This ISG white paper describes each of the SMAC technologies in the context of their role in driving healthcare reform and enabling the transformation to a new model of delivering and managing healthcare. Future articles will examine the areas outlined here in greater detail.

1. HEALTHCARE REFORM WILL
TALK SMAC
Disruptive Technologies Key to Success of Outcome-Based Delivery
By Al Denis, Director
www.isg-one.com

2. INTRODUCTION
The Affordable Care Act creates a powerful set of incentives to expose and
eliminate inefficiency and drive a transition from the existing fee-for-services
model to bundled payments and outcome-based service delivery across
treatments and supply chains. In this emerging environment, insurers will
transform into true “wellness” companies, with a financial stake in improving
the health of their covered populations.
For this model to succeed, payers and providers will have to collaborate to
develop shared risk/reward delivery systems that can:
 Offer wellness programs targeted to individual needs and interests

Analyze the health impact of wellness programs

Quantify the financial impact of improved health and reduced demand for healthcare services
The disruptive technologies of social media, mobility, analytics and big data
and Cloud (SMAC) will play a crucial role in enabling delivery models with
these characteristics.
This ISG white paper describes each of the SMAC technologies in the context
of their role in driving healthcare reform and enabling the transformation to a
new model of delivering and managing healthcare. Future articles will
examine the areas outlined here in greater detail.
HEALTHCARE REFORM WILL TALK SMAC
■
AL DENIS
1

3. THE WELLNESS IMPERATIVE
The ACA offers a unique opportunity to dramatically
improve the health of millions of Americans. It does so by
creating a financial incentive to reduce the amount of
healthcare individuals receive. While payers will achieve
incremental savings from exposing administrative
inefficiencies and optimizing processes and systems, the
real savings will come from solving the 80/20 problem –
that is, reducing demand for healthcare among the 20
percent of patients that account for 80 percent of
healthcare costs.
Put simply, the ACA gives insurers a powerful profit
motive to reduce childhood obesity, encourage smokers
to quit and convince sedentary adults to get off their
couches.
SOCIAL MEDIA
Payer organizations are increasingly focused on using
social media to encourage, incentivize, cajole and even
bully their customers into adopting healthier lifestyles.
The simple reason, of course, is that a healthier customer
base represents a healthier bottom line.
The power of social media as a wellness tool lies in the
fact that it’s ubiquitous and accessible, it’s fun, and it
drives positive reinforcement and peer pressure. Social
media platforms can be used to integrate goal definition
and rewards, and allow members to make statements
about healthy choices and to gain (and give) positive and
consistent feedback.
Healthcare organizations such as Blue Cross/Blue Shield
of North Carolina recognize this potential and are
developing a range of programs that incorporate social
media tools. Moreover, payers are integrating social
media with existing and emerging technologies. For
example, chat, email and web-based information and online programs can reduce sales cycle times and costs and
gauge customer satisfaction.
MOBILE
Mobile technology enters the picture as the ubiquitous
delivery vehicle that records patient activity, monitors
data, provides feedback to the patient and
communicates with the provider. Cigna, for example, is
piloting a fitness app aimed at reducing the risk of
diabetes through “high-tech measurement,” “high-touch
coaching” and “cool tools” aimed at encouraging patients
to stick with the program.
HEALTHCARE REFORM WILL TALK SMAC
■
AL DENIS
Mobile applications make it increasingly easy to navigate
plans, find physicians and even do first-level triage from a
smartphone; they can also be a fitness aid, by recording
vital signs during workouts and charting progress.
ANALYTICS AND BIG DATA
In October of 2014, all healthcare institutions affected by
the ACA will be required to comply with the ICD-10
protocol for coding disease symptoms, diagnoses and
procedures. The current system, comprising 14,400
codes, will be replaced by a system with more than
68,000 codes. While the transition will be difficult and
painful, the outcome will produce a mother lode of data
– data that providers and insurers can leverage towards
improved outcomes.
ICD-10 will help insurers gain insight into how positive
lifestyle changes affect healthcare requirements, and
translate that impact into actuarial models tied to costs.
For example, a patient who loses 20 pounds might be
able to go from a bi-annual physical to an annual visit –
an outcome that reduces costs for the insurer. The
challenge now becomes to track customers’ lifestyle
programs and progress, and analyze and evaluate the
impact of those programs on health outcomes and on
costs over time.
Specifically, insurers will have to securely integrate
information such as a weight loss of 20 pounds or a 30
percent drop in bad cholesterol into a patient’s Electronic
Health Record (EHR), and calcuate how that reduced
demand for healthcare services affects the payer’s
bottom line.
Addressing these challenges starts with understanding
the basic concept that insurance is about pooling for
shared risk, and that wellness is about reducing risk
through improving the health of the covered population.
Improving health, meanwhile, requires in-depth
knowledge of the covered population. ICD-10 is a
powerful big data tool to do just that, by providing
opportunities to identify risks, define elements of
positive behavior and reinforcement, and initiate
outreach to those who need help staying healthy.
2

4. Big data will also play a role in helping payers target
wellness programs to individual preferences. The
rewards and incentives payers offer to customer can’t be
generic – a middle-aged man trying to quit smoking will
want different rewards from a pre-adolescent battling
obesity. Collecting customer data, analyzing that data
and then developing tailored and automated programs
based on that data will be key to connecting with
member populations on an individual level.
“Gamification” models are already being developed to
engage patients with consistent reinforcement and
feedback. In addition to making lifestyle changes a
positive experience, such programs can offer customized
material benefits. So, an avid fisherman who loses 20
pounds could be rewarded with a new set of dry flies. For
a 12-year-old boy who loses 20 pounds, the reward could
be a new bike.
Big data and analytics will allow payers to tie social
media applications that motivate people to exercise and
eat right to improved outcomes. Ultimately, this will
enable payers and providers to put a dollar value on the
impact of lifestyle changes on their customers.
CLOUD
The healthcare sector faces a fundamental dilemma on
cloud computing: on the one hand, security and privacy
concerns have slowed adoption; on the other, growing
storage demands, cost pressures and scalability
requirements make cloud an increasingly attractive
proposition. On-premise cloud solutions that address the
massive data storage demands posed by electronic
health records requirements and ICD-10 are especially
intriguing, but even these are being carefully reviewed
for span of control in security.
Additionally, both healthcare payers and providers
(particularly the latter) must address some critical
questions around their internal processes for compliance
to regulatory standards and access to and use of
Protected Health Information (PHI). Only then should
they think about aggressively pursuing cloud solutions.
Cloud service vendors, meanwhile, are quick to tout their
ability to comply with the new regulations, but the onus
remains on buyers to get their internal houses in order,
as well as to perform due diligence on suppliers, their
sub-contractors and their compliance capabilities.
FROM INCUBATION TO MAINSTREAM
Today, healthcare companies and some IT service
providers are developing new solutions in an incubatortype environment, and are producing viable applications.
Such programs will quickly move beyond the pilot stage
and become foundational to insurer strategy. Forwardlooking providers will develop outcome-based delivery
models, whereby the savings derived from reduced
demand for health services will be shared among buyers
and suppliers. Service providers willing to share the
expense and risk of developing and implementing
scalable models will emerge as the winners.
Against this backdrop, the HIPAA Omnibus rule, which
defines compliance requirements and was finalized in
September of 2013, provides some much-needed
direction, and extends accountability for suppliers
though their subcontractors. This additional extension of
responsibility is driving more frequent reporting of
exposure and security breaches. It should be stated that
the majority of these breaches can be attributed to theft
and hacking incidents, rather than the technology or
storage model deployed. Nonetheless, they highlight the
fact that sourcing transactions in the cloud require
diligence and confirmation to ensure that the cloud
that’s purchased is the one that’s audited.
HEALTHCARE REFORM WILL TALK SMAC
■
AL DENIS
3

5. KEYS TO SUCCESS
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