23 Jun Goldman Sachs Report: How the Internet of Things Can Save the American Healthcare System $305 Billion Annually
In last week’s blog post (check it out here), we discussed the Internet of Things (IoT) and how it intersects with the healthcare industry.
This week, we’ll highlight a 2015 Goldman Sachs report, which explores the disruptive effect of the digital revolution on the U.S. healthcare system.
Healthcare IoT, as defined in the report, is “a device that is connected via the Internet and informs clinical decision making. This excludes technologies that are simply information repositories.” These devices, claims the report, can save the United States more than $300 billion in annual healthcare expenditures–by increasing revenue and decreasing cost.
Healthcare IoT is projected to produce $32.4 billion in annual revenue
The study conducted by Goldman Sachs identified a few key areas of healthcare IoT that could bring in revenue: remote patient monitoring (which includes chronic disease management), telehealth, and behavioral modification.
The remote patient monitoring sector of healthcare IoT consists of devices that allow care providers to observe and keep tabs on “high-risk patients”–those that are chronically ill, or have only recently been released. Examples of remote patient monitoring include wearable patches that diagnose heart conditions, or sensors that detect poor air quality.
Telehealth allows patients access to physicians, without having to enter a physical doctor’s office. With the increased prevalence of long-distance communication tools, such access is becoming ever easier to achieve.
The behavior modification sector consists of IoT tools that help patients change their unhealthy habits, with the goal of preventing and treating illness. Results of this behavior modification can include the cessation of smoking, reduction of heart attack risk, or even prevention of diabetes.
Combined, these healthcare IoT functions would produce an estimated $32.4 billion in annual revenue (45% from remote patient monitoring, 37% from telehealth, and 18% from behavior modification).
Healthcare IoT not only increases revenue–it also decreases costs
For the last several decades, U.S. healthcare expenditure has been on a continual rise. The Goldman Sachs report found that from 1960 to 2010, the increase in healthcare spending outpaced the growth in GDP in all but 7 years. In 2014, U.S. healthcare expenditure rose to over $3 trillion (check out data and projections here). This enormous cost is due in large part to the treatment of chronic diseases. Healthcare IoT reduces this cost by offering a more cost-effective method of managing chronic illness.
The report estimated that about $1.1 trillion is spent annually on chronic disease management. About 34.5% of that expenditure is accounted for by hospital and emergency room visits (which are theoretically preventable through the use of effective remote patient monitoring). This equates to a saving of about $205 billion.
Additionally, the increase of telehealth could reduce the cost of doctor’s visits by as much as 75%, and about half of all doctor’s visits could be conducted online. All told, the potential savings of telehealth could exceed $100 billion, yielding a grand savings total of $305 billion annually.
These savings will come at an opportune time, as pressure has steadily increased to reduce U.S. healthcare expenditures. Assuming IoT technology continues to grow in sophistication and convenience, it is predicted to become an integral part of the healthcare sector.
Healthcare IoT not only saves patients money, it also increases the accuracy and personability of their healthcare experience. As care providers continue to adopt new technologies, IoT is primed to help revolutionize the healthcare industry.
To find out how your company can implement the Internet of Things to positively impact your health organization, contact us.