February 23, 2013

Transforming business models in Health IT

eHealth Interoperability is an overused buzzword. But interoperability is still instrumental for us to access disparate health data and use it. And we need to meaningfully access and merge more and more data to drive innovation, develop new eHealth services and create new added value of Health IT (HIT).
In PARENT, we observe an increased desire from EU member states (i.e. regional and national patient registries) for the EU to increase interoperability efforts - even taking it as far as to providing interoperability frameworks and toolkits. I think this can be attributed to registry holders' interest to reduce the risk of vendor lock-in as well as to prepare for the implementation of the Cross-Border Healthcare Directive. Similarly, in epSOS (brief description in my previous post) Member States benefit from epSOS not just because of the future cross-border scenarios but also from applying the same principles on national/regional level and reducing the future national cost of interoperability.

The need for more interoperable data creates a marked effect on the HIT value stack and ultimately the HIT market. The need for interoperability is changing the relative importance of elements in the value stack.  The traditional HIT value stack in the market today is composed (starting at the bottom and moving up) of hardware, a (thin) interoperability layer, software and services. Typical HIT vendors usually provide at least the software and services components but often also the rest of whole stack.
The need for interoperability is increasing the relative added value of the 'interoperability' component. And this component is in nature quite different from the other components - it pushes vendors to open up content, to reduce the lock-in they create by storing data in vendor specific information models. Thus it pushes them to give away a valued competitive advantage - vendor locked health data. Applying Porter's Five forces diagram this reduces the entry barriers for new entrants as well as opens up opportunities for rivals, possibly even substitutes - all this because health care providers could now migrate their health data. And this eventually leads to de-fragmentation of the eHealth market.
For health care providers, national and EU decision makers this is a good and wanted effect as it enables us to access and merge previously locked islands of vendor specific health data, extracting further value from it for better policies and better care.
For existing IT vendors, this is a turning point – if they don’t change their business models and keep relying on the lock-in effect, not the quality and price of their services, they might be overtaken by those who will. A new line of companies focussing on data transformation is emerging, turning vendor-locked data into shareable data. And as a side effect many more companies are using new (XAAS, plug-and-play style) business models in areas where once deemed impossible (business intelligence, clinical decision support, business rules and process management). The ‘interoperability’ buzzword is live and kicking.

Do you agree? Please let me know of your views and comments - I will update the post accordingly.

This post is based on some of my thoughts at the 'Economics of Interoperability' round table at World of Health IT 2012 in Copenhagen (with Prof. Charles Jaffe as chair and Catherine Chronaki, Fredrik Linden, Rick Cnossen and myself as panelists). Figures 1 and 2 ©MaticMeglic

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