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The Shift from Systems of Record to Systems of Collaboration Will Define Healthcare Innovation for the Next Decade.

Our healthcare system is at an inflection point. The optimistic perspective is that it now seems more likely that the industry can come together to address many longstanding challenges that have traditionally limited our ability to deliver care in more efficient, effective ways. To succeed, innovators and enterprises need to shift from scaling up systems of record for enterprises to creating systems of shared record for collaborative networks. This transition represents the greatest healthcare opportunity in a generation.

Current Systems of Record

For many years our industry has invested in processes, standards, and technology that have hardened today’s siloed approaches. We have continued to invest in siloed systems of record, even though we know that healthcare is a team sport and the clinical setting is only responsible for 20% of our health. Eighty percent of our health is social, behavioral, and environmental.

The concepts of interoperability and decentralization that we espouse are not new, yet our systems, standards, and processes wed us to centralization. The design of these centralized systems is not optimized for the characteristics of value, transparency, aligned incentives, or trust across organizations which are crucial to solving our cost and access problems. They were designed at different times for different purposes. They were designed to serve the bottom line. Now they need to be optimized for patients, connectivity, and trust. They need to be re-balanced to become more accountable in today’s relationship between commerce and care.

In the past, healthcare seemed comfortable with systems of centralization even though we understand that what we’ve implemented (at great expense) falls short of what we need now in terms of orchestrating increasingly complex processes across distributed networks.

Electronic Medical Records

US expenditures on electronic health records (EHRs) are forecast to total $19.9 billion in 2024. The investment in these scattered sources of truth for patient records has been an important first step in creating digital systems of record for hospitals, but it is the next step of creating “cooperative agreements,” accelerating payment reform, and promoting interoperability that will make these investments pay off.

The designers of the existing systems had the primary requirement to generate clinical revenues for hospitals. That’s certainly important to the health of a hospital, but not always aligned with value to the patient who is having a hip replaced or who has received a cancer diagnosis.

We now understand that a relatively small percentage of our health has to do with things that happen in a clinical setting. The majority of our health depends on a variety of social, environmental, and behavioral factors not captured by traditional EMRs.

Our accelerating shift towards consumer-driven healthcare, consumer-generated data, unbundling, and value-based care has changed the requirements for medical records significantly. The new focus is on whole-person medical identity and reputation, which depends on data assets that are sourced largely from outside the clinical setting and should be controlled by the person.

Enterprise Resource Planning & Materials Management Systems

ERPs, the technology backbone of many companies, are designed to be a source of truth for business and product information at an enterprise. Like EMRs, ERPs have been a force for centralization and standardization in healthcare. They were never designed to look across an ecosystem of supply chain partners.

That job cannot be done by one ERP alone.

A well-functioning supply chain requires excellent materials data and processes not just within one company but across the value chain. The job of keeping supply chain databases accurate, complete, and attributed with all the necessary tactical and strategic data assets is difficult, especially this year as we have expanded those data files with non-traditional assets from non-traditional sources.

Data mismatches between companies frustrate clinicians, drive up costs, and impact patient care. Market-level automation opportunities exist if we can pivot to a shared source of truth across a supply chain, rather than maintaining discrepant sources of truth per company. IoT, wearables, and other data from the ecosystem are important tactical and strategic enablers. A more transparent supply chain enables faster, more efficient, more secure operations, which means getting the right product to the right patient at the right time and at the right cost.

Insurance Systems

Payers are realizing they have a lot to gain by looking outside the walls of their organizations. Whether it’s administrative tasks (ex. administering benefits, adjudicating claims, managing directories) or strategic imperatives (ex. assuming risk, paying for value, engaging consumers, sustainably providing expensive precision therapies to beneficiaries), there are many important problems that payers can’t solve alone. Solving these problems means insurance companies need to look outside their four walls for symbiotic partnerships including with providers and other payers.

One simple, but expensive and burdensome example is the coordination of benefits (CoB). This is the process by which two or more carriers coordinate their respective benefits so that the total paid amount does not exceed 100% of the allowable expenses. There are established rules to determine the primary and secondary payer, which makes this use case ripe for multi-party automation. Solving CoB issues could be an excellent gateway to solving bigger shared problems for payers.

Payments & Claims

The business transaction is the primary unit of value in healthcare today. Claims are designed to be a single source of truth for a business transaction between a provier and a payer. Claims are routed through large clearinghouses that check the claims for business errors and verify business compatibility. The EDI standards are designed to carry all the transactional business data necessary to communicate from a provider to a payer.

As we shift to paying for value (the relationship between cost and quality), the business-focused standards and processes start to break down. The payment infrastructure we have adopted doesn’t perform well when you consider the integration of clinical and real-world data, which are critical to the shift to value. The claims rail cares only about the business data, leaving payers, providers, and patients with costly, frustrating experiences. It is impossible to imagine scaling up reimbursement for precision medicine therapies based on claims data alone. It requires a real-time understanding of value leveraging data from many systems.

Clinical Trials Management Systems

In 2018 the median cost of a clinical trial was $19M. That year the FDA approved 61 novel drugs, the highest number ever by over twenty percent. It is critical that the industry innovate to reduce the cost of getting drugs to market.

One cost-cutting tool coming to life is virtual decentralized clinical trials that enable the collection of active signals in real-life settings, making it easier for patients to participate in trials from wherever they are. The FDA seems to be in favor of these new techniques, voicing support for decentralized trials in the recent Senate appropriations package.

To be successful, these more collaborative approaches will need to connect patients, caregivers, clinicians, investigators, and life sciences companies in new ways to improve patient recruitment, matching, and retention.

New Networks Solving Shared Problems

When it comes to data, there is a general realization that no single company has everything it needs. Good data often exists, but it is not evenly distributed. No single company has a complete picture of a person or a product. No single hospital has all the credentialing data needed to allow new physicians to treat patients efficiently. No single supplier has all the supply chain data they need to efficiently plan production and effectively market products. No single-payer has all the directory data they need to avoid fines. Pharma companies benefit from federated drug discovery and therapy development. And where no good data exists today, we need to reward its curation.

The transformation has already begun. We are seeing evidence of new collaborative behaviors in every corner of our healthcare industry. Around the country, we see new regional supply chain networks constructed of formerly competitive health systems banding together to acquire PPE. The Health Utility Network, the Synaptic Health Alliance, and Professional Credentials Exchange are examples of networks of large, brand name payers and providers collaborating to better manage credentialing, directories, and overlapping business processes. PharmaLedger is an example of a consortium of the largest pharma companies in Europe coming together (under the public-private partnership Innovative Medicines Initiative) to develop jointly operated solutions for clinical trials, data exchange, payments, supply chain, and research. We see a variety of companies convening pharma companies and payers to improve the management of shared outcomes-based contracts and new ways to pay for expensive, life-saving therapies. And we see traditional and non-traditional healthcare enterprises banding together to understand social determinants.

The business of healthcare is about the relationship between commerce and care. It must respect the chronological connectedness of business data, clinical data, and real-world data from a wide variety of sources. The ability to take risks has everything to do with operational intelligence that is not fed by today’s claims rail. A well-functioning supply chain has everything to do with data that sits outside one ERP. Patient care has everything to do with intelligence that sits outside one EMR. It’s not about one enterprise. It’s about the networks that wrap around the patient.

The Power of the Enterprise Ecosystem

As we shift the focus from enterprise sources of truth to ecosystem sources of truth, we become more capable of empowering companies, communities, and consumers with their data. We can accelerate the phasing out of rent-seeking behaviors that add cost and stymie innovation. Enterprise Resource Planning will be extended to Network Resource Planning. Rebates and charge-backs, which are poorly designed incentivization structures, can be replaced with real-time value transfer based on automated, clinically-integrated shared ledgers.

The big, innovative ideas in healthcare and pharma today require non-traditional, bi-directional data flow. Collaboration requires a shared source of truth for community-curated data and community-optimized processes. These new industry data frameworks enable market-level value creation beyond the EHRs, ERPs, and traditional standards-based processes.

Massive opportunities exist for enterprises and startups who can create the tools that enable these new constructs. The technical, business, and governance requirements for these new systems vary based on the use case, but generally, they all treat the patient (not the claim, or the transaction, or the product, or the process, or the service, or the technology itself) as the unit of value. And it is critical that they optimize for privacy, confidentiality, and patient empowerment.

A Shifting Paradigm for Innovation

Traditionally, startups and innovating enterprises have done well by focusing on specific transaction-focused steps of the patient episode or the value chain process. While these solutions may have improved parts of the process for a single company, they often added to the total cost of care by re-enforcing redundant processes and administrative burden. Healthcare is a team sport and we no longer have time for building and reinforcing walls that get in the way of caring for patients, sourcing products, or getting a life-saving drug to market.

There are root challenges such as identity, payment, and industry automation that are core enablers for the shift from siloed to connected systems. These root challenges are big and hairy. They require trust, transparency, and alignment. Such challenges are only solved through collaboration and market-level innovation. If we don’t design for collaboration, we are at risk of continuing what have been disappointing results when it comes to innovation in healthcare. The traditional, siloed, “every CFO for him/herself” approach will not work. These industry-level solutions require systems-level thinking and a focus on shared value.

Fixing the shortcomings in our systems of record will require a shift in perspective and an openness to working in new ways. It will require an uncomfortable realization that those expensive, exhausting Epic and Peoplesoft implementations are not going to get you there. Nor will new internal reports or AI initiatives that look to optimize your internal processes. It’s time to shift our thinking to an interconnected market. New, iconic companies will be born by leveraging new technologies that are optimized for trusted connectivity.

Distributed healthcare operating systems are the great hope for addressing the fundamental challenges in healthcare today. This will be the general construct used by the most successful solutions of the next decade.

Hashed Health is a venture studio specializing in collaborative innovation in healthtech, healthcare fintech, health insuretech, and supply chain tech. Interested in collaborating?

Contact us.

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