Entrepreneurs Outlook For The Healthcare Cloud Is ... Cloudy - Westhill Consulting Insurance
Entrepreneurs' Outlook for the Healthcare
Cloud Is ... Cloudy
I’ve written sunny posts about the opportunity for entrepreneurs
in key areas of digital healthcare: health & fitness wearables and
healthcare transparency businesses. The “healthcare cloud” is a third major
area of innovation, but here the opportunities for entrepreneurs will be fewer
and will carry more risk. [Disclosure: New Atlantic Ventures in which I am a
partner has an investment in one of the four companies cited below: TruVeris.]
First, the pro’s: the idea of putting data and applications in
the cloud is taking hold throughout the IT world, including healthcare. Payers
and providers get the fact that they are being held accountable for managing
cost and outcomes for groups of people (“Population Management”) and they are
working hard to master this problem, which creates strong need to collect and
analyze data from many sources in one logical database. And cloud technologies
promise to both lower costs by strengthening care coordination, and to improve
clinical outcomes, e.g., analysis of medical data in the cloud has revealed
drug interactions that were not previously understood (1)
Problem 1: It Will Take A Long Time To Get
Results From Healthcare Cloud
Healthcare has a culture of holding data close, particularly
among payers, which are mostly insurance companies that make money by
understanding risk better than customers and competitors. Data is the basis for
understanding risk. HIPAA, the law that protects healthcare data privacy, was
enacted before the cloud era and gives data holders the perfect excuse to not
share. And there is the problem of incompatible legacy systems and data
formats: healthcare IT did not grow up on open standards like the Internet did.
At a forum for entrepreneurs, Jonathon Bush, the CEO of AthenaHealth, declared
passionately: “It stinks [paraphrase] to be a healthcare entrepreneur … because
you can’t get your hands on the data.”
And, once you have the data, using it is not straightforward.
For example, a business that wants to use cloud-based meta-analysis of medical
data to guide drug development is ultimately limited by the FDA’s commitment to
tried and true double-blind trials as the gold standard for drug approvals.
Problem 2: The Healthcare Data Incumbents
Are Powerful, And Not Asleep
The drive to “accountable care” is causing healthcare providers
to consolidate, usually around a strong regional hospital system. Hospitals are
buying up doctors’ practices and now employ over 50% of doctors. Strong
regional payers (e.g., the Blue Cross/Blue Shields) create provider networks as
part of their business, and those networks will become “narrower” (less choice,
so the same providers are always working together) in response to cost
pressures. So the most relevant cloud for a provider is the cloud used by the
hospital system that employs him or the narrow network of which she is part.
Hospital systems already have an electronic medical record (EMR) system in 90%
of cases, and the payers already have their system that captures diagnoses and
treatment events, and manages payment. These are the two most important
databases to be integrated into the cloud healthcare cloud.
It’s likely that these powerful incumbents will create clouds
for their systems/networks, and if a few players cooperate they can create a
regional cloud. This will be the relevant cloud for most of the providers and
payers in the region, and both healthcare services and health insurance are
primarily regional businesses. An open, national cloud that entrepreneurs can
tap to create new value is probably not the first step.
And, there is a set of strong healthcare software companies,
some with significant cloud services business, that aim to build a healthcare
cloud. They include companies like Cerner CERN -1.32% (hospital EMR leader),
AllScripts (e-prescription leader), and AthenaHealth (cloud-based billing
services, not long ago a disruptive start-up). These companies have
relationships with many of the healthcare players and they hold part of the
data set that belongs in the cloud.
Problem 3: The Big IT Infrastructure
Companies Are Diving Into The Cloud, Too
Cloud services are heavily based on infrastructure and platform:
data storage, communication, and horizontal applications like databases and
security. Scale matters in these businesses, and they are dominated by the
likes of Google GOOG -1.02%, Oracle, Amazon, IBM, and Microsoft. Their services
are generic and may lack specific features like the proper audit trails for
HIPAA compliance. And sometimes they miss an opportunity, as they did with the
folder-sync-and-backup model that Drop Box and Box.net have built up. But, they
are well capable of building healthcare specific features on top of their
platforms, and well aware of the business opportunity. Healthcare has been a
big vertical market for IT companies since the beginning.
So healthcare entrepreneurs will be sailing on rough seas,
starved for data nourishment, and beset by killer whales.
Tim Draper once told me: “Great entrepreneurs don’t know what
can’t be done.” They always surprise with their creativity and tenacity finding
value and bypassing obstacles. Examples of companies making a go of it in the
healthcare cloud include both healthcare-specialized cloud infrastructure
companies …
• TrueVault: cloud-based database-as-a-service that complies
with healthcare regulations
• ClearDATA: cloud-based storage (one level lower in the stack
than TrueVault, similar to Amazon S3) that meets healthcare regulatory
requirements
As well as companies offering specialized applications that
utilize healthcare data from multiple sources …
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