Healthcare costs continue to surge. Now companies are using powerful cloud-computing networks and connected devices to stem the tide. For example, Qualcomm (QCOM) has partnered with Philips USA, the American division of the Dutch company Koninklijke Philips N.V. (PHG).
QCOM and PHG plan to develop an important Internet of Things healthcare ecosystem.
Medicare estimates that it spends $17 billion each year on avoidable readmission costs for patients. Frequently, these patients get readmitted because they suffer from the complications of multiple chronic conditions, such as diabetes.
Qualcomm Life quietly developed the 2Net open-device network, and a suite of connected medication dispensers, biosensors and self-care glucose meters. Philips Healthcare Suite is an open, cloud-based platform for healthcare systems, providers and individuals. The marriage of the two creates one massive, scalable ecosystem. It will also create a lucrative new niche medical business as providers move care from costly emergency rooms to the patients’ homes.
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Pricewaterhouse Coopers suggests the market for connected healthcare will grow to $61 billion by 2020. From current levels, that is an impressive growth rate of 33% annually. And all parts of the ecosystem are expected to prosper. By 2020, connected health devices should grow to $14 billion and connected services should expand to $45 billion. From current levels, that represents annual growth rates of 37% and 31% respectively.
The Pricewaterhouse numbers might be conservative. As healthcare costs rise at an unsustainable rate in most of the developed world, policymakers are reaching the broad consensus that maintaining health is just as important as treating conditions. Connected healthcare, especially for chronic sufferers, encourages patient self-management while at the same time reducing costs. It’s a win-win.
The timing is right for Philips and Qualcomm, too. Healthcare Suite has industry-leading core capabilities in data storage, data aggregation and analytics. Advances in cloud computing mean all of this can be delivered at scale. And 2Net allows healthcare providers to build custom applications for personalized treatment through the patient’s medical device, smartphone or, potentially, other wearable device. It’s not hard to imagine a world where patients with an Apple Watch are in constant, real-time contact with software at their healthcare provider.
Philips’ Jeroen Tas summarizes the prospects well: “Patient self-management combined with connectivity to a care network is an emerging model that enables scalable chronic-disease-management for patients and providers.”
That business, let alone its terrific prospects, are not yet reflected in Qualcomm’s share price, making the big chip company a buy on pullbacks for connected-healthcare investors.
Best wishes,
Jon Markman
