Why Data-Backed Innovation Is The Medicine Healthcare Needs

Among the more unnerving surprises of the coronavirus pandemic for most people was learning just how vulnerable and thinly stretched some areas of our healthcare system really are.

Between the panic over personal protective equipment (PPE), the concern over not having enough hospital beds and the interstate bidding wars for ventilators — the worries became so severe that shutting the entire economy down to flatten the curve seemed the only way to be certain that the entire system would not collapse under the strain as it came perilously close to in Italy.

“I think we are seeing widespread frustration with the current state of affairs,” Menlo Ventures Principal Croom Beatty told Karen Webster during this week’s edition of the Monday Conversation. “We’re living in the wealthiest country in human history, and the fact that these issues still exist, it’s very disappointing, and it feels like something that technology should be able to address.”

It feels that way, he noted, because technologies do exist to begin mitigating and reversing some of the vulnerabilities the COVID-19 pandemic has exposed — something he knows firsthand since his company focuses on investments in firms developing innovative technological upgrades to the healthcare vertical.

The segment has nonetheless been slow to move, he noted, due to a host of headwinds constantly blowing against innovators, such as the antiquated electronic data interchange (EDI) system, the fact that before 2009 most health records were paper files, and the reality that there are a host of electronic health record (EHR) vendors who have a vested interest in preserving “ossified data silos” that they’ve built because their control of that data is a significant revenue stream.

Plus, he noted, it is a heavily regulated field in which the focus on consumer privacy is tightly honed and submerged in a veritable ocean of bureaucratic red tape.

Making anything move fast has historically been a challenge, he noted, although in recent years the company has seen progress in both the innovations pushing forward — new programming languages and messages formats to supplant the over half-century-old EDI system buttressed by recent regulatory changes prioritizing data portability.

And, in the wake of the crisis, he noted, perhaps the most important ingredient of all has been added when it comes to pushing forward the next generation of healthcare innovations.

Breaking The Data Silos

The problem with data’s uneven and slow flow between the various stakeholders in the healthcare ecosystems — patients, providers, payers (insurance companies), pharmaceutical companies — is how much of the system’s most basic components are completely opaque to the players who most need to have access to them. By way of personal example, Beatty noted that he recently had some preventative surgery that ended with him receiving a bill for $4,000 for his share. That outcome was expected not in the sense that his out-of-pocket shares of medical expenses have risen sharply and consistently over the last several decades and he’d have to foot some of the bill, but because no one he spoke with at his healthcare provider’s office could explain why it was so expensive because they simply didn’t know.

“When you go to buy a car, you know what you are going to pay,” Beatty told Webster. “When you purchase a house, you know what it is going to cost. But when one consumes healthcare services, the consumer has no idea what the cost is going to be when they get the bill, and when they call to question their provider, they can’t explain it to them.”

Given the complicated series of 10,000 or so procedure codes and the complex interplay with insurance payer rules, the billing process is often as confusing to the provider as it is to the patient.

It’s why, he noted, Menlo has invested in Rivet Health and why he sits on their board. They are attacking the pain point by taking all the mystery out of the process and allowing both the patient and provider a way to see a highly accurate estimate of their out-of-pocket cost, which in turn allows them to begin to design a payment plan and path ahead of time.

Menlo’s most recent healthcare investment is in a data firm called Particle that Beatty called “the Holy Grail” firm when it comes to making data mobility happen in healthcare. Particle has an advanced product that makes it easy for consumers to authorize their healthcare information to be shared among providers. In the same way Plaid works to give consumer control of their financial data, he noted, Particle offers a similar ownership path for consumers when it comes to their healthcare information.

“And if you think about [it], this is the underlying kind of innovative building blocks that single digital health application or telemedicine provider needs,” he said. “To treat a patient, they need data. To prescribe something, they need to know what their history is, if they have allergies.”

And while building those foundational layers have been challenging, firms like Particle and Rivet have pushed through and started constructing the critical innovations the entire segments needs to evolve to its next level.

Charting The Change

While much of the world has been impacted by COVID-19, Beatty told Webster, healthcare in the U.S. is a $3.6 trillion market — and although the pandemic has created a massive impetus to change, change can’t happen overnight.

He said he believes change is coming because the crisis has made it clear how important it is to be able to move relevant healthcare information smoothly and securely. The crisis will go away, but the desire for a better, more efficient healthcare system — one where it is clear that the data can do a lot of good for a lot of players in every part of the ecosystem — will stay.

“I am very hopeful,” Beatty said. “I think we have the entrepreneurs who want to do this and who are putting in the effort. It’s still early innings, and I don’t think by next year everything is going to be solved. But compared to other points in my investing career, I’m more hopeful that all of these problems are the kinds of things that are starting to become addressed.”