For the past twenty years, the focus of health data has rightfully centered around privacy. We have created a high-stakes environment where adherence to HIPAA is woven into the mesh of healthcare companies’ technology and business models. However, in the wake of that, we have inadvertently ignored developing an underlying interoperability infrastructure that can leverage horizontal and longitudinal patient information to drive more meaningful outcomes. Recently, the COVID-19 pandemic has shone a light on healthcare’s hampered and siloed data network. From inaccurate case counts to haphazard inefficient information sharing between hospitals on the virus’ progression, the need for an effective data interoperability infrastructure has become even more apparent.
With Fast Healthcare Interoperability Resources (FHIR) rules finally outlined (to be clear, the creation of this rule was anything but “fast” — it took almost a decade!) and pressure mounting from the pandemic, we, at Wittington Ventures, are confident that data connectivity is poised to grow dramatically over the next few years. The question we’ve been asking ourselves and debating with our peers is what tools will become commoditized and which ones will stand out and grow into highly valuable businesses. In this post, we assess the healthcare data interoperability landscape and identify four key opportunities that can help any healthcare data startup win.
Data is the Connective Tissue in our Connected Health Ecosystem
Over the past several months, we’ve met with healthcare startups focused on a wide swath of areas ranging from clinical trial recruitment to on-demand medication delivery. Despite these companies’ varying products, we’ve observed that they are all connected via a common tissue: data. Data is generated at virtually every touchpoint within healthcare, be it an interaction with a patient, provider, payor or pharma company (Nikhil Krishnan just penned a great post on it here). If stored and structured effectively with other relevant data assets, this information can be used safely and securely across the healthcare ecosystem for a variety of scenarios such as training new clinical decision support tools, assessing true attribution of healthcare outcomes, or driving breakthroughs in drug discovery. Our Connected Health Map below is an illustrative example of the interconnected data web that defines today’s healthcare industry.
In a year where the challenges and vulnerabilities of the healthcare system became more apparent, the great news is that healthcare data mobility is moving quickly in the right direction. Tools exist so that a diabetic patient can easily give access to their charts and lab results to highly impactful chronic care platforms like Livongo or Virta. Having access to a complete view of this patient’s health is not only important to influence a positive health outcome but also to learn more about how to treat diabetes in the future. The ability to seamlessly do this wasn’t always the case. We saw a “first wave” of interoperability companies that addressed data portability challenges through deep technical integrations with providers (e.g. Redox) and a “second wave” of companies offering value-added structuring on top of data that is shared through a common exchange infrastructure (e.g. Health Gorilla via the Commonwell network). To assess what opportunities remain in the space, we took a look at the “stack” that healthcare data flows through today.
The (Complex) Health Data Stack
WV’s Health Data Stack
Data is typically generated by devices. There’s a wide range of complexity and environments where health data is being recorded, ranging from your Apple Watch at home to an MRI in a hospital to an immunoassay in a lab. Because the primary use of this data is often to provide clinical support for a patient, the data then typically flows only to whatever silos are directly associated with that patient journey. A test result may end up in the electronic health record of your doctor but may not be passed along to your pharmacist to assist in conversations about prescriptions you are taking. From there, it likely does not transfer to a walk-in clinic doctor you meet with on a telehealth app. And it almost certainly does not naturally flow to many of the interesting companies we are meeting who are building new tools for providers, patients, payors, and life sciences businesses. But the benefits of this data getting into these hands is high: it enhances care coordination, leads to better decision-making, and helps forward the next generation of healthcare research. To capitalize on this opportunity, many companies today are taking it upon themselves to obtain data (in a patient-permissioned way) using interoperability tools readily available or that they’ve fashioned themselves.
Opportunities to Stand Out
Innovators in the digital health space have many choices as to how they can get patient data. So what will the “next wave” of interoperability players look like? We see four key opportunities that will unlock value going forward. Note that these are not mutually exclusive; the companies we are most excited about address many, if not all, of these opportunity areas. And we would be remiss if we didn’t mention that execution is such a critical success factor, especially for vendors in healthcare. As such, we see these opportunities as a “data scorecard” for a startup which must also be combined with all the usual elements that make a venture-stage company attractive: team, product, business model, total addressable market and the like.
Opportunity #1: Connect High Quality Data
Hardly a day goes by where we don’t hear something along the lines of “oh, and by the way, we’re collecting super valuable data that we can later use and monetize.” What we’ve come to appreciate after comparing datasets across many healthcare startups is that not all data is high quality and it is certainly not all created equal.
We’ve highlighted below some key features of high quality data, although this is certainly not exhaustive. It’s worth noting that some of these features can be engineered for (e.g. data formats can be changed or privacy protections can be layered on). Other features, such as scale and detail, must exist from the onset.
Opportunity #2: Connect Unique Data
We see this as being one of the most critical factors in today’s interoperability landscape. Some parts of the healthcare data ecosystem are easier to access than others. In a world where access to the EHR and lab results is offered by a number of vendors, startups can stand out by layering on additional rich data sources to their offerings. What are the less obvious but incredibly valuable datasets that can be unlocked (e.g. first party biometric data via Apple Health Kit)? We suggest a few of these in the diagram below but are excited about data assets that go beyond these areas as well. The key here is that the whole is greater than the sum of its parts.
Opportunity #3: Make Data Accessible to End Users
This is the opportunity area where we’ve seen the most action in the interoperability startup space, and for good reason. Raw data coming out of EHRs is rarely usable, and the amount of heavy lifting it leaves on digital health companies to scrape relevant information, build their own APIs, and standardize formats is a real barrier. We believe that structuring data in an accessible way such as easily callable APIs, usable formats, and valuable integrations will continue to remain important for next-gen interoperability startups.
Opportunity #4: Serve End Users in Attractive Markets
This last one may seem obvious: build tools that you can sell into big markets. But we still see a real stratification of how interoperability players are positioned today so we think it’s worth doubling down on. Ultimately, these interoperability tools are only as valuable as the markets they sell into and their customers’ willingness to pay. In our analysis of healthcare buyers we shared why we are particularly excited about companies serving life sciences (aka pharma) and payors. While there is certainly opportunity to capture a customer base from multiple markets, we are particularly excited about companies that have a beachhead with end users that we see as having a high willingness to pay and favorable sales cycles.
We’re excited as investors and users of the healthcare system for the overdue surge in connectivity that we see coming. Interoperability businesses help power so many other areas of healthcare we are interested in as investors, and we see many emerging categories of startups eager for unique, quality data to grow their businesses. If you’re building something that addresses one of these opportunity areas, or are chasing something new altogether in this space, we’d love to connect. Drop us a line at email@example.com or firstname.lastname@example.org.