Entrepreneurs Outlook For The Healthcare Cloud Is ... Cloudy - Westhill Consulting Insurance

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Entrepreneurs' Outlook for the Healthcare Cloud
Is ... Cloudy
Westhill Consulting HealthCare
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Ive 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.
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First, the pros 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)
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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 Athena Health, declared
passionately It stinks paraphrase to be a
healthcare entrepreneur because you cant get
your hands on the data.
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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 FDAs commitment to tried and true
double-blind trials as the gold standard for drug
approvals.
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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.

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Its 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.
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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.

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Tim Draper once told me Great entrepreneurs
dont know what cant 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 True Vault
cloud-based database-as-a-service that complies
with healthcare regulations Clear DATA
cloud-based storage (one level lower in the stack
than True Vault, similar to Amazon S3) that meets
healthcare regulatory requirements As well as
companies offering specialized applications that
utilize healthcare data from multiple sources