New technologies are transforming healthcare

I read an eye-opening article recently about an unmanned drone that delivered a kidney for transplant between hospitals in the Washington area.

In what would have been dismissed as science fiction just a few years ago, the team at the University of Maryland medical school and engineering department built a drone that delivered an organ from donor to recipient in a fast and safe way. The critical factor in organ donations is time, so the longer it takes to transfer, the higher the risk of rejection.

The drone did the job in five minutes. It was able to keep the temperature constant, navigate around buildings and other obstacles, and land safely. An ambulance could not have done it that quickly. The kidney was successfully transplanted into a 44-year-old woman who had been on dialysis for eight years. In another drone experiment, global shipping giant UPS is using the unmanned robots to delivery emergency medical supplies in remote areas of Ghana and Rwanda.

This is one example of how new technologies are transforming healthcare. These innovations are creating new ways of diagnosing illnesses, helping doctors perform operations, and provide better treatment options. This is leading to better preventative medicine, faster patient recovery from procedures, fewer complications, less post-operative pain, and a reduction in length of hospital stay. The implications for better health and cost savings are huge.

In many cases the developments are combining Artificial Intelligence (AI) software, which learns as it goes, and the Internet of Things (IoT), which connects multiple devices to AI software. Increasingly blockchain technology is part of the mix. The convergence is creating robotic surgical tools and organizing far flung patient records.

This evolution will be as dramatic as the one that began in the 1980s. That transformation saw patients moved out of hospitals and into their homes for the management of chronic diseases. This one is about speeding up and coordinating treatment and recovery.

For example, UnitedHealth Group Inc., (NYSE: UNH), one of the largest U.S. health insurers, has rolled out a suite of online tools for clients. UNH’s goal is to cut health insurance bills for its clients by providing the clients’ employees with ways to stay healthy. If employees are healthier, they take fewer sick days.

UnitedHealth offers consultations by doctors and nurses via phone or computer links. It is working with Microsoft to create proprietary apps that let clients speak, or type, queries about symptoms. The software learns and creates a dictionary of terms that allows it to interpret the requests and translate them into medical terms.

Microsoft is using its Azure cloud platform to do this. IBM is working along the same lines with Watson, its computer system capable of answering questions posed in natural language.

Here’s a way to visualize the significance of all this. Suppose a patient has just had hip surgery. A smartphone app, or online portal, allows the family doctor to see the X-rays, CT scans, surgical record, and medications prescribed. With patient permission, the doctor shares this with a physiotherapist to create a rehab plan. The doctor may consult with the surgeon about prognosis or to change medications. These conversations might include a pharmacist. The patient can share the records with family and other healthcare providers.

Healthcare lags other industries in moving data to internet-based storage. While health records have gone digital, they are often stored piecemeal in databases that can’t share information easily. In Ontario, hospital records are kept in one place, immunization records in another, and on-going interactions with a family doctor elsewhere.

This point was made by Dr. David Jaffray, executive vice president for technology at the University of Toronto Health Network the recent Blockchain Revolution Global conference in Toronto. Dr. Jaffray said the goal is to untangle these information knots and pull patient data in one spot with you and I in charge of the information. The benefit is more privacy – we control who sees what about us – and eventually portability of our records. If a snow bird has a heart attack in Florida, a doctor can log on to a portal for access to all the patient’s medical history.

Medical device companies are using the innovations. As populations age, demand is increasing for implants to monitor heart disease, as well as surgeries to hips and knees as baby boomers opt for procedures to keep them active longer. Rising incomes in emerging markets mean more health insurance coverage there.

The Canadian Health Information Institute, (CIHI), a non-profit group based in Ottawa, says that knee replacements and hip replacements are the second and third most common surgery. (C-sections are first.) Hips and knees are one piece of orthopedic surgery where global medical devices giants are competing to introduce robotic aids.

The big medical players include Stryker Corp. (NYSE: SYK), Medtronic plc. (NYSE: MDT), Boston Scientific Corp. (NYSE: BSX), Johnson & Johnson (NYSE: JNJ), and Zimmer Biomet (NYSE: ZBH).

These robotic aids help surgeons be more precise and perform surgery that is less invasive. Stryker has sold more than 650 of its $1 million Mako robots, with almost 77,000 knee and hip replacement procedures performed by its tool in 2018. Double-digit growth is expected in 2019.

The Mako system takes a CT scan of the knee and converts it into a three-dimensional model of the joint. The surgeon uses the scan as the base to plan the surgery. Once the plan is approved, it is loaded into the robot. In the operating room, the surgeon compares the computer model to the actual motion while bending and straightening the knee or hip. The patient movements are modelled by the computer and the final plan is locked in. The arm assists the surgeon performing the cuts.

Medtronic, the world’s largest medical device company, paid US$1.7 billion in December, 2018 for Mazor Robotics, an Israeli specialist in robot-assisted spinal surgery.

Medtronic is exploring wearable devices and implanted monitors connecting patients to their doctors.  In April, Medtronic received approval for a device manager to help doctors monitor implanted cardiac devices via an iPad. The tablet monitors data from a pacemaker to ensure that it is functioning properly and that the patient’s vital signs are stable. The device manager has been approved in 20 countries.

This is just a fraction of the activity in the healthcare sector. For investors, there are plenty of options including insurers, drug manufacturers, biopharma drug companies, medical supplies, and medical devices. Each has its own appeal and dynamic.

Canada has very few home-grown heavyweights in this sector, so you have to look elsewhere. The S&P/TSX Capped Health Care Index has 11 stocks, five of which are cannabis companies.

In the U.S. the healthcare sector is under pressure, with insurers and pharmaceuticals most affected. Medicare has become a topic for discussion in the 2020 presidential race and while it’s unlikely the U.S. will ever introduce Canadian-style healthcare, changes may be in the wind.

Surgical device and supply companies are one place to look because they thrive in any climate. They are taking advantage of new technologies to create tools that are making surgery faster, cheaper and less invasive. They tend to be large and well capitalized with a wide array of businesses that enable them to fund expensive R&D. They also pay dividends and offer conservative growth. If the sector is out of favour the stocks are that much cheaper.

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(A version of this article appeared in the June 10, 2019  issue of the Internet Wealth Builder)