The Coming Wave of Healthcare Data Accessibility

Currently, individuals can readily access their financial information – bank accounts, credit card details, and brokerage data – instantly through a single application. Yet, when visiting a physician's office, patients often lack access to their own healthcare records, diagnoses, and prescriptions. A person’s health information should be as easily obtainable as their current checking account balance.

The increased accessibility of financial data, spurred by companies like Plaid, is beginning to mirror developments within the healthcare sector. This shift promises an even greater societal impact, potentially saving lives and extending lifespans. This improved accessibility is rapidly becoming a reality.

Early Investment and the Transformation of Healthcare Data

Having invested early in companies like Quovo and PatientPing, both pioneers in financial and healthcare data respectively, we recognize that the companies succeeding in the healthcare data transformation will differ from those in the financial sector, despite a similar ultimate outcome.

For more than ten years, both governmental bodies and individuals have advocated for this increased data liberation.

Digitization and Interoperability Challenges

The Health Information Technology for Economic and Clinical Health Act (HITECH) of 2009 provided a significant initial impetus, encouraging the widespread digitization of medical records through electronic health records (EHR). Today, over 98% of medical records are now digitized.

However, the market is largely controlled by major vendors such as Epic, Cerner, and Allscripts, collectively managing 70% of patient records. Despite this digitization, these large companies have not yet made these records readily accessible.

A subsequent wave of regulation is addressing the issue of data silos, aiming to enhance the interoperability and value of EHRs. Departments within the Department of Health and Human Services have mandated data sharing between payers and providers, utilizing the Fast Healthcare Interoperability Resources (FHIR) protocol as a common standard.

Consumer Demand and Shifting Healthcare Costs

This drive for greater data fluidity aligns with increasing consumer demand for transparency regarding healthcare costs and quality. Employers are progressively transferring a larger portion of healthcare expenses to consumers through high-deductible health plans – rising from 30% in 2012 to 51% in 2018.

As consumers assume greater financial responsibility, they become more focused on the value of different healthcare options. However, they are currently unable to make informed decisions without real-time access to both cost and clinical data.

Why Healthcare Data is Different

Tech startups are uniquely positioned to facilitate the transmission of healthcare data, responding to both regulatory pressures and consumer needs. While the success of fintech companies like Plaid might suggest a straightforward solution, the healthcare landscape presents unique challenges.

Plaid’s aggregator model benefited from a concentrated banking system, a limited range of data types, and relatively easy data access.

In contrast, healthcare data is fragmented across tens of thousands of providers, stored in diverse formats and systems, and infrequently accessed directly by patients. Individuals frequently access their bank accounts, but few regularly log into healthcare provider portals, and many are even unaware of their existence.

Furthermore, HIPAA regulations and stringent patient consent requirements add significant complexity to data access and sharing. Financial data typically involves one-to-one interactions, while healthcare data requires a many-to-many approach. A patient’s information is distributed across numerous doctors and facilities and is needed by an equivalent number for coordinated care.

Four Key Propositions for Success

Given this complex environment, successful healthcare technology companies will need to focus on four core principles:

• Prioritize the App Developer Ecosystem: Startups should adopt an API-first strategy, fostering third-party developer support with well-documented API endpoints that simplify access to and synthesis of healthcare data. Providing comprehensive documentation and testing environments, along with pre-built analytics, will be crucial.
• Focus on Providers and Payers Initially: While consumer-centric solutions are appealing, aggregating healthcare data and building consumer expectations will take time. Emulating the Snowflake model – helping providers and payers aggregate, standardize, and securely display their own data – will be a more effective strategy.
• Aggregators Will Be Important, But Not Dominant: A single aggregator is unlikely to connect to all providers and payers. Healthcare data seekers will likely utilize one aggregator API that then cascades through others to access all necessary data.
• A Winner-Take-Most Market: While not a complete monopoly, strong network effects will lead to a dominant player. The strongest effects will be seen among payers and their in-network providers, particularly with the growth of risk-sharing arrangements.

Current Business Models in the Healthcare Data Space

The current competitive landscape features three primary business models centered around healthcare provider or payer data.

Companies like Citizen and PicnicHealth, focusing on consumer-centric applications, can effectively serve specific patient populations, particularly in areas like chronic disease management and pharmaceutical trials. Their success hinges on rapid consumer demand for healthcare data.

Aggregators will be essential, but differentiation will be challenging in a crowded market.

Enterprise software companies, such as 1upHealth and Redox, initially targeting payers and providers respectively, are well-positioned to drive the initial stages of healthcare data liberation, enhance analytics, and build third-party developer platforms. This represents a compelling investment opportunity.

The Future of Healthcare Data

The liberation of healthcare data will not only reduce costs and improve patient experiences, but, crucially, it will also save and extend lives.

Over the next decade, U.S. consumers will likely bear a greater share of healthcare costs through high-deductible plans. Simultaneously, they will gain access to comprehensive cost and quality information before seeking care and receive complete medical records afterward.

Eliminating the need for repetitive medical intake forms represents progress, but we anticipate the industry will unlock far greater potential. Soon, with the emergence of new market leaders, accessing health records will be as seamless as checking a bank statement.