The Healthcare industry is as old as our earliest civilizations in Babylon and Mesopotamia. Thousands of years later, doctors still take the Hippocratic Oath to protect patients under the name of the earliest healthcare professional.
Of course, the practice of patient care has evolved over time, and in the last decade, we have seen a growing focus on “precision medicine.” What is precision medicine? According to Stanford Professor of Genetics Michel Snyder, this is medicine “entering the era of big data.” In Estonia, for example, a nation that has fast become known as digital-first, every citizen can track and share their data through a transparent blockchain eHealth system.
The era of big data has brought greater accessibility of health data to the patient, not just medical experts. According to the Edelman Trust Barometer Report, one in three people agreed that an average person can know as much as a doctor by doing their own research, and that this can be extended by input from wearables. The revolution in health data is being powered by “connected healthcare,” which combines digital health technologies.
Figure 1: The Value Chain of Connected Healthcare;
Source: Poehler 2022
As a result, direct-to-consumer business models are dominating the Healthcare market. As technologies advance, individuals are increasingly generating their own data and monitoring factors such as physical activity, sleeping patterns, blood sugar levels and even skin conditions. This allows them to “bio hack,” a do-it-yourself approach to improving their health. With further developments in agentic AI, monitoring and interventions via healthcare wearables will be autonomous and customized.
How Data Changes the Business Model
This transformation in the way data is generated has turned healthcare into a big business. Organization for Economic Co-operation and Development (OECD) member countries are spending between seven and 10% of their GDP on healthcare services. The percentage of the GDP spent on healthcare in the U.S. will likely be closer to 17%. Wearable technologies alone are expected to grow into a market with an annual value of ~$160 billion USD.
In this context, the ecosystem of healthcare services providers is constantly expanding. And it’s no surprise that many non-traditional healthcare companies want to find a way into this expanding market. After all, the generation of patient data is contributing to a forming trillion-dollar industry.
Figure 2: Data Monetization Strategies - Let's Talk About Data Part 2 with Steve, Sunder and Kathy - YouTube
Of course, when non-traditional companies provide adjacent healthcare services, challenges arise. Health and fitness data-gathering platforms like Apple’s HealthKit and Google Fit are creating economic moats that protect their market share and lock users into their platforms. When direct-to-consumer genetic testing company 23andMe experienced a data breach, it exposed the highly sensitive data of 6.9 million users. Then, when it went into bankruptcy in September 2024, the data of its remaining seven million users became vulnerable as well. Though data advocates recognized this as a problem as early as 2018 when the company shared data with GlaxoSmithKline for the purpose of drug testing, little was done in response.
Unfortunately, these kinds of compromises are not uncommon across the digital health ecosystem. It has been discovered that, without appropriate security protocols, healthcare applications on mobile devices can leak sensitive data through APIs.
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Protecting Digital Health Data with the Right Business Model
The Healthcare ecosystem has become complex, and no single provider or product can serve all the needs. To deliver personalized healthcare to patients, an organization must integrate and connect many interfaces. With these new personalized care options, it can be difficult for patients to identify who owns the process. Medical firms may have a strong relationship with patients due to remote monitoring, but the relationship may not extend to the whole chain of healthcare services.
Enterprises using digital health data and providing digital health services should use a value-based business model. Figure 3 below illustrates the components and dimensions of a business model that serves the patient journey.
Figure 3: Using Value-Based Business Models for Digital Health Services;
Source: Nathanson, J.M. 2023
The Healthcare industry is seeing shifts similar to other asset-heavy industries like automotive, in which consumers are moving toward a more collaborative consumption and shared economy. With Healthcare, the responsibility of patient care is beyond the individual and their doctor and extends to the companies that provide digital tools. This complicates the sense of ownership a patient may have over their own data.
For digital healthcare to work, the sharing and use of data across such value-based business models requires more nuanced data architectures. Decentralized, distributed ledger data models are seeing uptake in the Healthcare industry. While blockchain has been the answer for Estonia’s digital-first healthcare system, other approaches are empowering systems in the EU. One example is the nonprofit data platform MIDATA, a patient-owned cooperative in Switzerland, in which patients can control their data rather than being beholden to technology companies and healthcare providers. The governance principles of the platform are tailored to individual needs and those of research and the community. This leads to a “citizen driven” and outcome-based digital health model (see Figure 4).
Figure 4: Driving Outcomes: Digital Health Business Model Innovation;
Source: Nathanson, J.M. 2023
AI is another important component in digital healthcare and personalized medicine. AI has proven to revolutionize both the drug discovery and drug design processes. For example, U.S.-based biotechnology company Insilico Medicine has designed a drug that reduces the time to clinical trials from five years to one year. A reduction of this magnitude in one of the most time-consuming parts of the process has the potential to revolutionize the way drugs are brought to market. Some providers also are using AI to help create treatment plans in seconds rather than through multiple consultations with different medical practitioners.
Yet, with all the opportunity that data presents to the Healthcare and Life Sciences industries, most companies are not prepared for the volume of data that is produced or with the operational implications of navigating a changing regulatory landscape.
The Challenges and Opportunities for Digital Healthcare
Digital healthcare presents many challenges, but these same challenges can also be seen as opportunities. The following three should be at the top of the list.
Promoting Patient Engagement
Trust in the current healthcare ecosystem is on the decline. Patients are concerned about the potential for breaches and lack confidence in healthcare providers. On top of this, patients across age ranges perceive technology to have a negative impact on healthcare.
Trust in digital healthcare is also undermined by the fact that individuals need access to different kinds of services, whether it be on-demand, proactive monitoring or in-person general practitioner visits. The technology underpinning these services is being impacted by advances in AI without consideration for the individuals.
The answer is not to eradicate the use of data and digital tools in healthcare – that would be a step backward – but rather to leverage it in a transparent way with a clear purpose. One of the challenges is current legislation and patient rights, which are inconsistent across regions. Only in mid-2024 did the European Union agree on the European Health Data Space, which is a regulation on the use and exchange of electronic health data that enables citizens of the European Union to control their own health data. In the U.S., control of health data is regulated by a combination of federal and state laws, with a majority of states having statues explicitly stating medical providers own the medical records. Patients do have rights to access and control their health information, but the legal landscape is fragmented with some states emphasize property rights, others emphasize privacy concerns. In Australia, health records are owned by the creator of the data, not the subject in question.
What should healthcare provider organizations be asking themselves?
If patients are in control of their own health records, how would our digital operating model support that? Will patients have the right to collaborate, inform and lead the requirements of the future?
How are we designing our digital infrastructure for end-to-end care, ethics and medical needs?
Do the technologies and providers we are using enable us to govern our digital infrastructure and manage our data in a transparent way?
How does our organization ensure compliance with international data sovereignty laws?
Looking at Your Weakest Cyber Link
In ISG Research shows that cybersecurity will see the second greatest planned increase in IT spending in 2025 (only after AI). Enterprises claim that protecting against the threat of breaches is more important than customer/patient experience or sustainability. If Life Sciences firms cannot protect their patents and IP, and if Healthcare providers cannot protect their patients' data, all the rest of their medical services are at risk.
Reports are on the rise of state-backed attempts to disrupt healthcare in hospitals or by stealing sensitive medical data. This can have serious consequences. In 2023, a cyberattack in the UK delayed thousands of critical surgeries. The healthcare sector is in the top two of most-breached industries in the last decade.
Questions healthcare provider organizations should be prepared to answer:
Have we established custodian models for our data, insights and healthcare products?
Is our patient data infrastructure resilient in the face of geopolitical risks?
Do we have the mindset to develop precision medicine that can continuously adapt to the latest information? Are we sharing it with informed consent with our partners and suppliers?
How is our company using digital health data—strategically and ethically or just reactively?
Finding the Right Partners to Deliver the Healthcare of the Future
To achieve safe and effective precision medicine services, an entire ecosystem must be created. This is not just because of the push toward digitization and the use of data, it is also due to the increased need for access to bespoke services (value chain components). These services might include pharmaceuticals, health insurers, medical technology and even pure technology firms – and the necessary players involved in remote and at-home monitoring, which includes a mix of doctors and hospitals.
In Life Sciences alone, the network can be complex, and it is challenging to balance internal resourcing with outsourcing partnerships. This is made more difficult by evolving legislation that governs what data can be shared across the Healthcare chain. No single player can handle the volume of data being generated. This year, the World Economic Forum stated that 2.3 zettabytes of health data will be generated globally, and 97% of it will go largely unused. The right partnership models can unlock use of this data for much-needed services.
Three questions healthcare providers need to answer:
Are we qualifying, agreeing upon and defining the correct business model with all our service and tech providers?
Have we defined the handover points between our company and providers in the ecosystem to create a full end-to-end health experience?
Have we defined the revenue model and pricing strategies for all the players involved?
Digital healthcare is complex. Most enterprises need help transforming their IT environments and their operations to a new model that can support "precision medicine" and value-based care with the right data and tools. ISG helps enterprises navigate the changing Healthcare market and responsibly implement digital technologies and ecosystems to support their future patient and healthcare goals. Contact us to find out how ISG can help you.
About the author
Dorotea Baljevic
Dorotea provides the support and counsel to customers in their current and future digital journeys. Dorotea focuses on improving and enhancing the data and decision-making ecosystem to ensure healthy organisational longevity and relevance. Her spectrum of experience includes innovation, green-field environments, existing transformations (incl. building high performing teams) and decommissioning.
