Technological enablement, digitization, and automation are affecting industries today in profound ways. Healthcare delivery is no exception. On the supply side, a host of new technologies can now be integrated into care delivery: artificial intelligence (AI), robotics, precision medicine, 3-D printing, augmented reality/virtual reality, genomics, telemedicine, and more. Adoption of these technologies is being driven by both immediate needs (e.g., cost control and efficiency optimization) and longer-term goals (especially greater precision, fewer errors, and better outcomes).
On the demand side, new technologies have altered consumer expectations. An increasing number of today’s patients want healthcare services to be delivered with greater efficiency and in convenient, comfortable, near-normal settings.
As a result, the whole paradigm of care delivery is changing, and the changes will likely accelerate in the years ahead. It is against this backdrop that hospitals, traditionally the center of healthcare delivery systems, are seeking—or being forced—to redefine themselves.
In many parts of the world, whole cities are being redesigned with “smart” features that take full advantage of new technologies. Typically, these cities include future-ready smart hospitals. These hospitals embed new technologies into their design and operations to improve the customer experience, as well as outcomes and costs. The technologies are used not only to improve care delivery within a smart hospital itself, but also to connect the hospital to a wider healthcare delivery ecosystem, one in which hospitals play an important but less central role.
In some cases, smart hospitals are being created in less technologically advanced cities, surpassing the general rate of infrastructure development there. Most hospitals, however, are only beginning to take advantage of the technologies and must find ways to incorporate them into care delivery if they are to meet the challenges ahead.
The business case for smart hospitals is already very strong. Our experience suggests that in most OECD1 countries, implementing digital technologies in healthcare delivery could help realize cost savings of more than ten percent of overall annual national healthcare expenditures. Investors have recognized the opportunity—venture capital funding for digital health solutions has increased exponentially, from about US $1 billion in 2011 to more than US $8 billion in 2018.2
The implications and imperatives for hospital investors and operators are clear. Greenfield hospitals should be built based on a fundamentally new, futuristic, and nimble design, one that will allow the hospital to stay agile and relevant for at least the next 20 to 30 years. For existing hospitals, doing nothing is not an option. They need to integrate new technologies in a phased manner, redesign how they are delivering acute care, rethink how they interact with other healthcare providers, and divest activities that can be outsourced to others who can perform them more efficiently or effectively.
In this paper, we analyze the factors encouraging the development of smart hospitals, define the core characteristics of future-ready smart hospitals, and discuss their implications for hospital investors and operators. The sidebar describes the penetration of smart hospitals to date.
Trends driving smart hospitals
Five key trends are reshaping healthcare systems globally and encouraging the transition to smart hospitals:
Shift from disease treatment to health management.
A major change in recent years is the shift in focus from disease treatment to health management, a term that encompasses wellness, healthy living, disease prevention, and rehabilitation. The change is being driven both by patients, who want longer, healthier lives, and by payers, which are facing budgetary pressures (and, in some cases, financial losses). The shift to health management is occurring in many countries around the world. For instance, the Singapore government has established an organization called the Health Promotion Board that encourages residents to adopt healthy living habits through dissemination of evidence-based information and disease prevention programs at homes, workplaces, and schools. All residents in Singapore are urged to pay attention to their diet, exercise regularly, and undergo preventive screening, all of which helps reduce the likelihood of disease development (or progression) and need for hospital care. The Health Promotion Board also places greater focus on the nonhospital segments of the overall patient care pathway—and gives residents a tangible push to stay out of, and get out of, hospitals.
Quest for clinical outcomes and quality.
Shocking as it may sound, diagnostic and treatment errors are common in healthcare. Research in the United States, for instance, has shown that five percent of outpatient diagnoses are incorrect, diagnostic errors contribute to about ten percent of patient deaths,3 and approximately 20 percent of orthopedic surgeons will conduct a wrong-site surgery at some point in their career.4 News reports in developing countries suggest that the misdiagnosis rates there could be even higher. The World Health Organization estimates that even in developed countries, seven out of every 100 hospitalized patients develop a healthcare-related infection each year.5 In the United States alone, more than US $210 billion is wasted annually on “unnecessary services.”6 These statistics make it clear that the concept of hospitals as the major site of care delivery needs fundamental transformation to improve the quality of care. AI, robotics, and other new technologies can improve treatment precision and dramatically decrease the probability of error.
“Retailization” of health services (the movement to outpatient settings).
The old model of hospitals as stand-alone facilities that provide all services to all people is disappearing rapidly. Increasingly, hospitals are becoming just one component of larger, interdependent ecosystems that include multiple other facilities (e.g., primary care providers, clinics, pharmacies, rehabilitation centers). Already, many types of care are being shifted out of hospitals (Exhibit 1). In the United States, for instance, some leading retail companies offer patients a number of routine tests and treatments through clinics located within retail stores. In China, medical resources have traditionally been concentrated in tertiary hospitals, but the government is now shifting the focus toward primary care through a massive effort to build a family physician network and community clinics. New technologies are a key component of the move toward outpatient care, since they make it possible to establish strong integration among the various entities, which improves quality of care.
The rise of informed patients.
Around the world, many patients are becoming more informed about, and more empowered to make, healthcare decisions. In some countries, rising education and literacy levels are fueling this change; almost everywhere, increased internet access and the growing use of digital devices have fundamentally altered the information available to patients. As a result, many providers see an opportunity to become more patient-centric. Instead of passively receiving treatment, patients now often ask for more information and expect to be involved when treatment choices are made. Often, decisions about hospitalization are made jointly by the patient and provider. Patients can make clear whether they want, and can afford, to be hospitalized, and whether they would prefer to pursue alternative treatments. New technologies that make possible online consultations, multidisciplinary team support, and other new models of care delivery are helping hospitals become more patient-centric.
The new focus on value and accountability.
The rising cost of healthcare has been a major concern in most countries. For the past decade, the United States has spent more than 17 percent of its GDP on healthcare each year.7 Even in a country like China, which spends about six percent of its GDP on healthcare,8 costs have been rising year over year, and as a result many provinces and cities are facing growing deficits. Payment reforms that focus on value and introduce greater risk-sharing between payers and providers are being tested in a range of health systems. For instance, episodes of care have been introduced in the United States; diagnosis-related group (DRG) schemes are being rolled out nationwide in China. Our research suggests that digital interventions that support connected electronic health records (EHRs), hospital automation, care coordination, and primary prevention can help support payment reforms and deliver considerable savings.9 Furthermore, the value creation potential is probably higher in developing markets than mature markets, since the digital devices would make it possible for hospitals in developing markets to leapfrog over older forms of care delivery.
The look and feel of smart hospitals
Smart hospitals do not attempt to deliver all services under one roof; rather, they deliver a narrower set of high-value services within a broader ecosystem of entities, many of which have not traditionally been associated with healthcare delivery (Exhibit 2). In such an ecosystem, preventive services and healthcare management programs, for instance, are delivered at clinics, at gyms, and even in patients’ homes. Other medical treatments and minor procedures are provided at ambulatory centers. Diagnostic testing (imaging and laboratory services) is offered at independent centers. Hospitals are responsible only for major surgeries, intensive care, the management of severe trauma, and treatment for other acute, severe, complicated conditions.
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