Cloud and IT Predictions for the Future of Healthcare

2019 marks the beginning of a major shift in healthcare IT, away from onsite server rooms and legacy software systems and toward cloud-based software services. The next ten years will be defined by that move to a cloud-based healthcare system in America.

Cloud adoption came quickly to other enterprise industries, including banking and professional services, but healthcare has lagged. It trailed for two reasons: a lack of free cash flow, and the introduction of the Affordable Care Act in 2010, which pushed hospitals from a fee-for-service reimbursement model to a fee-for-value one. That foundational shift in reimbursement was so consuming that it slowed investment in IT innovation for nearly a decade. Nine years later, healthcare is finally catching up on cloud strategy. Three trends are driving it.

1. Millennial consumers are making their tech preferences known

92% of millennials have smartphones, versus just 57% of boomers, and only 58% of millennials say they trust doctors, versus 73% of previous generations. Millennials are changing the care delivery landscape because they prefer to interact with their caregivers through mobile and online interfaces rather than schedule an in-person visit.

The healthcare sector is responding. Companies building new care delivery models, including One Medical and Forward, are heavily focused on remote care and mobile technology. Kaiser Permanente now offers care by telephone and email, with scheduling through its mobile app. Other large healthcare organizations will follow, having finally recognized the need to invest in cloud-based healthcare.

2. Changing patient demographics are forcing hospitals to get efficient

By 2030 there will be 69.7 million boomers on Medicare, contributing to an estimated shortage of 120,000 doctors. Hospitals will have to get more efficient to serve their patients.

In 2018, the average hospital ran an operating profit of 1.7%, where 2.5% is a more sustainable number. With that little free cash flow, most hospitals can’t simply add staff to handle higher patient volume. So hospitals and healthcare practices are turning to technology to deliver care more efficiently, and to run the functions that support care delivery, like supply chain and materials management, which often account for 20% to 40% of a hospital’s capital budget.

3. A generational turnover in hospital leadership is driving modernization

Boomers started turning 65 in 2011, and eight years on we’re seeing boomer generation executives retire and make way for a younger set of millennial executives. Because the fee-to-value shift sparked by the ACA was such a radical, time-consuming change, outgoing executives never had the room to prioritize investment in technology and cloud-based systems. Their successors are digital natives with both the time and the inclination to jettison old legacy systems.

That generational shift is driving the same provider investment in cloud strategy we’ve already seen in other industries. Investor dollars support the trend too: 2018 brought an all-time high for diagnostics and tools M&A, plus more than $84.3 billion of venture capital investment across all healthcare sectors.

What the next decade of healthcare IT looks like

The next ten years will be about healthcare providers adopting cloud strategies wholesale. Driven by consumer tech demand, generational turnover in executive leadership, and the need to serve an ever-increasing number of patients efficiently, the days of limited, expensive legacy software are numbered. The move to cloud-based solutions will keep expanding and accelerating until it touches every part of healthcare.