Examining AI's Impact in Health Care: 3 Keys to Effectively Approach the AI and Digital Health Transformation

Katrin Zimmermann, Managing Director, TLGG, an Omnicom Precision Marketing Group (OPMG) company; Leonard Becker, Senior Consultant, TLGG's Healthcare practice.

With increasing talent shortages and unavoidable demographic challenges, the structural weaknesses of the US health care industry loom large. This is particularly evident in the impending demographic shift where, in less than 2 decades, adults over 65 are expected to outnumber children under the age of 18 for the first time in US history. According to the Centers for Medicare and Medicaid Services, the total health care expenditure accounted for 17.3% of the United States GDP in 2022.

Hospitals are also struggling significantly, with more than half anticipating financial losses as their expenses continue to rise. Improving operational efficiency could offer some relief, but efforts are often derailed by internal conflicts. This situation is exacerbated by a high rate of burnout among health care professionals, with 47% of physicians reporting feeling burned out. The pandemic has further strained the workforce, with about one-third of nurses considering leaving their jobs due to overwhelming stress and exhaustion. This sentiment was captured in a survey of more than 18 000 nurses, underscoring the critical demand for reform in the health care sector. Specifically, 69% of nurses are calling for higher wages, and 63% are advocating for a safer work environment to reduce their stress levels.

As we stand on the verge of a major transformation, attention is increasingly turning towards innovative solutions emerging in the market. Among these are the integration of digital health platforms (DHPs) and artificial intelligence (AI) solutions. These technologies hold the initial promise of mitigating some of the current challenges and significantly improving the healthcare system.

The Unforeseen Dynamics of AI in Health Care

AI and DHPs are set to revolutionize health care, promising to address longstanding problems by enhancing efficiency, reducing costs, and improving patient care. Much like digital transformations in other industries, technology is poised to change how services are delivered, focusing on personalization and accessibility.

However, the dynamics around AI in health care are more complex than they might initially appear. Epic, a leading electronic health record (EHR) provider and a major stakeholder in the industry, has fully embraced advances in AI by enabling third-party access to its data and facilitating the development of additional applications on its platform. Epic's partnership with Microsoft bears promise in building smarter clinical decision support systems. While Epic may not be the most innovative company, its existing contracts with most hospitals give it a significant distribution advantage. This strategy suggests that established companies like Epic could potentially lead the AI race through intelligent partnerships.

Whereas well-positioned players might leverage some of their competitive advantages, 2023 was a challenging year for many health care unicorns and startups, including promising industry darlings like Babylon Health and Olive AI, which closed shop as commercializing at scale remains a hurdle that is yet to be overcome in digital health.

How to Win With AI

Whether in medtech, pharma, or hospital operations, health care leaders must begin thinking about their AI strategy in relation to their operations. Critical lessons have been learned by those already at the forefront, such as Epic with its clinical workflow optimization tools, and Google with its AI-driven health initiatives like DeepMind and Verily. These pioneers demonstrate the importance of aligning AI with practical health care applications and exploring innovative integration methods. Their experiences offer invaluable insights for all health care leaders aiming to effectively integrate AI into their strategies, and the following should top the list:

1. Start with the user, not only the patient.

Organizations often become enamored with new technologies simply because they are shiny and new, neglecting the crucial step of understanding the specific problem they aim to solve and how to shape a value proposition. Technology without a distinct purpose can be a waste of resources, and that's the best-case scenario. The worst case involves introducing operational inefficiencies that were never there. It's essential to first define the problem and the desired value proposition, and then identify the technology that can address these needs. Experiment with new tools and understand what a solution offers. Consider how its introduction might impact the patient journey—as well as that of the physician. Corporate strategy should center on a specific value proposition an organization wants to achieve; it can then work backward to understand what technological components are required.

2. Recognize that distribution kills innovation.

In health care, innovation doesn't guarantee success. Startups often build great products but struggle to scale in a complex, regulated environment. For instance, despite creating efficient platforms, growth companies often need help with broader market adoption. The lesson here is the necessity of unique customer experiences, specific technology, or proprietary data access to protect and scale innovations. As digital transformation accelerates, health care players must quickly adjust to new value creation and distribution models.

3. Take intelligent risks.

Economic transformations in health care often follow a "gradually, then suddenly" pattern. Integrating AI early is vital to remaining competitive as the sector undergoes rapid changes with software-driven solutions. Tech giants have shown a distinct interest in the health care sector. Tim Cook has notably stated that he believes Apple's most significant impact on humanity will be in the field of health. Health care organizations must acclimate to these technological changes, moving away from outdated models to embrace the vast opportunities presented by AI and digital transformation.

The industry is at a critical intersection: Traditional fixes are failing, the market is currently choosing the winners, and AI can affect the entire field horizontally. The urgency to implement AI in health care now stems from the converging pressures of demographic shifts, rising health care costs, and a workforce increasingly strained and reduced in numbers. AI and DHP technologies promise not only to streamline operations but also to revolutionize patient care. By adopting AI strategically, health care leaders can navigate this transition, ensuring a more efficient and patient-centric health care future.

About the Author

Katrin Zimmermann is the managing director at TLGG, an Omnicom Precision Marketing Group (OPMG) company.

Leonard Becker is a senior consultant in TLGG's Healthcare practice.