In a time of rapid global transformation of markets, the health sector sometimes appears stubbornly unreconstructed. However, the growing flow of cash into health innovation suggests that may be changing.
In the USA, entrepreneurs are finding fertile ground for new services, with strong support from investors and from corporations. Three quarters of Fortune 50 companies are taking positions in healthcare – and 24 of them are new to the sector.
Ford Motor Company, for instance, is investing in ways to help drivers manage chronic health conditions while they are on the road.
According to Julie Hunter, managing director for Health, Education and Government at CommBank, "What we are seeing is a massive investment in healthcare – not just from start-ups but also from established non-healthcare companies."
The potential opportunities in solving the often huge inefficiencies in highly regulated health markets are attracting investors. McKinsey & Company says there is a trillion dollars in savings up for grabs just in the management of chronic health.
However, significant impediments remain. At a recent industry roundtable for senior health sector CFOs, participants discussed areas of innovation as well as some of the barriers to change.
Take payments, for example. The process of paying the bill has hardly changed in the last 30 years. Neither has the lack of transparency, nor the complexity behind the scenes.
Dharmendra Singh, financial controller for Virtus Group, says, "It's really about optionality for patients. Historically it has just been about debit cards and credit cards."
Contemporary customers are schooled in a digital world – where apps make everything simple and frictionless.
David Billing, chief financial officer of Medline, said customers would welcome tighter integration between health services and their traditional payment channels – like those offered by the bank. "An integrated system would make life so much easier."
Again, the US experience suggests that change is coming. There, customers are increasingly presented with services that feel much more like the retail shopping experiences with which they have become familiar.
According to Bronwyn Yam, managing director of commerce & platforms for CommBank, "There are definitely platforms in the US where it feels almost like a retail space of a shopping basket. You know exactly what services you are buying and, because of the integration between all of the participants in the system, you can see something very much like a pro forma invoice presented in the app. It will itemise the service you may need for a procedure and show you the current balance with your private health insurance, along with any cover from Medicaid."
The apps also reveal your out-of-pocket expenses. If you may need to borrow funds they will list the banks or other lenders, and the rates they offer, she said.
Ms Hunter from CommBank says, "In one particular area alone – transparency of pricing – there has been $400 million invested into start-up apps in the last few years. It is moving and it is moving fast."
Such technology also shifts more power into the hands of customers, as it has in other digitally disrupted markets.
"We see it as a key step in the journey, because that information – combined with data like patient reported outcomes – allows people to make informed decisions," says Michelle McPherson Deputy CEO and CFO of nib.
Still, the picture that Australian health executives paint is of a local market lagging behind its international peers when it comes to solving foundational problems of transparency and data integration.
It may be that Australians are victims of their own health funding success. Visit a GP and you may be asked to hand over a small co-payment – or nothing at all. Go to a public hospital for a major procedure and you never see a bill. Contrast that with the US system, where high health costs and a lack of certainty over payments provide a significant incentive to innovate.
Hospitals and other healthcare providers in Australia have confidence in payment thanks to funding models, whereas their US peers carry a long tail of overdue payments and the drag of bad debts. These kinds of problems have driven innovation.
So what is holding back further innovation in Australia?
Hamstrung by legislation
Some of the issues are technical and have more to do with financial rules than health regulation. For instance, one of the big limitations on the flow of data through the financial system at the moment is the number of data chunks organisations can send.
James Davison, CFO and company secretary at Australian Clinical Labs, said, "We are hamstrung by legislation in terms of what we can and can't do. There are complexities around billing and even in our health records. While we all have the same challenges, we don't use the same forms or have the same reference ranges. Until there are common standards it's going to be difficult."
Despite the impediments, local healthcare providers are finding opportunities partnering with international players.
Clare Battellino, chief financial officer and executive director of I-MED Radiology, said there is a wealth of offshore companies looking to use data generated from imaging to assist with diagnosis and clinical decision making.
"As the holder of a very large data set we are talking to a number of potential partners. We don't have the internal expertise, so we are looking at working with partners to use the data to design products that could improve clinical services."
Ms Yam agreed that there is enormous opportunity for partnerships to drive further innovation.
"As a bank we are continually investing in partnerships that deliver new solutions for our customers and the health industry is equally committed to delivering improved patient experiences."
This content was produced by The Australian Financial Review in commercial partnership with CommBank.