Move over “value-based care.” Digital transformation—the adoption of technology to improve efficiency and outcomes—is the latest trend taking over US healthcare.
Health systems are increasingly adopting new software, digital tools, and strategies that aim to modernize everything from how patients book appointments to how facilities order and manage medical supplies while also improving outcomes and lowering costs.
The move toward more efficient 21st-century solutions may seem like a natural progression for an industry that relies heavily on technology and patient outcomes. But hospital executives overseeing these efforts (and the consultants they work with) argue that digital transformation is more than just digital portals and virtual appointments.
“It’s really finding the right balance of people and skills, and technology—whether that be applications and infrastructure—and data to really exceed the customer’s expectations and [...] enhance the business operations margins,” Glenn Landmesser, VP of digital transformation at RiseNow, a supply chain management consultancy firm, told Healthcare Brew.
Digital transformation explained
Digital transformation is not an entirely new concept in healthcare. Hospitals and health systems have slowly adopted new technology over the last decade to improve clinical (i.e., patient-facing) and administrative systems (think: finance, supply chain, and data management).
But that shift accelerated in recent years, as the Covid-19 pandemic forced health systems to embrace telehealth and sparked supply chain, workforce, and capacity challenges.
Landmesser, who consults with healthcare organizations, said it’s “critical right now that hospital organizations digitally transform their organizations” on both the clinical and administrative sides.
“That’s the only way they’re going to continue to put themselves in a more favorable operating position—and a competitive position,” he said.
Spending on digital transformation is projected to hit $3.4 trillion globally in 2026, according to a 2022 International Data Corporation analysis. Following the security and investments services and banking sectors, the healthcare industry is slated to see the fastest growth in digital transformation spending, with a projected five-year compound annual growth rate of 19%.
About a quarter of healthcare executives said digital transformation has led to gains of over 10% in profitability or performance, a 2022 KPMG survey found. More than half (53%) said they devoted less than 10% of the budget to technology.
Health systems embrace digital transformation
The Ohio-based Cleveland Clinic, which operates 21 hospitals and 226 outpatient locations in multiple states, has significantly expanded its digital offerings since introducing its Express Care Online platform in 2014, said Steven Shook, the system’s virtual health lead.
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Cleveland Clinic patients can schedule online visits, including drop-in appointments during a physician’s “digital office hours,” or sign up for text message reminders to schedule routine care like colonoscopies. Physicians at the health system, meanwhile, use remote monitoring technologies and biometric data to track patient outcomes following procedures like lung transplants.
Christopher Sharp, the chief medical information officer for Stanford University Medical Center, said some patients now expect telehealth offerings, which made up 70% of the health system’s ambulatory care visits during the early months of the pandemic (up from 2% between 2019 and early 2020).
More than 90% of physicians at Stanford Health—based in the heart of California’s Silicon Valley—now use telehealth in their care models.
The shift, Sharp said, has allowed Stanford Health to reassess utilization of existing clinical spaces—and the financial effects associated with that—as well as improve access and serve more patients.
“The way we think of digital transformation is that we first start with the opportunity of care transformation. We say, ‘How could your care be different? How could we disrupt time and space and standard interactions to be able to provide you increased value?’” he said, adding that just adopting “some kind of whiz-bang technology” is not always the answer.
Challenges remain
Still, one major challenge health systems face when it comes to digital transformation is how to effectively implement strategies in a legacy environment, where operations, systems, and even practices may be outdated or entrenched in bureaucracy.
Stanford Health, for example, has engagement technology that’s effective at gathering patient-reported data, but that data may not be transferable into its core systems, Sharp said.
Landmesser, meanwhile, cautioned that failing to fully understand the capabilities of new technologies—or failing to identify existing issues in their own internal processes—can end up costing health systems millions.
And even when hospitals are prepared to deploy new strategies, the associated costs can pose barriers to adoption.
“To digitally transform an organization that is riddled with legacy technical debt, poor processes, and huge levels of regulations, it takes a lot of money to make those changes because it’s been left unattended for so long,” he said. “It’s a monumental effort.”