PwC Strategy: 12 plays for disruptors in healthcare

https://www.beckershospitalreview.com/hospital-management-administration/pwc-strategy-12-plays-for-disruptors-in-healthcare.html

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We see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement).

In early February, Amazon, JPMorgan Chase, and Berkshire Hathaway announced a partnership to tackle rising healthcare costs for their U.S. employees.

The announcement, which didn’t do much beyond outlining the formation of the partnership, is a sign of the times. The details of the Amazon–JPMorgan Chase–Berkshire Hathaway plan, which, notably, does not involve a health industry incumbent, have yet to be fully revealed. Although the three companies have a substantial number of U.S. employees — 1.1 million between them — they are not aiming to produce value via scale. The consortium’s stated goal is to help improve health costs via technology, and to create value by providing greater transparency and competition, reallocating risk, and eliminating waste and intermediaries.

But the announcement is interesting for a few reasons. Even though it is directed at the companies’ own employees, it highlights the types of capabilities and platforms that may be needed to win in the future health marketplace. It points to the potential for new entrants to disrupt incumbents in insurance and care delivery. And it throws into relief the kinds of bold moves that resilient players can afford to make.

The Plays

A consortium between companies with complementary capabilities and scale has the potential to optimize the matching of supply and demand within healthcare via new mechanisms (i.e., exchanges), the facilitation of easier transactions (including faster, multichannel delivery), and new products (such as wellness and healthcare bundles). And as a consortium begins to target health spending successfully, it could move from lower to higher clinical complexity and from local to national marketplaces.

Accordingly, we see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement). They are incremental innovation (testing the waters with gradual and piecemeal innovation); technology and analytics (enabling the improvement and redesign of the existing system); and radical disruption (creating new platforms, marketplaces, and ecosystems).

Incremental Innovation Plays

  1. Buy/partner with a third-party administrator. Use the buying power provided by the companies’ large number of members to buy or partner with a third-party administrator, thus removing the need for payors. The service could then be extended to other employers.
  2. Offer near-site clinics. Leverage the combined physical footprint of the consortium members to invest in up-front care that would in turn reduce downstream hospital costs. This would include partnering with facilities/care delivery providers and recruiting general practitioners to offer on- or near-site primary care clinics.
  3. Enable direct-to-provider contracting. Segment the employee base into groups — e.g., chronic conditions, healthy, risky — and directly contract with providers to manage those populations.
  4. Enter pharmaceutical/durable medical equipment (DME) distribution and manufacturing. Ship drugs in one convenient monthly package directly from manufacturers, use cloud computing to create a more efficient pharma supply chain. A consortium could potentially expand into the manufacturing of biosimilars and generics drugs.

Technology and Analytics Plays

  1. Offer virtual services. Build or host a network of virtual care services such as telehealth and second opinions, and eventually evolve to operate a “virtual hospital” in which specialists supervise medical care from a distance.
  2. Offer a customized consumer (member/employer) portal. Leverage data and analytics capabilities to personalize consumer engagement and experience, provide targeted concierge services, and integrate health and productivity incentives.
  3. Offer data-driven insights. Use data collection, tracking, and management to automate discovery, fuel AI-enabled decision making, and offer insights to stakeholders on, for example, the relative effectiveness of wellness programs.
  4. Offer services for providers/employers. Leverage data, technology, and analytics capabilities to relieve the administrative and regulatory burden for providers and employers.

Radical Disruption

  1. Develop a B2B and B2C clinical capacity exchange/marketplace. Much as Airbnb does with rooms and OpenTable does with restaurant tables, enable care-delivery providers to monetize current and excess capacity and let consumers identify, compare (on price, quality, and availability), and book needed clinical capacity at the required time and for the needed procedure.
  2. Develop a direct-to-employer (D2E) reverse auction platform. Similar to a private exchange, the D2E platform would let employers segment their employee base by micro geographic and risk segments, aggregate similar risk pools across employers, and enable payors or health plans to offer customized plan options for consumers. Shortening the distribution chain and bundling healthcare products and services would make healthcare more shoppable.
  3. Roll out an encounter-based, claimless model. Partner with large care-delivery organizations that cover the full continuum of care and are in risk-sharing/capitated arrangements to create an encounter-based, claimless network. For certain populations or certain types of care, patients would have unlimited access to physicians without having to file claims.
  4. Develop next-generation healthcare connectivity platform. Create a consumer-centric, plug-and-play connectivity platform, aimed at improving the overall health, wealth, and productivity of individuals. Much in the same way that a financial portal accommodates a range of products and services, this platform would allow payors, providers, consumers, and external partners to coordinate whole health and wellness products and services. Imagine logging onto an Amazon-like portal, filling out a risk assessment, receiving advice, interacting with nurses, and having Alexa act as a concierge to set up appointments, order pharmaceuticals, and provide behavioral nudges.

The Responses

Regardless of the plays they pursue, consortia will force incumbent stakeholders to create a more competitive market and more clearly define their value. As such, they will only add to the pressure being placed on the industry by disruptive and aggressive mergers, such as the one between CVS and Aetna.

The fact that a new group of entrants, blessed with deep pockets and strong capabilities, is potentially entering the market only heightens the urgency for the industry to focus on its strategy. Companies that react with one-off moves to respond to these announcements, or that stand still, are going to get disrupted. At the same time, in this evolving landscape, resilient first movers and fast followers will have the opportunity to gain a sustainable advantage. As we’ve noted, there are a series of no regretsoffensive, and option value moves that can increase all stakeholders’ ability to remain resilient and win in such a turbulent landscape.

No regrets moves, which make sense regardless of how the future develops, would include payors developing more effective technology and analytics, providers creating more holistic care protocols, and pharmaceutical companies teaming up with employers to manage costs more effectively. All players would benefit from the ability to explain and justify their prices and link them clearly to value.

Offensive moves, aimed at enabling the organization to get to a strategic destination first or faster, include providers partnering with new employer consortia to streamline the drug supply chain, pharmacy benefit managers (PBMs) expanding their business model to include broader medical benefits, and employers creating their own health consortia.

Option value moves offer a more nuanced way for companies to approach the future. These are low-risk, low-regret initiatives that preserve or afford the opportunity to participate in new markets and develop new products. They could include PBMs providing value-added services, such as tying reimbursements to the performance of high-cost specialty drugs, or retail pharmacies working with large employers to create near-site clinics, or employers considering forming their own consortia.

As we noted at the outset, a great deal is still unknown about the intent and potential of the Amazon, JPMorgan Chase, and Berkshire Hathaway health consortium effort. But one thing is clear: All stakeholders in the healthcare ecosystem need to ensure that their business models are resilient and allow for timely responses and the flexibility to evolve.

 

Prime for Disruption

https://www.chcf.org/blog/prime-for-disruption/

A line graph titled "Cumulative Growth Compared to Inflation."

 

Earlier this week, Amazon.com Inc., JPMorgan Chase & Co., and Berkshire Hathaway Inc. jolted Wall Street with their announcement of a joint venture designed to reduce health care costs for their combined one million US employees. It is exciting to see innovative private sector companies lend their intellectual and financial capital to a seemingly intractable issue that has plagued the American economy for decades. About 18 percent of our nation’s financial output is now devoted to health care. For decades, health care costs have outpaced overall economic growth, and the gap is projected to remain to remain at three percentage points a year.

How the High Cost of Care Affects Employers – and Everyone Else

Employees directly and indirectly shoulder these costs. The average premium that employers and their workers pay for a family plan in California now exceeds $1,600 a month. Employer-based family health insurance premiums in the state have increased by 234% over the last 15 years, nearly six times the increase in the state’s overall inflation rate. Every dollar spent on health care is a dollar unavailable for something else, such as education, affordable housing, and environmental protection.

Sixty-six percent of working California families face a deductible of $2,000 or more for their employer-based coverage, including many without high-deductible health plans linked to tax-advantaged health savings accounts.

Increasingly, health care is unaffordable for all of us—not just businesses like Amazon and its workers, but for retirees, the self-employed, people seeking employment, and low-income Californians who aren’t eligible for public coverage. The Affordable Care Act (ACA) attempted to address the cost burden for those with employer coverage by creating disincentives for employers to simply pass on unaffordable premiums, and by capping the share of premiums health plans spent on overhead and profit. For people who shop for insurance coverage on the individual market, the ACA provided federal tax credits to offset premium and cost sharing.

While these and other efforts have helped, more work is needed. Too many families still struggle to afford health care. In 2017, 37% of Americans with health insurance found it difficult to afford premiums each month. Forty-three percent said it was hard to meet their deductibles before coverage kicked in. Among California workers with an aggregate family deductible, 66% faced a deductible of $2,000 or more in 2016.

At least 40% of adults say they worry about being able to afford health care services, losing their insurance, or being able to afford prescription drugs.

What We Already Know About Reducing Health Care Costs

Addressing the affordability of care in California and throughout the country requires lowering the underlying cost of care across market segments. Many efforts are already underway. Health insurance companies, large self-funded employers, and public purchasers of care often deploy management strategies to reduce the use of expensive tests, high-cost prescription drugs, and duplicative services. The most common strategies include prior authorization, patient education for better clinical decisionmaking, chronic disease initiatives, and pushing the cost to employees through deductibles and other cost-sharing tools.

To date, the results of these initiatives have been mixed. The findings are consistent with a growing body of academic research that suggests the real driver of health care costs is price, not increased demand. If that is the case, the solution might be to create a market that rewards high-value providers and cost-effective drugs. This type of strategy would rely on tools like reference pricing (individual drugs are grouped by therapeutic class and payment is limited to the price of the cheapest drugs in each class), value-based insurance design (copayments are reduced or eliminated for the most efficient, effective services), or high-deductible health plans.

Unfortunately, consumer-driven approaches have also had limited impact. While companies like Amazon might develop new technologies to enable patients to easily compare, shop for, and purchase health care services in a competitive marketplace, to date these types of tools have not succeeded in reducing costs or changing provider behavior in California. More to the point, introducing blunt consumer-facing financial incentives may run counter to the overall goal of affordability. Everyone should have access to the care they need at a price they can afford and not face care that is rationed by their ability to pay for it.

The Promise of Scale

Perhaps the biggest advantage of the new joint venture is its size and reach. The most promising solutions today are found in large, integrated delivery systems. They have consistently shown that the best approach is to give providers simple, strong financial incentives to make care more efficient and effective. Because this type of model works best on a large scale, the ideal approach is for multiple public and private purchasers of care to come together to align quality reporting requirements, reward value, and support investments in improving health outcomes across entire groups of people. We are already seeing this happen in California and other states.

No one group or slice of the private health care market has the power to really drive down health care costs for everyone. It will take many, many players in the private and public sectors working together to align their efforts. The foundation of payment and delivery reform laid by the Affordable Care Act is a good place to start. Technology is critical and necessary – but it is not by itself sufficient. Leaders also need to pull policy levers, fix payment systems, and spark collaboration between purchasers. Innovators like Amazon, JPMorgan Chase, and Berkshire Hathaway will no doubt make material contributions. Their leadership, in tandem with that of other large purchasers, offers a prime opportunity to make care more affordable for everyone.

Some Jobs Are Best Left to the Nonprofits

https://www.bloomberg.com/view/articles/2018-02-01/some-jobs-are-best-left-to-the-nonprofits?utm_campaign=KHN:%20Daily%20Health%20Policy%20Report&utm_source=hs_email&utm_medium=email&utm_content=60406871&_hsenc=p2ANqtz–p6LLq3KGruyf8cxGYEWvzT4LzONfY0U7Nn1r39Ijl9mJf2I9nxEjZ1SABngM4CXcNNOxmf9vg_kjpMkg1MO_G4W_Lrg&_hsmi=60406871

Health care might be one of them. Amazon, Berkshire Hathaway and JPMorgan certainly hope so.

Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. are publicly traded, profit-oriented corporations. 1 So it is interesting that when they announced their new joint health-care venture this week they made a point of saying it would be “an independent company that is free from profit-making incentives and constraints.”

Interesting but maybe not all that surprising: Around the world, health, life and property insurance, as well as various other financial services, have long been provided by nonprofit organizations, mostly in the form of customer-owned mutuals. From the 1960s through 2000s, wave after wave of conversions turned many of these entities — especially in the U.S. and U.K. — into shareholder-owned for-profit corporations. But since the global financial crisis, the idea that corporations out to maximize shareholder returns might not always be the best at managing financial and other risks has undergone something of a revival.

Just to be clear: It looks like this new Amazon-Berkshire-JPMorgan entity will be owned by the three companies, not the employees it serves. That is, it won’t technically be a mutual. But the three companies’ apparent belief that the for-profit-insurer-dominated private health-care market in the U.S. isn’t cutting it — and that “profit-making incentives” are at odds with improving health-care delivery and cutting costs — got me thinking about the strengths and weaknesses of mutuals and other nonprofits relative to conventional corporations.

Mutuals that are owned by and distribute excess cash to their customers have been around for centuries, in many cases predating their for-profit counterparts. Some of the first insurance companies were organized in the 1600s and 1700s in the Netherlands and U.K. as customer-owned cooperatives, and the mutual organizational form has remained prominent in life and property insurance ever since. The 1800s saw an explosion of mutual activity, with fraternal organizations, trade associations, labor unions, social reformers and philanthropists starting co-operative lenders, health-care providers, pension funds, groceries, farming enterprises and even factories. This continued into the 20th century, although in Europe these mutual organizations were often co-opted or supplanted by government social insurance programs. 2

In the U.S., mutuals and nonprofits with mutual-like characteristics have continued to play major roles in insurance, money management, health care and other fields — including outdoor gear, which is top of mind at the moment because I recently spent a bunch of money at customer-owned Recreational Equipment Inc. But these mutuals and co-ops have just spent several decades on the defensive, with “demutualizations” in which mutual customers are given shares in newly created for-profit corporations transforming sector after sector.

I think this trend started with mutual funds, sort of. The first mutual fund, Massachusetts Investors Trust, was founded in 1924 as a true-blue customer-owned nonprofit. Most of the funds that followed in its footsteps were controlled by for-profit investment advisers, but for decades after the 1929 stock-market crash, those advisers acted more like cautious trustees than risk-taking profit-maximizers. Things changed during the booming stock market of the 1960s, with fund advisers getting much more aggressive in their investing and marketing, and in some cases acquiring competitors. In 1969, Massachusetts Investors Trust threw in the towel, demutualizing and transforming itself into Massachusetts Financial Services, which is now a subsidiary of Canada’s Sun Life Financial Inc. Mutual funds themselves are all still technically mutual, but the business (with one huge exception that I’ll get to in a moment) really isn’t.

Savings and loans demutualized in a more formal fashion in the 1980s, after the Garn-St. Germain Depository Institutions Act of 1982, in an attempt to attract new capital into the struggling industry, made it much easier for customer-owned S&Ls to convert to shareholder-owned corporations. (Credit unions remain the banking industry’s mutual holdout in the U.S.) Then life insurers began a great demutualization wave in the 1990s, with many of the industry’s biggest names — MetLife Inc., Prudential Financial Inc., John Hancock — switching from customer-owned to publicly traded. The Blue Cross and Blue Shield Association of mutual health insurers began allowing its members to switch to for-profit in 1994. And with Sweden, of all places, leading the way in 1987, stock exchanges began demutualizing as well.

For exchanges, it’s pretty easy to make the case for demutualization. With technological change, deregulation and internationalization transforming their business landscape, single-country, member-owned mutuals were in no position to compete. Publicly traded exchanges could raise capital, merge across national lines and take other steps that wouldn’t have been practical under a mutual structure.

Access to capital and increased flexibility have been offered up as leading reasons for demutualization in other industries as well. Also, in an influential pair of 1983 papers, finance scholars Eugene Fama and Michael Jensen argued that mutuals and other nonprofits lacked some of the control mechanisms — the threats of hostile takeover and shareholder activism, mainly — that kept managers of publicly traded corporations from taking advantage of owners. Empirical research since then has shown demutualized companies to be more efficient and achieve higher returns on capitalthan their mutual peers.

But that’s not the end of the story. It’s not entirely coincidental that the mass demutualization of the savings and loan industry in the 1980s was followed by an industrywide meltdown that cost taxpayers more than $100 billion. And remember Northern Rock, the U.K. institution that suffered a bank run in 2007 that was an early harbinger of the financial crisis? It had demutualized in 1997. On the whole, mutual financial institutions seem to have held up better during the financial crisis than their for-profit competitors. Mutual executives have fewer incentives to take risks, and that can sometimes be a good thing. There’s also evidence that mutual executives do more than just pay lip service to their customer-owned status. Mutual auto insurers in the U.S. — especially those such as Amica Mutual and USAA that pay regular dividends to customers — pay out a higher percentage of their premiums in claims than for-profits, according to one recent study. Mutual insurers perennially top for-profits in customer satisfaction rankings, and credit unions perennially top banks (although the banks have been catching up lately).

All in all, then, it seems that mutuals are, if not necessarily better than investor-owned for-profit corporations, pretty nice to have around. During and after the financial crisis, consumers seemed to take notice of this, with mutuals’ share of the global insurance market jumping from 23.6 percent in 2007 to 27.8 percent in 2013, according to the International Cooperative and Mutual Insurance Federation. That share has since sagged backed to 26.8 percent, though. Mutuals’ advantages may be less apparent when times are good.

Also, while there are multiple forces pushing mutuals to demutualize — not least the possibility of stock-market riches for their executives — there’s very little pushing in the opposite direction. The only major conversion to mutual status that I can think of in the U.S. over the past half century was Vanguard Group Inc., which arose in 1974 out of a power struggle at for-profit mutual fund adviser Wellington Management during which ousted president John C. Bogle talked the board members of Wellington’s mutual funds into seizing effective control of the whole operation. That was a rare case where mutualization seemed to help a top executive’s career prospects (although in the long run it probably resulted in Bogle making a lot less money than if he had simply gotten a job at another mutual fund company).

Starting new mutuals isn’t easy, either: The health-insurance co-ops created by the Affordable Care Act were undeniably a bust, although there’s disagreement over whether inadequate support or design flaws doomed them. And New York’s Freelancers Union, another relatively recent addition to the mutual landscape, got out of the health insurance business in 2014 after ACA rules made it impractical.

Once up and running, though, mutuals can be formidable competitors — as everyone else in the mutual fund industry can attest after decades of rapid growth at low-fee index-fund innovator Vanguard. Health care in the U.S. could sure use some low-fee innovation. Maybe, just maybe, Amazon, Berkshire and JPMorgan will find a nonprofit, mutual-ish way to get there. There are precedents: Nonprofit investment giant TIAA was founded by steel magnate Andrew Carnegie; the mostly nonprofit Kaiser Permanente health-care system was the doing of another industrialist, Henry J. Kaiser. For modern magnates Jeff Bezos, Warren Buffett and Jamie Dimon, creating something like that — or something better — would make for a pretty nice legacy.

 

Can Amazon do to health care what it did to books?

http://money.cnn.com/2018/02/01/news/economy/amazon-health-care/index.html

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First books. Then groceries. Now health care?

Amazon shook up the health care world on Tuesday, announcing it was partnering with fellow heavy hitters Berkshire Hathaway (BRKA) and JPMorgan Chase (JPM) to address soaring costs.

Amazon (AMZN), which has advanced light years from its origins as an online bookseller, has had a dramatic impact on many of the industries it’s touched. When it moved into cloud services and streaming shows, it left rivals scrambling to catch up. Last year, it bought Whole Foods, shaking up the grocery space.

The company is now one of the most valuable in the U.S. and its founder, Jeff Bezos, one of the richest people in the world.

But Bezos and his peers, Warren Buffett and Jamie Dimon, are taking on one of the nation’s thorniest challenges. Making health care more affordable has bested savvy business leaders in many industries. The announcement was met with cautious optimism and lots of skepticism.

Related: Jeff Bezos, Warren Buffett and Jamie Dimon want to fix health care

Not much is known about the threesome’s venture — a yet-to-be-named company that will give the firms’ U.S. employees and their families a better option on health insurance and will not be motivated by profit. Experts, are betting that the firm will eventually expand its services to other companies if the effort proves successful.

Health care costs have soared for both employers and their workers over the past decade. Premiums have jumped nearly 50% for family coverage since 2008 and more than tripled since 1999. Meanwhile, employees are shouldering more of the cost when they actually get medical care because their deductibles and co-pays are going up.

Amazon, however, is a master at wringing out inefficiencies in the supply chain. This could prove particularly useful in the health care arena, which is known for its bloat.

“One thing we know for sure is there’s a lot of overhead costs in health care,” said Frederick Isasi, executive director of FamiliesUSA, a health care advocacy group.

While many employers have tried to tackle health insurance costs in the past, they often didn’t have the bandwidth or resources to devote to the issue, Isasi said. The new venture, however, will be focused on its mission and will have the financial backing of three strong firms.

Some of the ways Amazon could use its know-how to make a dent in prices: Negotiate rates directly with health care providers and drug manufacturers, use technology to ease consumers’ ability to make appointments or consult with doctors outside of the office and improve access to price and quality information about physicians, procedures and prescriptions to allow consumers to shop around, Isasi said.

Amazon could also improve Americans’ interaction with their insurance companies and providers, which all-too-often involves ancient technologies such as faxing, said Bob Kocher, a partner who specializes in health care information technology at Venrock, a venture capital firm. After all, Amazon invented one-click ordering on its retail site. It could develop a similar process for paying medical bills, even grouping invoices for doctors, facilities and labs for care that takes place in a hospital, for instance.

And Amazon could make it easier for patients and providers to access their medical records, which would also reduce costs. The new venture could store all that information in the cloud, said Michael Pachter, managing director for equity research at Wedbush Securities.

That way “everything is all together in one place,” he said.

 

Podcast: ‘What The Health?’ The State Of The (Health) Union

Podcast: ‘What The Health?’ The State Of The (Health) Union

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In his first State of the Union Address, President Donald Trump told the American public that “one of my greatest priorities is to reduce the price of prescription drugs.” But that message could barely begin to sink in before other health news developed: The director of the Centers for Disease Control and Prevention was forced to resign Wednesday after conflict-of-interest reports.

Meanwhile, outside the federal government, Idaho is proposing to allow the sale of individual insurance policies that specifically violate portions of the Affordable Care Act. And three mega-companies — Amazon, Berkshire-Hathaway, and JPMorgan Chase — say they will partner to try to control costs and improve quality for their employees’ health care.

This week’s “What The Health?” panelists are Julie Rovner of Kaiser Health News, Alice Ollstein of Talking Points Memo and Julie Appleby and Sarah Jane Tribble of Kaiser Health News.

Among the takeaways from this week’s podcast:

  • Despite Trump’s strong rhetoric in the State of the Union Address, the president has taken few actions during his first year in office to reduce drug prices.
  • The president touted that Republicans had repealed the health law’s requirement that individuals get health insurance or pay a penalty. But that change in the law doesn’t go into effect until 2019, so his comments could be confusing to some taxpayers.
  • Idaho officials have announced that they are going to allow insurers to issue policies that don’t meet all the criteria of the federal health law. But it’s not clear that insurers are interested in participating in the experiment.
  • “Alexa, send me my Lipitor!” Can Amazon’s announcement that it and two other corporate behemoths are taking on employees’ health care create a new formula for keeping costs down and improving quality?

 

Can Apple Take Healthcare Beyond the Fax Machine?

https://smarthealthit.org/2018/01/can-apple-take-healthcare-beyond-the-fax-machine/

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Despite spectacular advances in diagnostic imaging, non-invasive surgery, and gene editing, healthcare still faces a lackluster problem: many patients can only get health records from their doctor if the fax machine is working. Even when records are stored electronically, different chunks of every patient’s health information sit in the non-interoperable, inaccessible electronic record systems in different doctor’s offices.

Anyone who needs her medical files gets them either printed or faxed, or has to log on into separate portals for each doctor and hospital, and even then getting view-only access. View-only apps can’t access data to help patients share information with family and healthcare providers, make decisions, monitor disease, stay on course with medications, or just stay well.

On the positive side, this is changing, sort of. Using the iPhone Health app, patients will soon be able to download and view health records on their phones. On the one hand, don’t get too excited–it will initially only work for patients at a handful of institutions, Android users are still out in the cold, and the data available will be limited. And, some dismiss the impact of Apple’s move because of others’ failures to give patients control of their records.

However, Apple’s move is a decisive and consequential advance in patients’ struggle to get a copy of their own health data. Apple wisely chose to use open, non-proprietary approaches that will float all boats–even for Android users.

Every patient deserves a ‘bank account’ of her health data, under her control, with deposits made after every healthcare encounter. After my colleagues and I demonstrated an open, free version of a “bank account” to companies in 2006, Google and Microsoft launched similar personally controlled health records — GoogleHealth and Microsoft Healthvault. Walmart and other employers offered our version, Indivo, as an employee benefit. Unfortunately, even these industry giants couldn’t shake loose data from the proprietary computer systems in doctors’ offices, or make the case to patients that curating the data was worth the effort.

But 12 years later, Apple’s product enters healthcare under different circumstances.  A lot more patient data is electronic after a $48 billion federal investment in promoting the adoption of information technology to providers. But those products, mostly older software and purchased at enormous expense, still don’t promote record sharing with doctors or patients.

Recognizing this unacceptable limitation and having received a generous grant comprising a tiny fraction of that federal investment, our team created SMART on FHIR. SMART is an interface to make doctors’ electronic health records work like iPhones do. Apps can be added or deleted easily. The major electronic health record brands have built this interface into their products.

Apple uses SMART to connect the Health app to hospitals and doctors offices. The good news for patients, doctors, and innovators is that Apple chose a standardized, open connection over a proprietary, closed one. This approach lets any other app, whether running on the web,  iPhone, or Android, use that very same interface to connect.

So Apple will compete on value and customer satisfaction, rather than on an exclusive lock on the data. Does Apple’s approach help Americans trying to stay well or manage their conditions? Yes. But only with follow-through by Apple, health systems, technology companies, patient groups, policy makers, and government regulators. The emerging ecosystem’s nuances must be appreciated.

First of all, the floodgates for patient information are at least a crack open and will be very hard to close. As patients gain access to their data, they will recognize it is incomplete and feel frustrated it’s not available everywhere. But, patients in need will drive demand for data access in their role as health consumers.

Secondly, the government is effectively using law and regulations to compel an open interface. By selecting SMART on FHIR, Apple and its healthcare launch partners mark the importance of standardization. A uniform approach is critical for scale. Imagine if every electrical product required a differently shaped 120V outlet. Understanding this, Google, Quest Diagnostics, Eli Lily, Optum, and many other companies are using the same interface to plug into healthcare.

Thirdly, Apple’s first version of health records brings data onto the phone, but from there, like the portals many patients are already familiar with, the data are still “view-only.”  In 2009, I had the chance to meet with Apple’s rockstar Bud Tribble and talk about how the iPhone could serve healthcare. We concluded that crucial data–like the medication list–had to be as easy for iOS developers to use in their apps as contacts and location are now.  I would not be at all surprised if this is the next step in Apple’s journey–making the health records available to iPhone app developers. Here too is an opportunity to chose open interfaces, and to allow patients to export the data to another device.

Lastly, competition in healthcare IT is hot. Amazon, Google, Apple and Facebook all have healthcare divisions.  Apple’s extraordinary hardware, including sensors in the phone and watch, will monitor patients at home.  Google’s artificial intelligence will lead doctors and patients to diagnoses and decisions.  Amazon is rumored to be eying pharmacy management. Facebook has sifted through posts to detect and possibly intervene when users may be suicidal.

There are so many opportunities to compete. Locking up a patient’s data should never be one of them.