Scientia Decentralization Of Healthcare Presentation Fall08

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Scientia Decentralization Of Healthcare Presentation Fall08

  1. 1. The Decentralization of Healthcare By Scientia Advisors Scientia Advisors LLC 1 Broadway, 14th Floor Kendall Square Cambridge, MA 02142 2008 Scientia Advisors, LLC Boston ■ Silicon Valley All Materials copyrighted and can not be used without explicit permission
  2. 2. Major trends in healthcare The next several years will see numerous changes due to these trends Aging population: Growth of chronic disease such as cardio-vascular illness, cancer, as well as severe infections for elderly Drug resistant “super-bugs” and Decentralized healthcare: Healthcare hospital acquired infections have delivery moving to clinics, pharmacies become a major healthcare concern and home healthcare and warrant rapid patient diagnostics Market convergence: Therapeutics Increasingly empowered consumer: and diagnostics; Imaging and In vitro Increased awareness and diagnostics; diagnostics and patient understanding of health monitoring Increasing emphasis on “wellness”, Payment for performance: health foods, preventative medicine, Payors are pushing for Rx-Dx early diagnosis, progression integration, given the potential to monitoring and tailored therapy reduce healthcare expenditure Source: Scientia Analysis All materials copyrighted and can not be used without explicit permission -2-
  3. 3. The decentralization of healthcare Advances in technology and strains on the current healthcare system are driving patient treatment to physician offices, rapid clinics, and homes Centralized Decentralized HOSPITAL Rapid LAB ICU ER PO HOME Clinics  The increasing migration of healthcare from centralized, core hospital locations to more point-of-care settings such as emergency rooms, outpatient clinics, rapid and urgent care clinics, and the home  A Decentralized Healthcare system aims to improve overall implementation of healthcare programs, provide uniformity of healthcare standards across rural and urban areas and lower costs by moving to more streamlined and efficient programs ICU: Intensive Care Unit ER: Emergency Room PO: Physician Office All materials copyrighted and can not be used without explicit permission Source: Scientia analysis -3-
  4. 4. Decentralization provides patients with more widespread access to healthcare services HOSPITAL PHYSICIAN’S OFFICE HOME • Traditional first point of contact GENERAL • Major healthcare facilities • Non-emergent acute care, CLINICS • Treat many types of disease and management of chronic medical injury conditions • Deal with immediate threats to • Dermatology & Plastic Surgery PO • Ultrasound/CT Scans/X-Ray/MRI health: ER/ICU • High # of beds and long-term care • Endoscopy • Specialized facilities for surgery, • Minimally Invasive Surgery • Optical Services plastic surgery, childbirth, ER • Pharmacy diagnostic labs, etc. • Radiology SPECIALIZED • Trauma centers, rehabilitation, • Routine lab testing ICU • Immunizations children's, geriatric, special needs, etc. H CLINICS GENERAL/RAPID • Non-emergent acute care, management of chronic medical conditions • Women's health issues HOME • Routine lab testing • STD testing, work physicals and drug testing • Assisted Living • Certain immunizations • Disease Management URGENT CARE • Multi-parameter Remote Patient Same as GENERAL but also: Monitoring • X-Rays • Admin. of IV medications or fluids • Lacerations/cuts that require sutures or adhesives All materials copyrighted and can not be used without explicit permission -4- Source: Scientia Analysis, Solantic, Harvard Vanguard Associates.
  5. 5. Major trends contributing to decentralization Changes in patient care, consumers, and technology are driving the push towards decentralization Empowered Consumer: Patients are Demographic Shift: Aging population taking greater ownership of their in developed world and some healthcare. Internet provides easy, emerging economies are creating a remote access to test results and need for proactive monitoring medical records Care Centers: Retail Care Centers and Fewer Health Care Workers: Urgent Care Clinics are emerging in Understaffed hospitals and drugstores, pharmacies, and super emergency rooms result in longer stores such as Wal-Mart and provide length of stay for patients fast, less expensive care Technology Advancements: Advances Rising Health Care Cost: Health care in electronics, microchips, wireless costs are pushing consumers and broadband, etc. enable new, small, health care providers to search for and easier to use instruments alternative methods of treatment All materials copyrighted and can not be used without explicit permission -5- Source: Scientia Analysis
  6. 6. Trend towards patient (consumer) driven healthcare Informed and empowered consumers are taking more control in managing their health Telemedicine & eHealth • Consumers are becoming increasingly educated with regard to self care and diagnosis e.g. through self- help books, the internet and numerous self-administered, home drug tests • More and more health treatments and diagnostic services are being aimed at patient convenience e.g. home MRI services All materials copyrighted and can not be used without explicit permission -6- Source: Scientia analysis
  7. 7. Decentralization of healthcare delivery Rise in the number of clinics will drive growth in POC of markets Rapid clinics for common illness Growth of rapid clinics Projected Number of Rapid Clinics in U.S., China, India 60,000 60000 50,000 50000 40000 30000 CAGR 20000 18% 10000 1,887 1,348 963 “Handles common illnesses, screenings 0 and immunizations” 2008 2010 2012 2012 2012 Urgent care clinics for non-life threatening emergencies U.S China India • The growth of rapid clinics will dramatically influence the POC market “Handles common illnesses, injuries and minor trauma” “Many rapid clinics are beginning to emerge Same day telemedicine oncology clinics and they will become big users of point of care infectious tests.” “Same day breast biopsy, -Dr. Marcon, Nationwide Children's Hospital results, and consultation with UltraClinics™ Oncologist” Sources: Scientia analysis, CAP Today, Kalorama; Solantic, Asia Pacific/China Equity Research – All materials copyrighted and can not be used without explicit permission Healthcare, Credit Suisse, British Medical Journal -7-
  8. 8. Electronic medical records Emerging patient-centered approaches to medical record keeping will ease the transfer of information across healthcare settings Key takeaways Clinics  Traditional methods of medical record keeping are a time and Pharmacies Hospitals cost burden on the healthcare system  Switching from a paper-based system will reduce redundancies during treatment and will lower healthcare spending Dentists Diagnostic Labs  Self-monitored health records simplify the healthcare system by giving power to the consumer to manage their health and associated costs Remote Patient Insurance Providers Monitoring Physician’s Office Source: Scientia Analysis, Microsoft, GoogleHealth, Insurance Journal All materials copyrighted and can not be used without explicit permission -8-
  9. 9. Advancements in technology promote decentralization Small, easy-to-use, mobile devices allow for patient testing and monitoring in clinics and at home with little or no expert assistance SEMI-PORTABLE TRADITIONAL MOBILE EQUIPMENT FUTURE? EQUIPMENT EQUIPMENT Bench-top and Small devices for Large, stationary handheld devices clinical and in- equipment that used in clinics home use must be operated and POs allowing requiring little to by healthcare for faster, on-site no professional professionals results assistance Medical equipment is decreasing in size and becoming easier to use All materials copyrighted and can not be used without explicit permission Source: Scientia Analysis, Roche -9-
  10. 10. Decentralization is happening today Many technologies in medical devices and diagnostics have already migrated away from the central hospital DATA TRANSFER & ELECTRONIC MEDICAL TECHNOLOGY ADVANCEMENTS HOME RECORDS • Continued technology • The penetration of CLINICS advancement and Healthcare with innovation has PO computerized information enabled the migration systems is at a very early of Hospital based stage relative to other ER Medical Devices, IVD sectors such as finance, tests and patient ICU transport, retail, etc. PULSE OXIMETRY monitoring capabilities to more • EMRs are replacing H decentralized Paper-based records in healthcare western healthcare POC INFECTIOUS DISEASE locations systems, however, US adoption remains low • Most US • DRIVERS: implemented EMR REMOTE PATIENT MONITORING Improved portability, systems are only accuracy, ease of use used for and faster turn- administrative around-time (TaT) purposes All materials copyrighted and can not be used without explicit permission Source: Scientia Analysis, OpenClnical.com - 10 -
  11. 11. The traditional method for diagnosis and treatment of common infections can take over two days Total Time Total Cost* Traditional Model 2+ Days $250 Drive to Return home pharmacy Home Doctor’s Office: Tested at lab Dr. calls in Pick up Rx at pharmacy Drive to Throat culture prescription (Rx) doctor’s office 30 minutes 1-2 hours 24- 48 hours 2-4 hours 1 hour Source: Scientia Analysis, CDC.gov, Wall Street Journal; Minnesota Council of Health Plans, 2005; MinuteClinic.com, CheckUpsUSA.com; *Total Cost represents actual cost, not co-pay or out of pocket cost. All materials copyrighted and can not be used without explicit permission - 11 -
  12. 12. Rapid clinics Diagnosis and treatment of common infections are made faster and easier Total Time Total Cost* Rapid Clinics Model 02:00 $100 Patient shops until Patient notified test results are in that Rx is ready Drive to Clinic Return home Home Rapid clinic: Tested on site Dr. calls in Rx to Return home Throat Culture Rapid Strep Screen on site pharmacy 20 minutes 20 minutes 30 minutes 30 minutes 20 minutes Source: Scientia Analysis CDC.gov, Wall Street Journal; Minnesota Council of Health Plans, 2005; All materials copyrighted and can not be used without explicit permission MinuteClinic.com, CheckUpsUSA.com; - 12 - *Total Cost represents actual cost, not co-pay or out of pocket cost.
  13. 13. Urgent care centers Provide care and treatment historically restricted to the emergency room Waiting room Traditional Model Total Cost* Total Time 08:00 $2,000 + Average waiting time is 1 hr If more tests are needed Injury Arrive at Triage Emergency Room Most serious cases Treatment Discharge 30 minutes 30 minutes 1-4 hours 2-3 hours Total Time Rapid Clinics Model 02:30 Average wait: <15 minutes Total Cost* <$200 Injury Arrive at Urgent Care Treatment Discharge Center 30 minutes 15 minutes 1-2 hours Source: Scientia Analysis, CDC.gov, Wall Street Journal; Minnesota Council of Health Plans, 2005; Solantic *Total Cost represents actual cost, not co-pay or out of pocket cost, All materials copyrighted and can not be used without explicit permission - 13 - ER cost is estimate for broken arm and simple cast
  14. 14. Telemedicine oncology clinics Quick turn around time on biopsy results and local clinics decrease time to treatment TOTAL: Traditional Model 6 WEEKS Processing Scheduling Scheduling Processing Consult Biopsy Biopsy Mammography at Mammography Surgical Consult Biopsy Consolidated imaging department of Result Pathology Report hospital 1 Week 1 Week 1-2 Weeks 1-2 Weeks TOTAL: Rapid Clinics Model 6 WEEKS Processing Scheduling Scheduling Processing Consult Biopsy Biopsy Mammography at Mammography Surgical Consult Biopsy Consolidated specialized imaging Result Pathology Report center 1 Day 1 Week 1 -2 Weeks 1 Day Source: Scientia Analysis, Ultraclinic.com, Breast Care Critical Pathway-Lopez A.M et al All materials copyrighted and can not be used without explicit permission - 14 - 2008, IBM report
  15. 15. Electronic medical records Emerging patient-centered approaches to medical record keeping will propel the decentralization of healthcare Traditional Model Patient-Centered EMR Model Clinics Clinics Hospitals Pharmacies Hospitals Pharmacies Diagnostic Dentists Labs Diagnostic Dentists Labs Remote Patient Insurance Remote Patient Monitoring Providers Insurance Physician’s Office Monitoring Providers Physician’s Office Source: Scientia AnalysisMicrosoft, GoogleHealth, Insurance All materials copyrighted and can not be used without explicit permission - 15 - Journal
  16. 16. Relevant device and diagnostic healthcare segments Market segments exposed to decentralization trends will outperform relative to others MD/IVD MARKET EXPOSED TO DECENTRALIZATION US$ MM 400 $354 B WW MEDICAL DEVICES WW IN VITRO DIAGNOSTICS 350 MARKET MARKET 300 31% US$ MM US$ MM $297B $229 B CAGR: $57B 250 300 60 15% 9% 9% 22% 200 50 250 150 $37 B $192 B 69% 40 200 CAGR: 100 78% 6% 30 150 50 20 100 0 10 50 2007 2012 0 0 Decentralized 2007 2012 2007 2012 Centralized Other^ MDx Anatomic Pathology POC* Cardiovascular Diabetes Immunoassay Microbiology GI/Urology Orthopedics Hematology Clinical Chem Neurology Hospital Supplies Respiratory Dental and Orthodontics ^ Includes coagulation, flow cytometry, drug of abuse, therapeutic drug Patient Monitoring & Assessment ENT monitoring, nephlometry, advanced lipid testing, and others Opthalmology Surgical Equipment * Includes OTC blood glucose and pregnancy testing Medical Imaging All materials copyrighted and can not be used without explicit permission Source: Scientia analysis, company reports/filings and presentations - 16 -
  17. 17. Medical community views on decentralization Experts stress impact of decentralization on healthcare system “I think it (ICD remote monitoring) is one of the best technologies to come down the road ELECTROCARDIOLOGY for device management in a long time…need to make it simpler and more efficient…” PULMONARY CRITICAL Electrocardiologist, MGH CARE “Instead of coming into the lab INTERVENTIONAL CARDIOLOGY (for sleep study), you can now do it at home…removes bottleneck at Sleep lab…might RAPID CLINICS result in more people needing treatment and help the market” ALLERGISTS Director of Sleep Disorder program: B&W, HMS HOSPITAL DIRECTORS “We use rapid Strep test, rapid influenza, urine dipsticks, urine pregnancy… we plan to bring pulse oximeters ETC. soon…right now looking at what devices to include” Nurse Practitioner, Little Clinic All materials copyrighted and can not be used without explicit permission Source: Scientia analysis - 17 -
  18. 18. Strategic acquisitions to position players at the forefront of decentralization Traditional players are preparing for a growing decentralization market Siemens acquired Dade Behring and Bayer Healthcare’s diagnostic division to become the first global full-service diagnostics company (2006-07) GE’s enhances health IT capabilities through IDX Systems Corporation acquisition, but were unsuccessful at acquiring Abbott’s IVD and POC diagnostics businesses (2006-07) Inverness improves its health management expertise by acquiring Matria Biosite, Hemosense, Inc., Alere Medical, Inc. , Matritech, Paradigm Health, and forming a 50/50 joint venture with Procter&Gamble to develop diagnostics (2007-08) Roche signed a licensing deal with 454 Life Sciences and acquired Ventana to broaden its diagnostics business through Ventana’s tissue diagnostics expertise (2005-08). Philips takes steps to become world leader in the home healthcare market by acquiring Lifeline Systems, Inc., Health Watch, Raytel Cardiac Services, and Respironics (2006-07) Source: Scientia analysis, IVDT, and company press releases , company All materials copyrighted and can not be used without explicit permission - 18 - annual reports
  19. 19. International decentralization overview Western nations have established signs of decentralization while the eastern nations have strong growth plans Western nations (US and Europe) Japan • Experiencing affects of • Highly centralized form of decentralization with healthcare delivery numerous rapid care clinics, • Japan’s doctor offices have POC diagnostics, remote limited POC, but hospitals are patient monitoring, and increasing uptake of rapid POC EMR tests for emergency and critical care India • Japan is the largest market for rapid flu tests • Due to a mostly patient self-pay system (86% of health financing is out-of-pocket) China and many small primary care clinics, the healthcare system is predominantly • Has an evolving dual-natured healthcare decentralized. system, presently highly centralized but has the • There is an increasing number of health potential to become more decentralized. China insurance companies entering that can is currently hospital centric and is expected to affect the healthcare landscape by introduce numerous primary care centers, expanding health coverage and access to growing from 23,000 to 60,000 (2006-2011). timely health care. Source: Scientia analysis, company presentation, IBEF market review, All materials copyrighted and can not be used without explicit permission KPMG presentation, www.ehealthnews.eu, Kalorama report - 19 -
  20. 20. Traditional players initiated decentralization with POC devices and telehealth solutions Players have revolutionized care management and clinical monitoring for home use Siemens – GE Philips Draeger Inverness Healthcare Healthcare Medical • In GE’s extensive • Philips has cardiac and • Siemens and Draeger • Inverness portfolio, patient monitoring division, have a joint venture manufactures and monitoring systems home health, and company that markets consumer and have various point telehealth divisions manufactures professional medical of care (POC) medical point of care diagnostic products • Philips acquired devices for for emergency care • Acquired Alere ambulatory, clinic, Respironics (2007), and home care and home care use which increases home Medical, Inc. (2007) • Home technology health portfolio to which remotely • Patient monitoring include home oxygen includes a series of monitors patients systems intended technologies clinical ventilation through a unique for hospital use, systems combination of at- • Philips Lifeline is an specifically to home monitoring, effectively transfer easy-to-use personal patient education, and information from response service for nurse-patient the bedside to remote patient relationships caregiver monitoring All materials copyrighted and can not be used without explicit permission Source: Scientia analysis, company websites, press releases - 20 -
  21. 21. Non traditional players are easing the decentralization transition New players are empowering the consumer and integrating hospital informational technology • User health • Health Monitoring • Personally controlled • Healthcare division information database System that is health record that devoted to creating hospital grade FDA empowers people and technologies for data • Explore online Class II medical their doctors to be integration across health services device active partners for healthcare and • Create an health by providing patient spaces • Product offering can extensive medical secure, convenient • Recently (July 2008) take vital signs (heart record access to lifelong rate, blood pressure, received FDA market • Find a doctor health information etc.) and securely clearance on in-home transmit data medical device for management of health conditions • Connects user with • Integration of data and • Online community for doctors, hospitals, software for Picture physicians to personal health and Archiving Communication exchange fitness devices and Systems (PACS), EMR, observations and dozens of health sites electronic prescribing, knowledge in real on the Web to help and wireless mobility time achieve health goals • Wireless mobility enables POC data access All materials copyrighted and can not be used without explicit permission Source: Scientia analysis, company websites - 21 -
  22. 22. Players affected by decentralization Changing roles for traditional and non-traditional players sets the stage for new market dynamics Traditional Non traditional New paradigm of decentralization will cause shifts in Insurance companies Rapid care clinics the healthcare market All materials copyrighted and can not be used without explicit permission Source: Scientia analysis - 22 -
  23. 23. Regulatory and reimbursement issues Primary adopters of POC products will need to overcome key regulatory and reimbursement hurdles. Hospital Reimbursement: POC vendors have not been able to demonstrate the big picture cost savings to hospitals and Physician’s office insurance organizations Reimbursement: Vendors must justify the costs Regulatory: Approval will of instituting POC products at the physician’s depend upon meeting safety, office over sending the patient to centralized efficacy, sensitivity, and hospitals already equipped to better handle specificity profiles of these procedures established products on the Regulatory: Approval depends upon achieving market results equivalent to those achieved through products traditionally used in hospitals Home Reimbursement: Vendors of POC products for use at home must establish adequate support for the extent of coverage, coding rationale, and value proposition for the product Regulatory: With a lack of predicate devices to establish equivalency, new POC products will see rigorous regulatory scrutiny in order to address safety and efficacy concerns All materials copyrighted and can not be used without explicit permission - 23 - Source: Scientia analysis, Kalorama, Abbot I-stat website
  24. 24. Value of decentralization Decentralization creates different incentives for each healthcare player HOSPITALS • Reduce readmissions, patient process times, and test duplications INSURANCE PROVIDERS PHYSICIANS • Reduce costs from treatment, • Access comprehensive patient hospital length of stay, personnel data and history for improved need, and overall efficiencies decision making and diagnosis Decentralized DIAGNOSTIC AND MEDICAL DEVICE Healthcare PATIENTS COMPANIES • Need for smaller, faster, easier • More informed of personal to use devices for use in remote health, reduced treatment settings by patients and times, and better health healthcare professionals management ELECTRONICS AND HEALTH IT RAPID AND URGENT CARE CLINICS COMPANIES • Demand for chips in devices, EMR • Demand will rise as consumers software capabilities, remote seek fast, efficient healthcare patient monitoring will provide catered to their lifestyle new growth opportunities All materials copyrighted and can not be used without explicit permission - 24 - Source: Scientia Analysis
  25. 25. Decentralization will change the dynamics of healthcare Success will depend on strategic positioning and understanding market needs HOSPITALS PAYORS PHYSICIANS DIAGNOSTIC REGULATORS COMPANIES PHARMACEUTICAL PATIENTS COMPANIES URGENT CARE MEDICAL DEVICE CLINICS COMPANIES HEALTH IT ELECTRONICS COMPANIES COMPANIES RAPID CLINICS Source: Scientia Analysis All materials copyrighted and can not be used without explicit permission - 25 -
  26. 26. Science, Knowledge and Skill for your competitive advantage. Scientia Advisors is an international strategy and management consulting firm with a concentration in life sciences. We have one mission, to ensure that our clients consistently outperform the market and their competitors. All materials copyrighted and can not be used without explicit permission
  27. 27. » Scientia Advisors is an international management and strategy consulting firm with a concentration in biotechnology and life sciences. We combine our deep knowledge of the market with growth strategy tailored to your company’s needs. » We help the world's best and most innovative life science companies make decisive improvements in their direction and performance. » Our highly collaborative work style converts insight into strategy that substantially impacts performance. » We continually strive to generate insight based on experience into what drives value creation and competitive advantage in our clients' businesses. » We earn the trust of our client teams by consistently delivering impact. All materials copyrighted and can not be used without explicit permission
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  29. 29. CONTACT INFORMATION Harry Glorikian Managing Partner hglorikian@scientiaadv.com Office: +1-617-401-2330 - Ext 1382 Mobile: 617-407-5093 Fax: +1-617-812-0315 1 Broadway, 14th Floor Kendall Square Cambridge, MA 02142 THIS PRESENTATION IS MEANT TO BE ACCOMPANIED BY COMMENTARY & VIEWPOINTS BY SCIENTIA ADVISORS THIS IS NOT MEANT TO BE A STANDALONE DOCUMENT ON WHICH TO BASE THE FINAL VIEWPOINTS OF SCIENTIA ADVISORS OR ON WHICH TO BASE THE FINAL AND DEFINITIVE GO-FORWARD DECISIONS All materials copyrighted and can not be used without explicit permission - 29 -

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