How To Understand The Health Care Cloud Computing Market

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Global Trends, Challenges, Opportunities

& Forecasts (2012 – 2017)

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1 EXECUTIVE SUMMARY

Cloud computing can help healthcare organizations share information stored across disparate information systems in real time and can free up IT staff to attend to more critical tasks thereby increasing productivity and cost-efficiency. The healthcare industry is in its early stages of embracing cloud computing technology. The slow adoption rate was mainly due to concerns about safeguarding confidential patient information and compliance with regulations such as HIPAA. The need to reduce costs in the healthcare industry ecosystem is a key factor for the adoption of cloud computing. Hence an increasing number of hospitals, healthcare agencies, and pharmaceutical companies are allocating funds to migrate their legacy systems to cloud technology.

Cloud computing market in healthcare is estimated to grow at a CAGR of XX% from 2012 to 2017. Healthcare organizations have to stretch their limited budgets to meet increasing product and service demands while complying with new regulations and healthcare reform legislation. Many healthcare organizations are also struggling to manage and optimize their complex IT systems so that patients and physicians can be provided instant online access to information, products and services through their desktops and mobile devices for faster healthcare delivery. All these requirements have driven the healthcare organizations towards adoption of cloud technology and are expected to contribute to its growth in the near future.

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TABLE 1

CLOUD COMPUTING HEALTHCARE MARKET REVENUE,

BY GEOGRAPHY, 2010 – 2017 ($MILLION)

Region 2010 2011 2012 2017 CAGR% (2012-2017) North America XX XX XX XX XX Europe XX XX XX XX XX Asia XX XX XX XX XX ROW XX XX XX XX XX Total XX XX XX XX XX

Source: Annual Reports, SEC Filings, Expert Interviews, MnM Analysis

The global cloud computing market revenue is expected to increase from $XX million in 2011 to XX million by 2017. North America is the largest contributor to this market as a result of various changes such as transition from ASC x12 version 4010 to 5010 claims processing transactions, conversion from ICD-09 to ICD-10 clinical diagnosis codes, Meaningful Use rules of American Recovery and Reinvestment Act (ARRA) and Health Information Technology for Economic and Clinical Health Act (HITECH), which mandate the adoption of electronic medical records.

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2 MARKET OVERVIEW

2.1 EVOLUTION OF CLOUD COMPUTING IN HEALTHCARE

FIGURE 1

TRADITIONAL ECOSYSTEM VS THE CLOUD ECOSYSTEM

IN HEALTHCARE

O n -p re m is e V ir tu a li za ti o n O n -d e m a n d

Traditional IT Ecosystem T he Cloud Ecosystem

Single user Multi-tenant user

Service Vendor

Service Vendor SaaS + PaaS + IaaS

Software Hardware Network Data Center Application hosting & Development Source: MnM Analysis

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3 GLOBAL CLOUD COMPUTING HEALTHCARE

MARKET, BY APPLICATIONS

3.1 INTRODUCTION

Technologies in the healthcare IT industry are converging with time and are far outpacing the legacy systems used by hospitals and healthcare providers. Pronouncements by various countries such as American Recovery and Reinvestment Act of 2009 (ARRA) laid down by the U.S. government are encouraging businesses in the healthcare industry to utilize certain applications of electronic records. Recently, cloud technology has started replacing these legacy systems and offers easier and faster access to this data as defined by the way it is stored i.e. public, private or hybrid. The electronic data stored in the cloud includes Electronic Medical Records (EMRs), Computerized Practitioner Order Entry (CPOE) Systems, Picture Archiving and Communication System (PACS), Laboratory Information Systems (LIS), Pharmacy Information Systems (PIS), Radiology Information Systems (RIS), and Financial/Billing/Administrative System. IT applications of the healthcare industry are categorized into the Clinical Information Systems (CIS) and the Non Clinical Information Systems (NCIS)

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TABLE 2

CLOUD COMPUTING HEALTHCARE MARKET REVENUE,

BY APPLICATIONS, 2010 – 2017 ($MILLION)

Application 2010 2011 2012 2017 CAGR% (2012-2017) CIS XX XX XX XX XX NCIS XX XX XX XX XX Total XX XX XX XX XX

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CIS accounted for $XX million in 2011 and is expected to reach $XX million by 2017, at a CAGR of XX% from 2012 to 2017. The higher CAGR is justified by the fact that initially healthcare providers were faced with the problem of migrating their legacy systems to cloud and hence considered it safer to first migrate only back-end, billing processes, and claims management to the cloud. With the introduction of the Health Information Technology for Economic and Clinical Health (HITECH) Act, providers are striving to satisfy the conditions laid down in order to be eligible for incentives. This has given a boost to the CIS market.

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3.1.1 ELECT RONIC MEDICAL RECORD (EMR )

TABLE 3

EMR SOFTWARE CLOUD COMPUTING MARKET REVENUE,

BY GEOGRAPHY, 2010 – 2017 ($MILLION)

Region 2010 2011 2012 2017 CAGR% (2012-2017) North America XX XX XX XX XX Europe XX XX XX XX XX Asia XX XX XX XX XX ROW XX XX XX XX XX Total XX XX XX XX XX

The EMR cloud computing market in North America was $XX million in 2011 and is anticipated to reach $XX million by 2017, at a CAGR of XX% from 2012 to 2017.

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4 GLOBAL CLOUD COMPUTING HEALTHCARE

MARKET, BY DEPLOYMENT MODELS

4.1 PRIVATE CLOUD

Private cloud offers computing resources and on-demand infrastructure with dedicated resources to one organization. Although these computing resources can be shared they are shared across domains, applications, and units within the same organization. Private cloud is a virtual IT infrastructure that is securely controlled and operated by the organization. A healthcare provider can choose to put these resources on-premise or off-premise, depending on the nature of applications run and the data stored. Generally this depends on the risks and affordability of space required to maintain these resources as the major concern for healthcare providers is to cut the costs.

TABLE 4

PRIVATE CLOUD HEALTHCARE MARKET REVENUE, BY GEOGRAPHY,

2010 – 2017 ($MILLION)

Region 2010 2011 2012 2017 CAGR% (2012-2017) North America XX XX XX XX XX Europe XX XX XX XX XX Asia XX XX XX XX XX ROW XX XX XX XX XX

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5 CLOUD COMPUTING HEALTHCARE MARKET,

BY PRICING MODELS

5.1 PRICING MODELS

Each service provider/vendor has a customized pricing model, but all the models can broadly be categorized into two types: subscription based model and pay-as-you-go model. Each model differs again based on the type of service utilized. To serve customer requirements and needs in a better and efficient way, cloud providers offer innovative pricing models such as athenahealth’s "orders-based" pricing tied to their new service called OrderFlow.

TABLE 5

GLOBAL CLOUD COMPUTING HEALTHCARE MARKET REVENUE,

BY PRICING MODELS, 2010 – 2017 ($MILLION)

Model 2010 2011 2012 2017 CAGR% (2012-2017)

Pay-as-you-go XX XX XX XX XX

Spot pricing & other charges XX XX XX XX XX

Total XX XX XX XX XX

Pay-as-you-go pricing model accounted for a higher share of XX% as of 2011 and is expected to grow at a higher CAGR of XX% from 2012 to 2017.

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6 GLOBAL CLOUD COMPUTING HEALTHCARE

MARKET, BY COMPONENTS

6.1 INTRODUCTION

Software, hardware, and services are three main components of the healthcare cloud computing market. All the applications and services utilized by the hospitals, government agencies, and healthcare and pharmaceutical industries involve the use of one or all these components depending on the purpose of use. The most widely adopted component is the software since it is used as an application to either run the systems or to perform the primary tasks in any healthcare organization or hospital. Software is the non-tangible component and in the cloud computing market it comprises the service model SaaS. Hardware and services form a part of IaaS and PaaS model along with software.

TABLE 6

CLOUD COMPUTING HEALTHCARE MARKET, BY COMPONENTS,

2010 – 2017 ($MILLION)

Component 2010 2011 2012 2017 CAGR% (2012-2017) Software XX XX XX XX XX Hardware XX XX XX XX XX Services XX XX XX XX XX Total XX XX XX XX XX

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7 GEOGRAPHIC ANALYSIS

7.1 NORTH AMERICA

TABLE 7

NORTH AMERICA: CIS CLOUD COMPUTING MARKET REVENUE,

BY TYPES, 2010 – 2017 ($MILLION)

Type 2010 2011 2012 2017 CAGR% (2012-2017) EMR XX XX XX XX XX PACS XX XX XX XX XX RIS XX XX XX XX XX CPOE XX XX XX XX XX LIS XX XX XX XX XX PIS XX XX XX XX XX Others XX XX XX XX XX Total XX XX XX XX XX

The EMR market in cloud is anticipated to show the highest growth owing to various incentives and regulations introduced by the government. For example, The Department of Health and Human Services offers financial incentives to hospitals and doctors' practices that can achieve "meaningful use" of electronic records by certain dates. Providers who fall behind in achieving meaningful use will eventually receive lower reimbursement rates for treating Medicare patients. Hence the EMR market is forecasted to grow from $XX million in 2011 to $XX million by 2017, at a CAGR of XX% from 2012 to 2017.