There's an idea that the "Internet of Things" -- which will connect all machines and their internal components to the cloud -- will lead to new levels of organization, synchronization, and automation across multiple industries. Cars could drive themselves, homes could regulate their own electricity consumption, and ovens could even tweet you when the meatloaf is done.
According to networking giant Cisco (NASDAQ:CSCO), approximately 10 billion devices were connected to the Internet in 2013. Cisco projects that figure to soar to 50 billion by 2020, accounting for 2.7% of all the "things" in the world. Therefore, the world's "smart grid," on which these devices can be accessed, will continue growing and cover entire cities with continuous connections to each other and the Internet.
The health-care industry could benefit immensely from the growth of these smart grids, expanding their reach from hospitals seamlessly into homes. Unfortunately, U.S. hospitals are known for their reluctance to upgrade their outdated technologies. A survey by the Ponemon Institute last May estimated that outdated tech and HIPAA requirements were costing U.S. hospitals $8.3 billion a year.
The problem: Outdated technologies and regulations in U.S. hospitals
In the Ponemon survey, which consisted of 577 health-care and IT professionals, 39% of respondents stated that Wi-Fi was unavailable at their hospitals.
A lack of Wi-Fi cripples access to promising cloud-based technologies, such as electronic health record, or EHR, apps for Apple (NASDAQ:AAPL) iPads and Microsoft (NASDAQ:MSFT) tablets, medical reference tools such as athenahealth's Epocrates, and next-generation medical apps designed for Google (NASDAQ:GOOGL) Glass.
Mobile connections on 3G and 4G offer an alternative way to get online, but restrictive bring-your-own-device regulations often prohibit physicians from bringing their own mobile devices to work. Although many hospitals have relaxed these restrictions to encourage the use of mobile apps, 28% of respondents in the Ponemon survey stated that they were still not allowed to bring their own mobile devices to work. The majority of respondents also noted that pagers, a standard hospital device since the 1980s, were inefficient.
Topping off these problems is the widespread use of Windows XP, which is still installed on nearly 30% of the world's computers. Microsoft will cease support for XP in April, which could leave some hospitals vulnerable to data breaches and viruses. That's a major issue, since the number of data breaches in U.S. hospitals rose 138% year over year to 199 reported incidents, according to a recent report from Redspin.
The solution: Building a smarter hospital, one step at a time
Even though companies such as IBM (NYSE:IBM) and Cisco have laid out plans for intricately connected smart cities, it's painfully clear that many U.S. hospitals aren't ready to be plugged into the smart grid yet.
In response, the Obama Administration's Health Information Technology for Economic and Clinical Health Act, which was enacted in 2009, provides government subsidies to practices that upgrade their outdated technologies to Health and Human Services, or HHS, standards.
These subsidies have created a fertile new market for IT companies to expand into. Cisco and IBM, for example, teamed up to introduce a "smarter hospital," aiming to install these "smart" features in hospitals:
Real-time tracking of patients, staff, and equipment via radio frequency identification tags to ensure the right procedure is always being performed on the right patient.
Secure access at point-of-care terminals through a single biometric sign-on.
Keeping patients connected to remote alert notifications at all times.
Telehealth features such as video calls and surveillance of patients, which can reduce the overall response time for medical staff.
Smart hospitals represent a rare opportunity for growth for IBM, which has posted seven consecutive quarters of sales declines as cloud-based storage solutions displace its core business of traditional servers.
The growth of the smart grid across hospitals will also benefit Apple for two main reasons -- its iPads, which share identical software and hardware configurations across the same generation, still command 36% of the global market in tablets. By comparison, Google Android has a dominant 61.9% market share, but its universe is a fragmented one which is much tougher to develop apps for.IBM's Watson supercomputer, best known for participating in Jeopardy!, could play a central role in smart hospitals. Watson, which has been shrunk down from the size of a bedroom to the size of three pizza boxes, is now programmed with the education of a third-year medical student. Physicians can access Watson via an iPad app, which can recommend the best diagnosis for patients based on accumulated patient data and medical evidence.
As a result, the iPad will probably remain an ideal platform for the development of medical apps and attached peripheral devices.
Microsoft has struck back at Apple by touting the fact that EHR apps on Windows 8/8.1 can run across different platforms for tablets, hybrids, and laptops, but its 2.1% market share in tablets means that it still has a lot of catching up to do.
To take advantage of these new technologies, Cisco is encouraging physicians to bring their own devices to accelerate the transition from pagers to smartphones and tablets, which can cohesively fit into a hospital's smart grid and take advantage of cutting-edge technologies like Watson and cloud-based EHRs.
The future: Can the government and companies connect hospitals to the cloud?
Simply put, cutting-edge health-care technologies won't be practical unless hospitals improve their wireless infrastructure and allow more physicians to bring their own devices to work.
More importantly, constantly keeping hospitals connected will reduce the number of medical errors across America. A 1999 report from the Institute of Medicine claimed that 44,000 to 98,000 deaths occurred annually because of medical errors in hospitals. That sobering figure rose over the following decade -- in 2010, HHS estimated that medical errors contributed to approximately 180,000 deaths annually.
In closing, smart hospitals might not get as much press as self-driving cars or smart homes do, but they are an essential part of the Internet of Things, and companies such as Cisco, IBM, Microsoft, Apple, and Google could all play crucial roles in improving patient care and saving lives. Their shareholders may also be richly rewarded as these companies expand their footprint in this important and growing market.
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Leo Sun owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, athenahealth, Cisco Systems, and Google and owns shares of Amazon.com, Apple, Google, IBM, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.