Healthcare Technology: Who Owns The Data?

A couple weeks ago I was listening to a panel discussion with a bunch of venture capitalists and someone (I can't remember who) made the point that the value of so many of today's web services comes down to one question: "who owns the data?" For example, while Uber has some nice UI/UX, the real reason they're so valuable is that they own the data. For them, the data is knowing where all the cars are located. I go to Uber because I can quickly locate and communicate with the drivers in my area. I like the app, but the real value is the location data. Same thing with AirBnB. It's not the app, it's the data they have on all the properties that I'd like to rent.

With this in mind, last week I read that Stanford Healthcare announced that they built the first patient facing app that integrates data from devices such as Fitbits and Withings scales into Apple's Healthkit app. Apple can than transmit that data to the patient's provider through the provider's patient portal app (in this case, MyChart, which is built by Epic Systems, a huge health IT vendor that builds software for hospitals and health systems).

This is an enormous step forward for the integration of patient captured health data with provider captured health data. It's awesome news.

But as all of this finally starts to come together, it begs the question: who owns the data?

Or, at scale, which company benefits the most from all of this data floating around?

Stanford? Withings? Fitbit? Apple? Epic?

Well, Stanford is very local, and isn't terribly focused on data collection, so it's probably not them.

Withings, Fitbit and other device makers contribute a relatively small part of human health data so at least for now they're not going to own a large piece of the data pie.

Apple still only owns well under half of U.S. smart phone market share -- and that number is expected to shrink. And they own even less of the market share of the chronically ill patient segment that can really benefit from this kind of data exchange.

So that leaves Epic, the 30-year-old health IT vendor that currently owns a medical record on well over half of the U.S. population. They have long-term contracts with large providers and (presumably) a long-term contract with Apple and will likely cut deals with Android and other smartphone operating systems in the near future.

In short, more than anyone else, Epic will own the data.

But this raises all sorts of new and interesting questions and conflicts. Will Stanford allow Epic to share its patient records with other Epic providers? Will Stanford allow Epic to share its patient records with other health IT companies? Will Epic allow Stanford patient records to be shared with other health IT companies? Will Apple allow Epic to share data captured from an Apple device with data captured from an Android device?

As I've written before, it seems to me that in the long-term, the answer is a Mint.com for Healthcare, where the patient truly owns the data. But in the meantime, the question of "who owns the data?" will be watched closely by investors, app makers, providers, health IT companies and patients. It's going to be fascinating to watch this play out.

Mint.com For Healthcare

Vince Kuraltis, a healthcare IT consultant, tweeted this the other day:

He’s referring to the fact that each of his healthcare providers has a different patient portal run by a different IT vendor with a separate log-in and separate data and functionality. Providers are launching patient portals to allow patients to view clinical records, refill prescriptions, email their providers, etc. The point is to better engage patients in their health. It's a very important effort. But as Vince points out, the disconnected and fragmented experience can be really frustrating for patients.

This challenge is quite similar to the challenge that banking faced years ago as they took their customer experience online. Personally, I have accounts with Bank of America, Fidelity, eTrade, American Express and a few others. All of these accounts have separate web “portals” with separate log-ins. That's frustrating. But not really. Because I spend very little time on any of them. Most of my time is spent on Mint.com, where I’ve integrated all of these accounts into one place. From there, I can view all of my transactions and balances, track expenses and create budgets. It's great. It's has award-winning UI/UX and everything is one place.

Mint has taken the bottom-up approach. They started by building a platform for the consumer. And the consumer allows data from multiple vendors to be integrated into their account.

Healthcare needs a similar bottom-up approach.

We need a portal that allows us to integrate all of the data collected on us from our dentist that runs Dentrix software, our primary care doctor that runs eClinicalWorks, our gastroenterologist that runs Epic, our wife’s OBGYN that runs Cerner and our child’s pediatrician that runs Allscripps. All of that data could be neatly compiled into a really user-friendly website (and app), similar to Mint. If I move to a new area and select a new primary care provider, she could simply tap into my account and view all of my scans, test results, prescriptions, etc.

As we consider all of the controversy around forcing EMR vendors to become more interoperable and share patient data with one another, in some ways, you can argue that this isn’t their role.

Why should Bank of America freely pass data they’ve captured about me to Fidelity (a competitor)? They don’t want to do this because they want me to stay with them, not make it easy to use other vendors. Why is that any different than asking UCLA Medical Center to pass my data to USC Medical Center? It would be nice if they did, but I'm not sure it's the government's role to force them to do something that might not be aligned with their competitive interests.

The bottom-up, consumer led approach circumvents this entire conflict. We need a patient portal that starts with the patient, that allows providers (and their EMR vendors) to plug-in (if they'd like). Not the other way around.

Real World Healthcare vs. Venture Capital

Fred Wilson, the well-known venture capitalist, wrote a blog post last week with some technology predictions for 2015.  He touched briefly on healthcare:

the health care sector will start to feel the pressure of real patient centered healthcare brought on by the trifecta of the smartphone becoming the EMR, patients treating patients (p2p medicine), and real market economies entering health care (people paying for their own healthcare). this is a megatrend that will take decades to fully play out but we will see the start of it in 2015.

All of these predictions are spot on, of course -- the patient will become more and more in control of their care.

But if you talk to the people on the ground you'll find that these things aren't really being talked about or worked on at the provider level.

Case in point, John Halamka, the CIO of Beth Israel Deaconess Medical Center, considered one of the most innovative thought leaders in healthcare technology, wrote a post the other day reviewing some of the key health IT issues on his plate during 2014 with some predictions for 2015. In short, he's focused on implementing software that will facilitate accountable care workflows inspired the Affordable Care Act; meeting government electronic medical record adoption standards (Meaningful Use); and complying with government regulations around the protection and security of personal health information (HIPAA).

These are very different things than the things that guys like Fred Wilson are thinking and talking about. Venture Capitalists are completely focused on the patient. Real world healthcare operators (CIOs) are primarily focused on meeting government requirements.

This disconnect -- or, at least, that degree of separation from the patient -- isn't the fault of CIOs; they have no choice but to focus on the urgent and intense demands coming from the government to ensure that they continue to receive government incentives and avoid penalties.

Venture Capitalists are focused on where healthcare technology and the patient are going (e.g. where the money will be). Given the intense regulation, health system CIOs don't have that luxury.

All of that said, for the most part, I think government intervention into healthcare IT has been a good thing. Healthcare execs are totally focused on efforts to increase quality and reduce cost. Most stakeholders (providers, payers, regulators) have gotten behind value based care payment models -- the winds are all going in that direction. And providers are now fully onboard with electronic medical record adoption (at last check ~80% of providers are using them). None of this could've happened this quickly without government intervention.

But now that the groundwork is laid, it's time for the government to back off a bit and let the market start to drive more of the innovation in healthcare IT. Providers need the room to move their businesses and IT investments away from meeting the requirements of restricting, top-down government initiatives and closer to providing tools that are centered-on and built around the needs and desires of the patient.

The Consumerization Of Procurement

The other day I was talking to a founder of a B2B software startup about how hard it is for big companies to buy things. Even at a super low price point (a couple hundred bucks a month) software purchases still have to go through a litany of approvals. I was telling her how almost exactly two years ago I wrote a post titled, Individual Employee Budgets, where I predicted that employees would have their own discretionary budgets that could be used to buy things that would make them more productive and profitable employees. With the growing trend towards the consumerization of enterprise and the ability for anyone in their basement to build and distribute a great productivity application to millions of employees, individual budgets, I thought, would be a requirement for companies to succeed and retain employees. For smaller purchases, traditional procurement eventually has to get out of the way.

I still believe this will happen, but it's moving much slower than I predicted.

That said, two years after writing that post, when I think about the software I use to get my job done, much of it is 'consumerized'. That is, it's sold directly to me and in order for me to use it my company doesn't have to go through a painful procurement process. Software like Wunderlist, Google Maps, TripIt, Sunrise, Feedly, Evernote and Google Docs, to name a few. There are only a couple of applications that I use that were procured through a traditional procurement process -- and most of those aren't as useful or as easy to use as those that I procured myself. Self-service software has to be really, really good as the switching costs are near zero.

It's disappointing that the way companies buy hasn't become more flexible as enterprise software has become more consumerized and easy to procure. Employees are ready for self-service productivity tools and software makers are ready to build and distribute them. The only thing we're waiting for is for big buyers to let it happen.

Enterprise Software For Patients

Most readers know that an EMR (electronic medical record) is the back-end software that runs a healthcare organization (think ERP for healthcare). EMRs have been around for a while. Recently most large hospitals and health systems have begun building out the patient-facing version of their EMR; allowing patients to communicate electronically with their doctors, refill prescriptions, schedule appointments, view clinical information, etc. I've written at length about the differences between B2B software and B2C software and how B2B software is generally not very good (particularly from a usability perspective). And it's not very good simply because it can get away with not being very good. B2B companies really just need a good salesperson that can lock-in long-term contracts to be successful.

B2C companies, on the other hand, need an incredible product to be successful. If your user experience isn't flawless, you cannot survive in the B2C space. The switching costs for consumers are near zero -- the user experience must be incredible. Product is much more important than distribution.

Applying this to healthcare, if you're a hospital and your EMR is hard to use, your employees will still use it because they have to.

But if your patient portal is bad you will lose patients instantly. It's too easy for patients to switch to something else.

The Healthcare Information and Management Systems Society (HIMSS) published a good report last month talking about patient portals.  They noted that despite the difficulty of building a wonderful online consumer experience and the totally different skill set required to execute on it, 80% of hospitals surveyed chose their patient portal vendor simply because it was the same vendor that provides their EMR (the top three portals are made by Epic, Cerner and McKesson). All of these vendors have been building B2B enterprise software systems for more than 30 years. They're all wonderful companies. But they have no idea how to build a patient facing product. Their management, engineering talent, sales force, culture and DNA is all about B2B. They have almost no chance of building a world class consumer product. That's not a knock on these companies, it's just reality. You can't be really good at both.

As we transition to a world where the patient is in the drivers seat, exposing patients to old fashioned enterprise software code is a terrible idea. Hospitals shouldn't let a piece of software touch their customers unless it's been vetted and tested fully and it's clear that patients love it. If you check out the satisfaction scores for most patient portal apps you'll find that most patients despise them (one of them had 2,000 reviews in the iOS app store and more than 1,500 of them were only 1 star).

Patients are becoming consumers. They want slick, easy, mobile, beautiful, simple and seamless web experiences. If the software that touches patients doesn't give them that they're going to go somewhere that does.

Now, in defense of these hospitals let it be known that there aren't a lot of great consumer-focused software companies building out patient portals. So in the short term they might have no choice. But I'd encourage CIOs that are making patient portal investments to consider the consumer, and to cautiously enter into flexible and short term contracts with these patient portal vendors.

You wouldn't buy groceries from the company that washes your car and you shouldn't buy a patient portal from the company that built your EMR.

On The Web, Bad Reviews Are Good

The Wall Street Journal had an article a while back on online doctor reviews. It noted that 25% of patients are now viewing doctor reviews before booking an appointment.  For the segment of patients that either don't have a doctor or are unloyal to their doctor (about 60% of patients) this ratio is far higher and growing fast. Like most products and services, patients want to see what the community has to say before "buying".

This has fairly significant consequences for providers. In some ways this trend is commoditizing the big hospital brands. It used to be that you’d want to go to a doctor that was affiliated with one of the prominent hospitals in your community. In some ways this is still true; but today, if a doctor has good online reviews from other patients, the patient doesn’t really care as much which health system the doctor is affiliated with. The doctor can gain trust from patients without the big brand. The community replaces the brand. The larger implication of this is that in the future health systems will have to focus more on their product (cost and quality) and less on their brand. But that's an issue for another day.

The article notes that many providers are uncomfortable with patients posting reviews about them for the world to see. This hesitation is completely understandable. But smart providers will embrace reviews rather than avoid them.

Case in point: just look at Amazon. There are 536 one star reviews of the new Kindle Fire on Amazon.com. Why would Jeff Bezos ever allow negative reviews to be posted about his product on his own website?

The answer is simple: it’s all about  trust. Bezos knows that the bad reviews increase trust and actually end up helping him sell more Kindles.

When eBay started many years ago, most of their transactions were small purchases like Pez dispensers and other low-cost items because buyers were worried about giving their credit card to a stranger over the internet.

Fast forward to today and eBay sells all sorts of very high ticket items on their site -- they sell tens of thousands of cars over their mobile app. That's right, people buy cars on their phone.

In order to buy a car on your smartphone you have to really trust the seller. That trust comes from reviews. It never would've happened without the trust that was built through seller reviews.

Providers need to embrace this as well. And some already are: Cleveland Clinic, the University of Utah and other big hospitals are now allowing patients to post negative reviews of their doctors on their websites. Like Bezos and eBay sellers, these providers understand that the trust gained from being transparent about a provider outweighs any negative perception that might come from bad reviews.

From hotels to taxis to healthcare, we're seeing that the community is trumping the brand. Reviews from the community create transparency, and transparency creates trust, and trust creates growth.

Should Amazon Be Profitable?

I've been meaning to write a post about Amazon and its strategy to never make a profit in a given year, but Benedict Evans beat me to it in this great post and podcast from a couple of weeks ago. I recommend reading the post. After looking at Amazon closely, there are three things that really jump out at me:

1. Revenue has grown every year since 1996 and net income has remained flat, at near zero.

2. Every dollar in profit goes directly back into the business. They're investing most of the profit into capital expenditures such as new warehouses and Amazon Web Services but they're also using it to rapidly enter new verticals in e-commerce. There literally must be someone whose job is to make sure they don't make a profit in any given year.

3.  A lot of people are asking how long Amazon will continue reinvesting their profits instead of passing them onto investors (even a great innovator like Apple pays out a nice dividend). How long can Amazon keep investing in themselves? Benedict uses a Wal-Mart comparison. Currently, while Amazon is an enormous player in e-commerce, they still only make up around 1% of North American retail sales. So asking Amazon if they should continue to invest in their growth is a little like asking Wal-Mart if they should've kept investing in new stores back in the 1960s. The answer for Wal-Mart was yes in the 1960s and it's yes for Amazon in 2014.

It's Always Been About Trust

Sherpa Ventures released a comprehensive presentation on the “on-demand" economy the other day. It’s worth flipping through it if you have some time.

Slide 8 contrasts the “village economy” with the economy we have today and it got me thinking...

We’ve gone from:

1. The general store where everyone in town knows and trusts the owner to...
2. Large, main streets with lots of stores with less intimacy and less trust to...
3. Larger, big box retailers with much less intimacy and much less trust.

As stores have become less intimate and less personal, retailers realized that, in order to compete, they had to try to maintain the level of trust that the owner of the general store had with his or her customers. That led to massive investments in brands – Wal-Mart, Best Buy, Macy's etc.  They have built brands so that you know they’re low cost, high quality, reliable, etc.  

Every customer couldn't know and trust the owner but every customer could know and trust the brand, the thinking went.

But in the new economy, constant connectivity, new payment platforms and reputation management programs (ratings and reviews) have recreated this high level of intimacy and trust, without the customer knowing the owner or knowing the brand.

"I don’t know that restaurant but it has a great rating on OpenTable."

"I don’t know this artist, but people on Etsy like her."

"I don’t know the guy that owns this apartment in Paris, but people on Airbnb trust him."

The point of this post is that, regardless of the mechanics that drive our economy, it’s always been about trust. Whether your’e relying on your personal relationship with the owner of the general store on the corner, or you’re relying on Best Buy’s brand when buying an expensive flat-screen TV, or you're relying on a five-star review rating when accepting a ride from a stranger on Uber -- it’s always been about trust.

A Step Forward For Telehealth

A few weeks ago, the Federation of State Medical Boards passed an updated recommendation for telehealth use.  This is interesting because the federal board often guides policy for state boards and state boards often guide policy for providers.  Two notable things:

1. The recommendation notes that virtual visits can be used for first time provider-patient encounters (a 180 degree turn from their prior position where they recommended that telehealth only be used once a relationship has been established).  This propels telehealth companies deeper into the patient acquisition business.
2. To qualify as a telehealth visit, the board requires that the encounter be done using video (as opposed to just audio).  Phone-based telehealth companies won’t be eligible to provide telehealth based on the updated recommendation. Nor would the board recommend that those visits be eligible for reimbursement.

The news is being reported as both a big step forward for the industry (initial consults can move online) as well as a big step back for the industry (it limits vendors' ability to provide services to patients that don't have internet access). Regardless, it's nice to see this channel becoming more officially recognized and sanctioned. For some segment of provider-patient encounters telehealth will lead to better outcomes and significant reductions in the cost of care.

Why Is Foursquare Unbundling?

Foursquare recently announced that they're splitting in two. They're moving the location sharing feature to a new app called Swarm. I've been a fairly loyal Foursquare user for quite some time. And when I think back to why I use it and why I've stayed loyal, I'd say it's a few things (in order):

1. Their search and discovery is really good. It's incredibly useful when I'm in an area I don't know well and random searches like "free wi-fi" or "cappuccino" are really effective. And their GPS is extremely accurate.
2. Foursquare records a history of where I've been. If I'm trying to remember a restaurant that I really enjoyed it's great to be able to look back at my history when I can't remember its name.
3. The gaming component is fun. Their UI/UX is absolutely phenomenal. I have to admit it's pretty satisfying when you check-in.

The one thing I don't use Foursquare for is location sharing. I don't have a large network on Foursquare and I'm uninterested in sharing my location with large groups of people. That said, there are lots and lots of people that love to share their location with the world. But that market was quickly swooped up by Facebook a while back when they released the exact same feature.  So for me there isn't much value to Swarm.

I recognize I'm a sample size of one, but all of this makes me wonder if Foursquare unbundled because they wanted to create two really valuable, standalone apps. Or if the move was more of a spin-off or divestiture of a less valuable and less promising feature (location sharing). I'm not sure. But it will be interesting to see what comes of Foursquare and Swarm as mobile search, discovery and location sharing evolves.

SaaS & Minimizing Buyer Risk

Andreessen Horowitz had a podcast recently on software company valuations. All of their podcasts are excellent by the way and definitely worth listening to when you have some time. This one discussed the fact that, traditionally, big enterprise software deals were sold as "perpetual" licenses. This meant that the enterprise would pay big money upfront for software that could be used forever. This was a nice thing for the seller from an accounting point of view. You'd get big bucks on day one that you could use to pay your engineering team and sales force. Your financials would look really good in that period. The software as a service model (SaaS) is much different. With SaaS, the license is sold as a subscription and revenues and costs are spread out over the life of the agreement. At first glance, the SaaS model doesn't make a seller's financials look so good. When the deal is closed the seller has to pay their engineering team and sales force upfront. All that cash is out the door but the revenue is collected and realized over several years. This is why Castlight Health was called the most overpriced IPO of the century when they went public a couple months ago at a valuation of $1.4 billion on only $13 million in revenue (an outrageous 100x revenue multiple). I don't have a strong opinion on the company or their valuation but what many people in the media missed is the fact that most of that multiple was being driven by the company's "deferred revenue" -- or deals that have been closed but not yet realized from a revenue recognition perspective. Deferred revenue is a critical measure of a SaaS company's health.

I say all of this to make a related point. One of the challenges in selling enterprise software is the buyer's concern about risk -- e.g. a buyer might say "what if we make a big investment in your product and we find that it doesn't work for us, do you provide a guarantee?" When you're selling SaaS (as opposed to a perpetual license) it's important to explain to your buyer that you are totally aligned on risk. The entire SaaS model is built around getting renewals. During the initial contract period, the cost of selling the software likely exceeds the revenue collected so it's critical for the seller to get the buyer to renew. The good news for the seller is that over time the costs are amortized and when the client renews the relationship becomes quite profitable. So the entire model is setup to drive customer renewals -- in many cases, most of the risk is actually on the seller. It's worth explaining some of this simple accounting to a buyer when they push back on risk.

Unlike a perpetual license, the buyer and seller's interests are completely aligned: the buyer needs great software and the seller needs a renewal.

4 Things That Big Healthcare IT Companies Must Do To Stay Competitive

The healthcare IT space is possibly the most exciting and dynamic industry in the United States right now. Healthcare is going through a total transformation driven by massive regulatory change, the “consumerization” of healthcare and the important shift from a system that manages sickness to a system that manages health. Underlying all of this change is the software that runs large healthcare organizations -- specifically, the big EMR systems. Given all of the rapid change in healthcare, the EMR industry -- and the dominant players that lead it -- are ripe for disruption. It's not unlikely that there'll be some big names dropping out of the race over the next several years.

With that in mind, here are 4 things I think the large EMR players should do to remain competitive amidst all of this change.

1. Move to the cloud. Healthcare IT is all about big data. And the large EMR companies host loads of it. In the traditional database space, Oracle and SAP waited much too long to move their data to the cloud. And it seems that some of the big EMR companies appear to be waiting too long as well (though, it's possible they could be making this transformation behind the scenes). Regardless, the fact is that health information is going to have to live on the cloud in the long-term. There is no way around this. Patients are going to demand interoperability of data between their primary care doctor and their gastroenterologist and their dermatologist and their dentist. And there is no way that all of those providers are going to be running the same EMR – the space is way too fragmented. I'd argue that not moving to the cloud is a bigger risk for EMR companies now than it was to the large database companies ten years ago. Patient advocates and regulators are simply not going to allow a big EMR vendor to keep their data in house. Larry Ellison said it took 7 years of development to get Oracle on the cloud. EMRs vendors can't continue to put this off.

2. Open up platform APIs (I mean, really open up platform APIs). I've used the BlackBerry versus Apple's iOS example in the past when discussing this topic. Apple opened up its app store early (effectively employing hundreds of thousands of app developers) and as a result made the iPhone 1,000 times more valuable. Meanwhile, BlackBerry dragged their feet and eventually ended up near bankruptcy. There are a number of reasons why the analogy isn't perfect (EMRs aren't consumer products, there are HIPAA restrictions around exposing personal health information, etc.) but EMRs should take a close look at what caused BlackBerry's demise. Part of the reason they dragged their feet on opening up was that their corporate customers were hesitant to allow their employees to download apps. They let their own customers slow down their development. Now some will tell you that the EMRs have created APIs and are adding services on top of their products all the time. This is not true. Even the most open EMRs are tightly policing the products that plug-in to their platform. The first EMR that takes a true "app store" approach will have a massive advantage. There are a ton of well-funded developers building amazing things that these EMRs can tap into if they open up.

3. Focus on usability. I'm not a doctor and I don't work in a doctor's office. But I've seen enough of these systems and I've heard enough complaints from users of them to know that the usability of most EMRs is not up to par with high quality B2B software tools. This is the classic case of B2B software being bad because it can. These companies have high talent sales teams that only need to sell a handful of executives and the rest of the health system is forced to use it and deal with the usability problems. With the emergence of B2E2B (business to employee to business) sales strategies a lot of this is changing. Staff members expect B2B software to work the same way their consumer tools work (Facebook, Gmail, Amazon, etc.).  Granted, due to high switching costs, the big EMRs can get away with poor usability for a while -- it'll be a long time before EMR software is sold the way Yammer is sold but when big contracts come due in a few years, usability will be a massive competitive advantage.

4. Get out of the B2C business. Many big EMRs are rapidly creating direct to consumer products, mostly in the form of a patient portal. This is being driven by 1.) the belief that consumers will continue to be more and more engaged in their care and 2.) the government is requiring it as part of meaningful use; though it’s mostly being driven by the latter, which is a recipe for really weak consumer products. Take a look at the app store ratings of many of the big health IT apps – consumer expectations of what makes a good app are much too high for an enterprise-focused vendor to meet at this point.  To compete in the consumer space you have to be totally focused on the consumer. It has to be an obsession. Take a look at a company like Oscar Health that has built their entire business around consumer experience. This isn’t a criticism of the EMRs, they do lots and lots of things really well. The point is that they should focus on those things and double down on them. Moving to the consumer space is too hard and too competitive and too much of a distraction.  The better approach is to buy or partner with an organization that is built around the consumer.