2009 Medical Innovation Summit, Cleveland Clinic
October 6, 2009

Good morning. I am extremely pleased and honored to be here with you today.

I'm also humbled—as I look out on a room filled with such extraordinary depth and breadth of expertise… and then think about speaking on a topic in which I am decidedly not an expert. Fortunately, my company has many who are. IBM has deep involvement in your world, on at least three different levels.

First, we develop a broad range of technology and business solutions in healthcare and life sciences—from drug discovery, to health supply chains, to genetic research, to modeling the brain. We have a worldwide staff of more than 4,000 employees dedicated to healthcare, including more than 60 medical doctors and 350 other healthcare professionals, as well as a network of more than 1,800 business partners who specialize in providing solutions. We have teams of life sciences researchers at each of our eight research labs around the world. IBM has received more than 600 patents in life sciences, healthcare and medical devices.

These researchers, doctors and experienced professionals work with leading enterprises and government agencies from across the entire healthcare ecosystem—many of them here at this conference. Healthcare and life sciences are a $4 billion business for us—one of our major areas of focus as a company.

Second, we are a large global employer: As such, we are dependent on healthcare systems all around the world. Here in the U.S. alone, IBM covers 450,000 employees, retirees and family members, on whom we spent $1.3 billion in 2008. For me and our employees, the quality and affordability of healthcare are a very immediate concern.

And third, we are an active participant in national efforts, in both developed and emerging markets, to lay the groundwork for a 21st century healthcare system. In the U.S., we have been working with the federal government and at the state and local levels on ways to use economic stimulus—including that focused on healthcare—not just to pull us out of recession and repair what is broken, but to prepare for what is to come.

For all these reasons, we are actively interested in the direction and evolution of healthcare, here in America and as a global industry. And we have a point of view, grounded in something that is one of IBM's core competencies: systems thinking.

Which is the reason I was so eager to come here and speak with you today. Because, from my perspective, the single question that is most critical to the future of healthcare in this country—and the world—is the need for a true healthcare system. Underscore "system." And I believe we have a better chance now than ever before to build it.

To explain why, I'll discuss some of the emerging shifts in technology and business that are helping to make our world smarter. Then I'll look at what these shifts imply for the healthcare industry. And finally, I'll suggest some ways in which your leadership could prove critical.

Our planet is becoming smarter

The first decade of the 21st century, it's fair to say, has been remarkably eventful—indeed, disruptive. And there has been a pattern to that disruption.

• In the last few years, our eyes have been opened to global climate change…
• And to the environmental and geopolitical issues surrounding energy.
• We have been made aware of the vulnerabilities of global supply chains for food and medicine.
• We entered the new century with the shock to our sense of security delivered by the attacks on 9/11.
• And, of course, we are now in the midst of a global financial crisis.

I believe this series of crises, though they may seem to be unrelated, actually share a single subject: the reality of global integration. These wake-up calls have reminded us that we are all now connected—economically, technically and societally.

But we're also learning that being connected is not enough. Yes, the world continues to get "flatter." Yes, it is becoming smaller and more interconnected. But it turns out that isn't sufficient to prevent system breakdowns.

Fortunately, something else is happening, as well. In a word, our planet is becoming smarter.

This isn't just a metaphor. Intelligence is being infused into the way the world literally works—the systems and processes that enable services to be delivered… physical goods to be developed, manufactured, bought and sold… everything from people and money to oil, water and electrons to move… and billions of people to work and live.

First, our world is becoming instrumented. Today, there are nearly a billion transistors per human, each one costing one ten-millionth of a cent. There are 4 billion mobile phone subscribers, and 30 billion Radio Frequency Identification tags produced globally.

Because of their increasing sophistication and low cost, these chips, sensors and devices give us, for the first time ever, real-time instrumentation of a wide range of the world's systems—natural and man-made, business and societal. Second, our world is becoming interconnected. Very soon there will be 2 billion people on the Internet. But that's just the beginning. Systems and objects can now "speak" to one another, too. Think about the prospect of a trillion connected and instrumented things—cars, appliances, cameras, roadways, pipelines… even livestock and pharmaceuticals. And then think about the amount of information produced by the interaction of all those things. It will be unprecedented.

Third, all things are becoming intelligent. New computing models, such as "clouds," can handle the proliferation of end-user devices, sensors and actuators and connect them with powerful back-end systems.

Combined with advanced analytics and supercomputers, these new models can turn mountains of data into intelligence. And that intelligence can be translated into action, making our systems, processes and infrastructures more efficient, more productive and responsive.

Thanks to these shifts in technology, our world is getting smarter. You can see this in how companies and institutions are rethinking their systems and applying technology in new ways. For instance:

• The island-nation of Malta is building the world's first national smart grid, which will also monitor the country's water systems.
• Smart traffic systems are being built in cities from Stockholm to Brisbane to Singapore—with many more being planned.
• We can even tackle perennial problems like public safety. New York City's Real Time Crime Center queries millions of pieces of information to uncover previously unknown data relationships—leading to a 27 percent drop in crime since 2001.

This list goes on—a smart bay in Ireland, smart food tracking in Norway, smart telecommunications in India. And all around the world, economic stimulus is being injected by governments, much of it aimed at smart grids, water management, smart transit and healthcare data integration, to improve the systems that make our world work.

What we have today isn't a healthcare system

Now, how do these shifts apply to the healthcare system? Well, when we talk about a healthcare system, I think we all know that the word "system" needs to be put inside quote marks. What we have today isn't a system. It's a collection of related industries—some large, some small, operating in close proximity to one another.

Don't take my word for it. Last week, IBM held a forum on "Smarter Cities" in New York, and one of the speakers was Dr. Denis Cortese, head of the Mayo Clinic. I think he surprised some people in the audience at one point when he said that the American healthcare system isn't "broken."

Why? Because that would imply that there actually is a system to be fixed. He said there isn't—we don't have such a system today. And he was eloquent about the need to build one.

Well, at IBM, we know something about systems. Over nearly a century of work with businesses and governments around the world, we have designed, built and to some extent managed systems—from Social Security, to modern electronic banking, to airline reservations, to retail. We've worked on transportation systems, food systems, telecommunications systems and more. We have learned what is required for a system to be well-functioning.

For purposes of this discussion, let me focus on what we believe are the four essential qualities for any system to be reliable and resilient:

• First, there must be clarity on the system's purpose or goal—a vision of its end-state.
• Second, its elements must actually be connected—which is another way of saying, interfaces matter.
• Third, we must be able to know, continually and with confidence, the status of the system and its critical components.
• Finally, the system must be able to adapt as conditions change.

Viewed against these four characteristics, every well-functioning system looks strikingly similar. But not healthcare.

In theory, everyone agrees on the system's purpose. There is a broad consensus—forged, in many respects, by the example of such institutions as Cleveland Clinic—that American healthcare must become patient-centric. Yes, the patient's health needs to be the foremost consideration.

To be sure, it must also be value-focused, evidence-based, accountable and sustainable. But the most important thing to get right is the initial design point. As Dr. Cortese pointed out in his talk last week, what you optimize a system for—the way you envision its end state—will determine what it ultimately delivers.

There is also wide recognition that the components of American medicine and healthcare—testing capability, hospitals, medical schools, emergency response, pharmaceuticals and the like—are typically of high quality, many of them world-class, many of them leaders in technological innovation. They are not the problem.

The problem is that there is no actual connectivity among these elements. This is something so basic that we simply take it for granted in other areas of life. In the banking system, we assume we can transfer funds and make payments between institutions. In the airline system, we take it for granted that reservations are connected to ticketing, payments and loyalty programs. All of these systems have standards and interfaces that permit information and data to flow.

And I'm not talking just about digits moving through wires and through the air. I'm talking about the processes and protocols that comprise the work of any system. Healthcare in America fails this key test of a well-functioning system.

Second, many of the components and subsystems of healthcare are not instrumented, so that it is impossible to know with confidence what their current status is. Indeed, most of the participants in the system—most notably, patients—must record their status anew every time they interact with it.

You know the stats. Physicians in medical practices average three weeks a year on insurance-related administrative tasks. For medical practice nurses, it's 23 weeks per physician per year. Fewer than one in ten American hospitals have implemented any kind of electronic patient record system. And more than 20 percent of lab tests are repeated unnecessarily, because patients' medical records are not available at the point of care.

This isn't just a colossal waste of time and money. It also introduces inconsistencies in quality and multiple opportunities for error. That's terrible for patients, like you and me—and from a systems-management standpoint, it's a huge barrier to our ability to know the status of the system or its components.

If the healthcare system were a patient, and we were its doctors, we would be unable to read its vital signs.

It doesn't have to be this way. We have the technology to remedy it. Cleveland Clinic, for one, has been a pioneer in the use of electronic patient records since 2002, reducing errors, lowering costs and becoming more patient-centric.

And the more than 1000 hospitals and clinics of the Department of Veterans Affairs, with one of the most advanced electronic record systems in the U.S., have been ranked best-in-class by independent groups across a range of measures—from chronic care, to the treatment of heart disease, to the percentage of members who receive flu shots. While studies show that 3 to 8 percent of the nation's prescriptions are filled erroneously, the VA's accuracy rate is greater than 99.997 percent. And yet, through it all, the VA spends an annual average of $5,000 per patient, vs. the national average of $6,300.

And when it comes to the fourth characteristic of a well-functioning system—adaptability—ask yourself: Is our healthcare system in America today—spanning providers, hospitals, insurers, pharmaceuticals, employers, communities and government—is that ecosystem ready for what's coming?

Because whether there are 260 million Americans in the healthcare system—or 307 million—demand is only going to grow. Especially as the huge Baby Boom population enters its senior years—when we know that usage of healthcare increases exponentially. We will need more capacity—especially given the enormous data complexity and volume in medicine and healthcare.

So, if we agree on the need for, and lack of, a true healthcare system, how do we get there? What do we do first, and why? And who's going to do it?

Well, for clues to that, think about one of the well-functioning systems that we all use every day—retail. We take it for granted that store shelves are being stocked, inventories are being managed, global supply chains are operating smoothly and efficiency is being continually improved. This has made Wal-mart… Wal-mart.

So, what made possible the modern global retail system that enabled Wal-mart? In many ways, it began with the invention of the humble Universal Product Code, or UPC.

Originally developed to help supermarkets speed the checkout process, the first live use of a UPC took place here in Ohio—in a Marsh Supermarkets store in Troy, on June 26, 1974, when a cashier scanned a package of Wrigley's gum.

But replacing individual price-labeling with the UPC did a lot more than improve checkout speed. It ushered in better inventory management; it simplified returns and rebates; it streamlined global supply chains. And that, in turn, laid the groundwork for further advances in instrumentation. For example, we're working with Norway's largest meat supplier to use RFID tags to track the temperature and condition of individual cuts of meat, from farm to fork.

This same pattern has been seen across most of the ways our world works—from transportation, to food, to telecom, to media, to the electric grid. We see it in the Internet itself. Today's vast global network became possible because of arcane protocols such as TCP/IP, which were developed to enable networking among military and research users, in the Defense Department.

In all these instances, basic standards and building blocks were introduced—and then progress and industry transformation, once incremental, became exponential.

Is there anything that might have the same kind of catalytic effect on healthcare as the UPC code or TCP/IP?

Well, one strong candidate is the much-hoped-for electronic health record. A lingua franca for health and medical information could help spark what some are calling a "Health Internet"—and that could be the start of a true healthcare system.

Of course, it would just be a start. Connectivity is necessary—but as we've learned painfully over this past decade, it isn't sufficient.

We also need the ability to inject intelligence and analytics into the network and the myriad things, processes and management systems it connects. But as we've seen in other industries, world-sized trees can spring from seemingly small acorns.

We can't know today all the dimensions of such a system—any more than retailers in 1974 could envision global, just-in-time inventory control… or than the Defense Department creators of ARPANET could foresee eBay. But their experiences suggest that the upside for healthcare is enormous.

Clearly, a smarter healthcare system, optimized around the patient, would increase efficiency, reduce errors, achieve better quality outcomes and save lives.

It could embed best practices and medical knowledge—as well as real-time patient monitoring—into clinical and business workflows, for error-free delivery of care. And that alone is ample justification for the investment.

• But could it also let us apply analytics to look across many patients' histories and unlock new insight into the treatment of a disease?
• Could it speed discovery of new drugs and therapies?
• Could it track and report infectious diseases to predict high-risk populations, enabling us to intervene early and keep people well?
• Looking farther ahead, could smarter healthcare help us apply the discoveries of genomics and proteomics, leading to more personalized medicine?

Just blue-sky dreaming? Well, earlier today, IBM Research announced that it has developed the capability to create a nano-scale device that can act as a kind of "bar code reader" for an individual strand of DNA. The goal for this type of technology is to make personalized genetic makeup readily available to each individual for less than $1,000. As you may recall, the first sequencing done by the Human Genome Project cost $3 billion.

All of this and more is possible today, or soon will be. The progress of technology is only accelerating. The question is: Will we have a healthcare system that is capable of leveraging it? And, importantly, will we have policy regimes that ensure appropriate ethical, privacy and security protections?

To get there, I believe those of us in this room, and our peers across the healthcare ecosystem, must take a leadership role. And here's the good news: We do not have to wait for the government—or anyone else.

Let's remember, none of the vast global systems we now take for granted—the things that make our world work—resulted from a government mandate. They all began because some companies, institutions, organizations and individuals took the initiative. Not for philanthropic reasons, but to deliver real ROI.

Someone is going to turn healthcare into a true system, designed with the patient's health in mind. Someone is going to put in place the key building blocks. Importantly, someone is going to institute standards, accomplish cross-segment connectivity—and break down the silos. Someone is going to unleash—and scale—the expertise and creativity of America's healthcare professionals. And someone is going to build the capacity to identify the key patterns in all this data and knowledge.

That someone is going to drive incredible progress in medicine and in the health of populations across America and around the world. That someone is also going to unlock incredible amounts of economic growth and profit.

I suggest that someone should be you.

Four key areas for the healthcare industry

So, both as an employer with rising healthcare bills—and as a company whose business strategy is aimed at making our world work better and smarter—let me close by asking for your help in four key areas.

First, standards: We must establish agreed-upon data standards for healthcare content. This is long overdue, but I am hopeful that it will soon be accomplished.

As we do, however, it is essential that those standards be open. That's the only way to interconnect processes and data sets across the whole system. On this, you need to be an active voice.

Second, wellness: A patient-centric model requires that we have better incentives for prevention and primary care. There must be some component of the system that thinks about the total wellness of the individual—and not just about reacting to acute symptoms and delivering isolated procedures.

Now, individual companies can do their part. For instance, IBM has just announced 100 percent coverage for our U.S. employees' routine doctor visits, and we are expanding our rebates for healthy living. But, again, this must be tackled not just individually, but at a system level.

Third, moving to a true healthcare system will enable—and require—far more collaboration: I'm not just talking about the familiar idea of "private sector-public sector cooperation." We need true collaboration.

A diverse, multi-stakeholder world requires all the parties actually working together, shoulder-to-shoulder on a daily basis, at the point of care. That's where the system should be optimized—and doing so will be transformative.

But it will also require change—far more sharing of both benefits and responsibilities—among patient, doctor and hospital.

Finally, policy and ethics: From new models of technology… to the changing form of the corporation… to the changing role of the individual in modern life… we are entering a very different world. We must come together around clear guidelines on how to operate and manage our organizations and industry, from an ethical and societal point of view.

As medical professionals, you know how exciting it is to embrace technology to improve patient care. But the idea of computer chips in your body, swallowing pills that monitor your health, sharing data with insurance companies and employers—not everybody is going to be happy about that. If we don't together forge a new policy framework, people may say "stop." And they should.

The precondition for real change

Let me conclude with a dose of optimism.

We find ourselves today at a unique moment. The key precondition for real change now exists: People want it. And they are hungry for leadership. Such a moment doesn't come around often, and it will not last forever.

So ask yourself this: In hindsight, when the circumstances that cry out for change are gone, when things have returned to "normal"—don't we always wish we had been bolder? More ambitious? Gone faster… gone farther?

I'm convinced we can build a true healthcare system—one that truly serves patients, and that, in so doing, achieves both societal progress and economic growth. Smarter systems are not some grand, futuristic ideal. The examples I've mentioned are real, and more are being deployed.

Last week's "Smarter Cities" conference in New York—where we had more than 600 leaders, from the Obama Administration, from state government and from 165 cities—strongly reinforced my optimism. It was a vibrant discussion, and I was struck by how many were anxious to get going—to build smarter grids, smarter public safety systems, transport, schools—even smarter sewers. I was also reminded that building a smarter planet is a realistic goal precisely because it is so refreshingly non-ideological.

Yes, debates will continue to rage on many contentious issues in our society—from energy, to security, to climate change, to the economy. And yes, we will surely continue to deliberate, for some time to come, over how access to healthcare should be paid for and delivered—by private firms? By the government? Or by some combination?

There are serious and worthy perspectives on all sides of these controversies. But no matter which viewpoint one shares—or which ultimately prevails—the system that results will need to be smarter—more transparent, more efficient, more accessible, more equitable, more resilient, more innovative.

And that's one final reason for hope: Making our planet smarter is in everyone's interest. For a whole spate of reasons, the boldest action and the most pragmatic action are now one.

And we can take that action—if we truly come together.

That, finally, is why I was so eager to be here today, to have this conversation with you, at this important moment.

As I've talked to leaders around the world, it has become clear to me that our dialogue must be broadened. Yes, we all have responsibilities to customers, to partners, to patients. The Hippocratic Oath is a shining emblem of such personal responsibility. But in today's world, fulfilling those responsibilities requires that we also fulfill our responsibilities to the system as a whole.

And to do that, we will need to call together leaders from every part of society—from across many industries—from NGOs, from government and from the public at large. We must come together in ways we have never done before.

I hope you share my excitement about the opportunity before us, and that you will join with us in this exciting journey.

The world now beckoning to us is one of enormous promise. I believe it is one that we can build—if we open our minds and let ourselves think about all that a smarter planet could be.

Thank you.

Read more from IBM's chairman

See how the world is becoming instrumented, interconnected and intelligent

Learn more about intelligent healthcare

Be a part of the conversation at the Smarter Planet blog