tightly focused on compliance. But respondents said that compliance can at times hold them back in their digital transformation plans, with 38% citing it as the top barrier to success (see Figure 9). If compliance is non-negotiable, then other aspects are more within their control. The 36% that cited a reliance on legacy systems can at least do something about that issue. The impact of cloud comes into play here again as the extent to which it is possible to modernize, migrate, integrate or lift and shift legacy workloads and applications into the cloud increases. Figure 9: The main operational barriers impacting digital transformation projects specific to the healthcare industry. (n=258) What s holding healthcare back from digital transformation? Q. Which of the following do you see as the main operational barriers impacting digital transformation projects specific to the healthcare industry? n=196 Privacy, regulatory, and security mandates regarding use & storage of medical data 38% Reliance on legacy systems (e.g., claims & payments, HIMS, etc.) 36% Siloed data, applications, non-interoperable infrastructure (reporting, sharing or communicating information between systems or stakeholders is difficult) 35% Compliance burden Held back by legacy systems Lack of interoperability 14

15 Digitally Transforming Healthcare a Course of Action The challenges in the healthcare industry are a unique mix of technological upheaval, customer demographic changes, national politics and data security. The fact that almost every healthcare professional in our survey was engaged in either planning or executing a digital transformation strategy demonstrates that those in the industry are aware of the role technology can play to overcome some of these challenges even though it is itself driving some of that disruptive change. As such, we advise healthcare professionals to take action in several areas. INVESTIGATE THE POTENTIAL OF ARTIFICIAL INTELLIGENCE If healthcare data collection and analysis seems challenging now, it is only going to become more so without the adoption of technologies such as AI and machine learning, which can augment the work of clinicians and operations staff in the healthcare industry. They cannot do it alone. These and other technologies notably IoT and augmented and virtual reality should be viewed as force multipliers for healthcare professionals. INTEGRATE DATA FOR THE BEST TREATMENT Healthcare data is both more plentiful and more valuable than ever as people collect vast troves of health data about themselves. Healthcare providers need to find ways to integrate that data into their longitudinal care plans. This adds more data sources to one of the main IT issues in healthcare interoperability but the benefits in terms of enhanced preventative medicine will surely outweigh the costs. LEVERAGE THE CLOUD AT EVERY OPPORTUNITY While information security should be foremost in the minds of any healthcare professional, organizations should look to the cloud for data storage and application hosting where possible to alleviate some of the pressure on their own IT departments, which can then better focus on some of the barriers to digital transformation, such as the ongoing burden of compliance. 15

16 APPENDIX Methodology The survey data used in this report was collected in March and April 2017 by 451 Research as part of a global digital transformation enterprise study commissioned by CenturyLink and conducted in 11 countries across North America, Europe and Asia-Pacific. It is designed to provide insights that will help executives understand how businesses leverage the changes and opportunities of digital technologies to serve different stakeholders, manage risk, support continuous improvement in operations, and invent new services and business models. In taking the pulse of digital transformation across a broad spread of sectors, we have been able to identify which new IT choices are becoming popular, explore service partner preferences and track investment priorities, as well as establish the state of vertical-specific digital transformation readiness and evolution. For this report, we reviewed and analyzed data derived from a sample of 258 decision-makers in the healthcare sector in North America (US and Canada) and Asia-Pacific (China, India, Singapore, Australia and Japan). Study Demographics We conducted the digital transformation survey in March and April using a combination of web-based surveys and telephone-based interviews comprising roughly 30 questions. All respondents have primary responsibility for making purchasing recommendations and influencing decisions and strategy about digital transformation initiatives, or they have significant decision-making authority. About 40% of respondents are responsible for decisions about digital transformation strategy, with 60% providing input. Overall, 60% of respondents work as senior IT executives, and 40% lead line-of-business departments for their organizations. Our business segmentation corresponds with the categories typically used by service providers to identify midmarket and large enterprise customers. Further Information This report is one in a series to explore the current state of maturity of enterprise digital transformation strategies representative of organizations in key commercial sectors and government agencies in North America, Europe and Asia-Pacific. The series comprises a set of reports addressing the analysis of the global picture, as well as three summary regional reports that assess some of the variations identified across geographies. There are also four vertical-market-focused reports to help IT and line-of-business executives in financial services, healthcare, retail and government agencies navigate some of the key issues and considerations specific to digital transformation themes in these sectors. About CenturyLink CenturyLink is a global communications and IT services company focused on connecting its customers to the power of the digital world. CenturyLink offers network and data systems management, big-data analytics, managed security services, hosting, cloud and IT consulting services. The company provides broadband, voice, video, advanced data and managed network services over a robust 265,000-route-mile US fiber network and a 360,000-route-mile international transport network. Learn more about how CenturyLink can help you accelerate your digital transformation. For further information, go to 16