8 minute read 24 Mar 2021
EY - Doctor reviewing patients leg x-ray

How health care organizations can improve their digital strategy

By H. Mallory Caldwell

EY US Health Leader

Proven executive and business strategist. Passionate about helping reshape and restructure industry to meet marketplace demands.

8 minute read 24 Mar 2021

Digital capabilities are essential for health care organizations, but most say they lack a clearly defined digital strategy.

In brief

  • Despite health care investments in digital capabilities, many organizations have gaps.
  • Lack of skills and talent are frequently seen as stalling digital initiatives.
  • Addressing talent gaps, updating data and analytics tools are key steps to improvement and digital maturity.

Digital capabilities are increasingly essential for health care organizations looking to deliver best-in-class patient experiences, improve outcomes and reduce cost of care. While health care organizations have been investing in digital capabilities for a while, the EY-Parthenon Digital Investment Index (DII) illustrates the significant gap between historical activity and what market participants feel is truly required to enable transformation across their organizations and the broader value chain.

In fact, more than 70% of the health care executives surveyed say they lack an agile operating model, hindering the potential benefits of partnerships and digital M&A. And 62% say they do not have a clearly defined digital strategy.

Several leading practices can help health care organizations shape their digital agendas to better promote their long-term strategic initiatives. These include addressing talent gaps, upscaling the use of data analytics tools and instituting the concerted measurement of return on digital investment (RODI).

Follow  the health care leaders to enhance digital capabilities

The EY-Parthenon Digital Investment Index survey, which included more than 40 C-suite payer and provider executives from a broader cohort of roughly 1,000 executives across a wide range of industries, highlights some characteristics of leading companies. Leaders appear to be those who:

  • Achieved at least 5% return on their digital investments in 2019
  • Self-identify as being among industry leaders when it comes to the success of digital initiatives

Two-thirds of leading health care organizations not only have a clearly defined digital strategy, but they also consider changes needed to their organization’s culture and processes when mapping digital strategies — this compares favorably with half of the leading companies in all industries. This broader scope of consideration (internal and external) reflects the continuous need to align payers, providers and patients to achieve long-term success. Only about a third of the non-leading health care organizations have such a set strategy and focus.

Lack of skills and talent were identified by 64% of all health care executives as the reason their digital programs are stalling. Leading companies were more likely to take steps to address these issues than non-leading companies, through investment in retraining programs (67% vs. 33%) and outsourcing certain functions (50% vs. 31%).

Health care leaders also tend to take more decisive action to build enterprise resilience (e.g., shifting focus to immediate cash return initiatives and accelerating the creation of new digital products, services and business models) than non-leaders. Leaders expect to increase their operating expenditures on digital activity to about 13% in 2021 from 7% in 2019.

Digital investment programs within leading health care organizations include:

  • Intermountain Healthcare and Trinity Health’s growth investments in Jvion, an artificial intelligence (AI)-driven prescriptive clinical analytics platform focused on preventing avoidable patient harm. Jvion’s AI identifies at-risk patients and recommends specific provider interventions by marrying clinical, socioeconomic and behavioral data with clinically validated best practices.
  • Mount Sinai Health Partners, the primary care network of the eponymous health system, recently teaming with Babylon Health to roll out an app providing AI-powered diagnosis and video appointments. The app’s COVID-19 Care Assistant is being deployed to ease patient anxiety and take the pressure off of New York emergency rooms and other providers.
  • ATI Physical Therapy’s recent launch of CONNECT, a virtual offering that combines digital screening/musculoskeletal evaluations with expert advice, educational content and video messaging. ATI is now able to maintain continuity of care via online PT following an initial in-person screening and onboarding session.
  • Humana’s strategic partnership with DispatchHealth to provide its Medicare Advantage members with access to an advanced level of care in the home. DispatchHealth enables the coordination and delivery of clinical care along with a suite of other services that address social determinants of health (e.g., pharmacy, meal delivery). This model affords patients the ability to be treated in the comfort of their homes and avoids unnecessary hospital visits.

Investment  in key health care digital initiatives is mixed

When it comes to digital investments, 67% of health care organizations say they have been able to accelerate or scale internet of things (IoT) investments, exceeding the 39% mark achieved by organizations outside of health care. However, no health care organizations say they have realized the full benefit of IoT. Some of the most promising applications of IoT — remote patient monitoring and robotic surgery — are relatively nascent in health care delivery. More reliable, low-latency broadband may be necessary to achieve the full potential of advanced applications in diagnostic imaging and clinical AI, given the need to transmit vast amounts of data in real time beyond the urban core.

Regarding AI, only 9% of health care organizations say they are at full benefit realization, but this exceeds those surveyed across industries. Health care does, however, appear to be trailing other organizations in cloud computing investment — less than half (47%) of health care organizations are at the “accelerate/scale” or “full benefit realization” level, compared with 54% of organizations outside of health care. Most core software platforms (e.g., EHR, CAPS, ERP) remain on-premise, though migration is underway to varying extents (many vendors have been hesitant to push, given the potential for associated churn).

AI, IoT and cloud computing top the list of health care spending priorities, not only for the past two years, but also looking ahead over the next two years. These capabilities can be key for health care organizations as they seek to bring together, and benefit from, data that currently sits across a range of disparate internal and external platforms. Centene’s 2020 acquisition of Apixio, a leader in AI/NLP-enabled risk adjustment, is one example of a health care organization adding digital capabilities to drive direct revenue and cost impact.

Meanwhile, leading health care organizations are investing in IoT capabilities and cloud deployments (including via data warehousing solutions) to enable increased data availability and comprehensiveness. These initiatives aim to alleviate one of the biggest challenges that health care organizations cite: 64% say they lack a strong data analytics function, and 60% say they have incomplete or poor-quality data.

While AI, IoT and cloud computing are the areas where most executives say their organizations will invest in the next two years, blockchain, digital collaboration tools and advanced cyber defense are not far behind. One common theme across these initiatives is a desire to enable the secure transmission of protected health information. While many believe that blockchain technology has strong potential in this application, most stakeholders acknowledge that further development is required.

EY-P Bar chart of health which emerging technologies

Beyond these digital categories tracked in the Digital Investment Index, health care organizations have adopted telemedicine solutions at a breathtaking pace, achieving five years or more of progress almost overnight. While observers expect utilization of some telemedicine applications to decrease when the country emerges from the COVID-19 pandemic, this period has driven critical acceptance of the technology from patients, providers and payers alike.

As health care organizations focus their investments on these areas and beyond, health care executives can consider the key success factors espoused by peers across “leading” organizations:

  • Take a value-driven, not technology-driven, approach; focus on the business needs, not just the technology
  • Balance achieving quick wins with future goals; start with agile sprints with available data to test impact and drive value in weeks instead of months while defining future goals and setting up digital governance to measure results and secure future funding
  • Design an operating model that meets current and future needs
  • Break down silos and make data available to all

Buy, build or partner: which works best for health care organizations?

Overall, health care executives appear to be having the most success accelerating their digital objectives via mergers and acquisitions (M&A) compared with other approaches. Executives indicate that digital-focused M&A exceeded organizational expectations in 62% of cases — this compares favorably with partnerships (50%), organic capability building (48%) and corporate venture capital (21%).

Across our work, we find that different approaches to investment are appropriate based on the challenges that our clients seek to address:

  • Building in-house can be effective when an organization has the required capabilities and needs a heavily customized or truly unique digital solution.
  • Partnering with startups or similarly nimble technology providers can help close specific capability gaps, especially when funding is constrained.
  • Corporate venture capital investments can help an organization advance its own innovation and research and development (R&D) efforts by learning from startups; in some cases, this unlocks future strategic M&A while, in other cases, it seeds ecosystems in otherwise neglected domains.
  • M&A is a powerful tool to enable extension into adjacent areas and accelerate capability scaling.

Improving digital maturity – key takeaways

Enhancing digital capabilities is likely to be essential to near-term success for most health care organizations. To help maximize RODI, consider the following lessons from health care’s digital “leaders:”

  • Define a clear strategy, anticipate scale requirements and set targets for return on digital investment at the outset.
  • Start with the application, not the technology. Determine the job to be done and find the best solution for that job. Don’t assume that a solution claiming to incorporate AI or machine learning technology is inherently better than others that are more fit for purpose.
  • Decide on the right approach and mix of build, buy or partner for your organization based on existing capabilities and ambitions.
  • Remove barriers to scale by defining talent, funding and operating model requirements.
  • Establish a strong governance model and key performance indicators with which to manage digital initiatives, including regularly measuring RODI against targets.

Aaron Feinberg, Principal, EY-Parthenon, Ernst & Young LLP co-authored this article.

Summary

Despite many years of investments in digital capabilities, most health care organizations say they lack agility and do not have a cohesive digital strategy. Defining talent, funding and operating model requirements is a key step toward closing those gaps. Training or partnering can increase digital skills and digital maturity.

About this article

By H. Mallory Caldwell

EY US Health Leader

Proven executive and business strategist. Passionate about helping reshape and restructure industry to meet marketplace demands.