This week I attended the Digital Health Investment Summit hosted by KLAS. They brought together a great group of people from the healthcare provider, vendor, payer, and investor space. We had some really great conversations and I heard a lot of great perspectives. However, if there was one theme I had coming out of the event it was this:
Over and over is seems like the independent small health care provider is going to have an extreme challenge going forward. #DHIS18
— John Lynn (@techguy) August 15, 2018
I’d take this statement one step further. I don’t think I heard one thing said at this event that indicated that there’s something that was going to be beneficial to the small practice. Everything that was said was building towards the need for big data, comprehensive solutions, and tools, relationships, and technology that was largely only going to be available to large health systems.
As one person on Twitter pointed out, this is unfortunate because there have been a lot of studies that have shown how the small ambulatory practices are much more cost effective than the corporate ones. Plus, patients often love that personal relationship as well. However, patients also love the advanced services and personalization that future healthcare IT can provide when you have the right scale.
This reminds me of what we’ve seen in the banking industry. There used to be a lot of local banks. Now, they’re all but disappearing as the large corporate banks take over. Sure, there are some credit unions and a few local banks left, but it’s really hard for these to compete with the kind of services the large corporate banks can provide. The same is likely to happen in healthcare and it seems to be happening fast. One health system executive told me at the event, “Practices are coming to us saying they want to be part of us. We can’t keep them away.”
I’ve mentioned before that the one hope for small practices is that large health IT companies that provide some of these advanced services could make them available to small practices. Basically, a healthcare IT company could provide a service to enough small practices that all the small practices together share in the costs associated with the advanced services like genomics for example. To go back to the banking industry, that’s what we’ve seen. A small bank or credit union doesn’t create their own online banking tech with the scan technology for mobile deposits. However, they can use a third party to be able to provide those services.
The only problem with this view is that most entrepreneurs look at the small practices as the worst market. Talking to the investors this weekend and other startups, almost none of them are targeting the small practice as their market. There are a lot of reasons for this. It’s notoriously hard to get to the decision makers at a small practice. We can thank pharma sales reps for this. Plus, small practices are quite cheap when it comes to investing in technology. All of this makes for a really challenging sales process for companies that want to sell into the small practice. The large health systems have a long sales cycle, but at least the reward is big when you make the sale.
While there are so many things going against the small practice. I still hope they find a way to survive. I also think it will be interesting to see how super groups do in this environment. If you have all the gastroenterologists in your area in a group, that can give you a lot of power to resist the health system taking you over. A fair number of direct primary care practices seem to be doing well also and could very well survive as well.
Watching some of the past senate hearings for various legislation, you can see how the government wants to do things to keep the small practice alive. Will what they do be enough? I don’t think many of us want to put our faith in government in this regard, but they may surprise us. There are some interesting rules and regulations for rural that has allowed many of them to survive.
I’d love to hear opposing viewpoints. Do you see reasons why the small practice can survive? What does this mean for healthcare? Should we be doing more to support small practices? If so, what can we do? I think it’s clear that most would like to keep small healthcare providers around, but it’s hard to see how they’ll be able to compete as technology continues to evolve.