This week's GovernmentHealthIT reports the dissolution of the Northeastern Pennsylvania Regional Health Information Organization ("Pennsylvania RHIO to close"). This follows on the demise of the Santa Barbara County Care Data Exchange. In the coming weeks another relatively high profile effort will announce their decision to dissolve.
There are over 200 HIE efforts across the country, most still burning through their initial grant funding, trying to find the elusive "sustainability" model. None have yet been able to replicate the successes of the only self-sustaining efforts to date: Indiana Health Information Exchange, HealthBridge, and MA-SHARE.
It's worth noting that the lines of business that have made these efforts sustainable so far haven't been about ubiquitious sharing of data, per se; success in these efforts has come from creating a single "pipeline" that efficiently channels disparate streams of data. The successful product/service areas have used technology to create economies of scale in basic backoffice functions, and collaboration to convince participants to outsource these functions to the "RHIO".
This general model can be replicated in many other places, so there's still plenty of opportunity out there, but it's not a universally applicable solution. Making this model work in other places where it fits, and establishing other value-generating product/service areas where the model doesn't fit, will be key to getting more RHIOs firmly in the win column.
Friday, June 15, 2007
Wednesday, June 06, 2007
David Brailer Returns
Today's New York Times reported the launching of Health Evolution Partners, a private equity fund led by Dr. David Brailer. Everyone in the area of health IT will remember David, the first National Coordinator for Health IT (ONC) and architect of the Strategic Framework for Health IT.
Brailer's idea is to apply private equity (he has $700M from CalPers to start) to a new type of niche: products and services that can exploit new developments in health information exchange to reduce fragmentation of care and improve quality, safety, and efficiency of health care delivery. This hasn't been an area that has typically drawn much private capital for a few reasons.
First, there are barriers to entry in becoming a domain expert. Health care delivery is so darned complicated that there are fewer people with both deep domain knowledge and investors' acumen than there are in other market sectors.
Second, investments in health care delivery don't typically meet the hurdle rates that typical venture capitalists apply to their investment decisions. The health care delivery value chain is convoluted, at best, as are the distribution of costs and benefits across the value chain. In addition, while the costs are crystal clear, the benefits aren't; benefits such as reductions in ED visits due to better preventive care, for example, take a long time to get realized and are hard to measure.
Finally, a lot of investors just think that health care delivery isn't really a market, and thus, they don't want to invest in a sector where they don't know the rules or how the rules are made. I used to work in the Pentagon and found a similar attitude among many investors toward the defense industry.
Yet, there's opportunity in health care delivery for those who can thread their way through the thicket. It requires some patient capital (perhaps VERY patient capital) and a unique combination of expertise in the nitty-gritty of health care delivery, business/economics, and technology. Health Evolution Partners seems like it's got the perfect combination of these assets -- I wish them well.
Brailer's idea is to apply private equity (he has $700M from CalPers to start) to a new type of niche: products and services that can exploit new developments in health information exchange to reduce fragmentation of care and improve quality, safety, and efficiency of health care delivery. This hasn't been an area that has typically drawn much private capital for a few reasons.
First, there are barriers to entry in becoming a domain expert. Health care delivery is so darned complicated that there are fewer people with both deep domain knowledge and investors' acumen than there are in other market sectors.
Second, investments in health care delivery don't typically meet the hurdle rates that typical venture capitalists apply to their investment decisions. The health care delivery value chain is convoluted, at best, as are the distribution of costs and benefits across the value chain. In addition, while the costs are crystal clear, the benefits aren't; benefits such as reductions in ED visits due to better preventive care, for example, take a long time to get realized and are hard to measure.
Finally, a lot of investors just think that health care delivery isn't really a market, and thus, they don't want to invest in a sector where they don't know the rules or how the rules are made. I used to work in the Pentagon and found a similar attitude among many investors toward the defense industry.
Yet, there's opportunity in health care delivery for those who can thread their way through the thicket. It requires some patient capital (perhaps VERY patient capital) and a unique combination of expertise in the nitty-gritty of health care delivery, business/economics, and technology. Health Evolution Partners seems like it's got the perfect combination of these assets -- I wish them well.
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