Why Quest Diagnostics is an important showcase for healthcare partnerships and IT innovation

Lab test market leader Quest Diagnostics recently announced an important big data analytics partnership with Inovalon, a cloud-based analytics provider, to deliver real-time patient analytics to Quest’s vast community of physicians and hospital systems. The partnership is a crucial step in Quest’s evolution from a company known only for lab tests to becoming essentially a health information services company. This is important at many levels for healthcare industry observers, and more specifically, for healthcare CIO’s.

The partnership announcement symbolizes a conscious effort by a major healthcare sector player to diversify away from traditional revenue streams related to healthcare services by getting into information services.

The diversification takes the form of data monetization. Sitting on over 20 billion lab test records, Quest has a gold mine of data that could be monetized in multiple ways. Quest has been mining this data, in anonymous form, for years, primarily to support public health initiates such as with the CDC, and for research. More recently, Quest has signed partnerships with virtual consultation portal Healthtap, and with clinical research outsourcing firm Quintiles, leveraging its large database of lab test records and vast network of lab test facilities.

The Inovalon partnership takes that one step further. The partnership combines Quest’s lab data with Inovalon’ s analytics platform and algorithms, and provides access to a large database of payer data to provide powerful insights from complementary datasets in a data lake with advanced algorithms running on them in real time.

The emerging role of the healthcare CIO in a digital business

Another important subtext to this story signals a fundamental transition in the CIO’s role in healthcare. Lidia Fonseca, SVP and CIO of Quest, is the executive sponsor for all three of these partnerships. According to her, the CIO’s role today now essentially comprises three components – managing operating efficiencies, enabling business technology, and leading business transformation. Her role reflects the new expectations of CIOs across the board.

At the Gartner CIO conference last week, Jeff Immelt, CEO of GE, exhorted CIOs to start taking leadership roles in digital initiatives, essentially saying that CIOs need to be “at the table” in business decisions. What McKinsey refers to as a two-speed IT architecture, and Gartner refers to it as bi-modal IT, essentially refer to the third component that Fonseca speaks about. From her position, she not only has a “seat at the table” in business discussions, but is able to see the complete spectrum of value levers from efficiency plays to transformative initiatives that drive the organization’s future.

The emerging nature of partnerships in the future of healthcare

The nature of emerging partnerships also requires a new set of skills from CIOs – a deep understanding of technology, experience in managing a diverse partner ecosystem, and a knowledge of the fundamentals of the business. In Fonseca’s case, Indian IT consulting and outsourcing company Wipro delivers operational efficiencies, Silicon Valley startup Healthtap provides new market opportunities, and cloud analytics-provider Inovalon provides a value-added service offering to existing markets. Each partner delivers its offerings using a different model, and requires the CIO to understand the nuances of each model as well as their limitations.

Faced with long-term declines in reimbursement rates, the pressure on revenue and margins for healthcare is only likely to increase. In addition, as the industry transitions from piecemeal to value-based reimbursements, enterprises have to look hard at revenue and margin expansion opportunities. For some, this takes the shape of mergers and acquisitions, as we are seeing in the ongoing wave of M&A across all sectors in healthcare. However, acquisitions can raise questions about capital efficiencies, especially given lofty valuations today. Strategic partnerships represent another option, and can accelerate speed to market, reach, and innovation.

Quest’s recent partnerships will have to stand the test of time to deliver incremental value to the business, especially the one with Inovalon, which launched in October. Regardless of how that goes, innovation through partnerships with companies that were hitherto service providers or even competitors may become the new normal for a healthcare sector in transition. Ultimately, as Fonseca says, consumers are expecting innovative new healthcare pricing and delivery models, and each enterprise has to answer the question: what does innovation look like for us?

Regardless of the outcomes of these developments in the market, one thing is clear: the successful healthcare CIO of the future is going to be one who creates enterprise value through the most innovative partnerships.