Over the past decade, interoperability has become one of the most notable buzzwords in healthcare. From value-based care (VBC) and prior authorization to enterprise AI and data infrastructure, the need for quick and simple sharing of data between payers, providers, and patients drives business decision-making across the healthcare sector. However, despite this systemic need for data, few organizations have had clear definitions or repeatable systematic approaches to implement “interoperability.”
In recent years Untangle Health has seen the industry begin developing a clearer understanding of what interoperability means in practice. The regulation-inspired push towards a baseline FHIR standard for data exchange means that organizations across healthcare are increasingly building in the same direction, with a common syntax, and a soon-to-be more standardized data schema.
This trend towards FHIR has led to stratification in the healthcare sector. For the first time, interoperability maturity has become a strategic advantage for organizations pushing the envelope on data infrastructure. Today, the market has reached a tipping point. Organizations are no longer solely pursuing interoperability because of market pressures; instead, they are optimizing for short- or long-term needs tailored to their own organizations’ strategic vision.
Yesterday
Roughly 30 years ago, faxing was the standard for data sharing in healthcare. Since then, digitalization has exploded. From 2011 to 2014, meaningful use requirements pushed organizations towards EHR adoption, bringing patient records online and ushering in a vast array of new possibilities for data-driven care. Third-party applications and HCIT quickly followed EHRs into healthcare networks, facilitating data collection, integration, and analysis. However, closed systems were common, and not all patient records could be easily exchanged between organizations. A first attempt at a common interoperability “language” resulted in HL7, but acceptance was mixed at first. HL7 is now a standard format, but still requires custom point-to-point integrations, resulting in high maintenance costs and high switching costs, due to dependence on integration partners.
| “Interoperability” Yesterday | |
| Format(s) | Fax, HL7, X12, some proprietary APIs |
| Use-cases | Specific, few use-cases |
| Hosting | Local / On Prem |
| “Interoperability” | Custom point-to-point, some inefficient networks |
| Switching Costs | Highest |
Today
Organically, organizations have been evolving their architecture and interoperability methods in line with technical advances in cloud computing and distributed infrastructure. While healthcare is often viewed as a laggard compared to other industries, we have seen substantial advances in the past decade. Where yesterday focused on “pooling all of your data into a data lake,” systems today are moving towards distributed cloud implementations, with rising cloud costs requiring optimization and reducing duplication of data. The spike in healthcare venture funding in the same period created a wave of healthcare IT companies with sights on “disrupting” legacy formats, data monopolies, and inefficiencies. Jointly created by this new wave of startups and legacy players connecting to those startups were a new set of external-facing APIs and services. While these proprietary APIs had similarly high switching costs to the integration formats of the past, they allowed for more precise data sharing, new types of just-in-time data requests with RESTful APIs, and allowed for healthcare’s migration from monolithic on-prem platforms to more modernized, microservice oriented architecture.
The tipping point came with the 21st Century Cures Act, with the Department of Health and Human Services banning information blocking, pushing healthcare organizations to more readily share information across the sector. The Cures Act also required provider organizations to support a subset of read-only FHIR APIs, setting a standard format that would reduce switching costs and create standardization across the industry. This was closely followed by a 2023 mandate requiring that patients be able to easily access their health data through third-party applications and interfaces. These requirements made it even more important for healthcare organizations to be able to quickly exchange data in a unified format, and APIs (specifically FHIR) became an increasingly common solution.
This year (2024), CMS published a final rule giving payers until 2027 to share data with providers, patients, and other payers through single APIs, as well as to maintain a prior authorization API to reduce time between requests and coverage decisions. These mandates also require payers to comply with FHIR standards, pushing a large portion of the healthcare sector towards a single data standard. When coupled with TEFCA’s push (via mandatory responses) for participants to move to FHIR APIs, the healthcare sector has almost reached critical mass for widespread FHIR adoption – and proving the elusive interoperability baseline that has long been missing.
| Interoperability Today | |
| Format(s) | APIs and FHIR APIs(Still some fax, still lots of HL7 & X12) |
| Use-Cases | Broad / Many |
| Hosting | Hybrid, cloud-first |
| “Interoperability” | More network-based approaches, slightly better networks, still many point-to-point connections but often brokered by middlemen / integration hubs which reduce the burden for individual organizations |
| Switching Costs | Medium (depends on format, scenario) |
Tomorrow
In this new reality, healthcare organizations face a future where they are no longer merely following general market movements towards interoperability but are instead building data infrastructure and interoperability strategies tailored to their own vision. In the next five years, Untangle foresees a healthcare sector where FHIR-based interoperability is the true standard, with an agreed-upon, mandated, unified schema (maybe USCDIv6?) that encompasses ICD10 level detail. Broad national networks such as TEFCA will replace the fragmented, localized networks, providing national data liquidity in this shared format. With switching costs drastically reducing based on the unified format and broad data access, relying on health data moats will no longer be a standalone strategy.
To navigate this future, organizations need to decide who they want to be when they grow up, and decide where they want to place their bets for long-term strategic differentiation. If everyone has access to the same data, how are you planning to keep your business differentiated?
| Interoperability Tomorrow | |
| Format(s) | FHIR APIs (and the long tail of legacy formats slowly diminishing?) |
| Use-Cases | Broad / Many |
| Hosting | Cloud-first, private cloud growing, some hybrid |
| “Interoperability” | Broad access to data for specific use-cases in FHIR |
| Switching Costs | Lowest |
How to Interoperate with Intent: It’s Time to Develop Your Integration Strategy
To effectively respond to the changing landscape, healthcare organizations must answer a series of basic questions:
1. Why are you interoperating? Organizations should determine which goals are high or low priority within each window, then shape their data strategy around achieving those targets. For example, a payer prioritizing compliance with CMS regulations may use FHIR APIs in the short term to collect data on patient outcomes to improve its star score while building out its own prior authorization and patient access APIs for 2027. Building a data infrastructure for interoperability looks different based on the end goal of each organization: an HCIT vendor simply seeking to remain compatible with FHIR-based organizations may pursue a FHIR Façade wrapper, while a large health system pursuing commercial growth or efficiency may need a more robust and time-intensive FHIR Repository build.
2. With whom should you be partnering? Based on the answer to the first question, organizations need to find an interoperability partner or invest in developing these capabilities in-house. The level of data infrastructure needed, including the choice between a FHIR Façade vs FHIR Repository, and the top priority objectives, such as compliance or clinical insights, will largely dictate which type of partner makes sense. For some organizations, a digital health vendor or even a general data solution may suffice. However, for large organizations seeking to build out an entire data infrastructure in native FHIR, a vendor with deep data, software, and healthcare expertise may be necessary.
3. How to think of data defensibility? Finally, for much of the evolution of data-driven healthcare, access to more data or proprietary data has provided an immense competitive advantage to the largest payers, providers, EHRs, and HCIT vendors. However, with information blocking mandates and a trend towards FHIR API-enabled interoperability, these same organizations must decide how to continue extracting unique value from data even as data defensibility wanes. The loss of data moats will only be amplified as patients and other organizations can generally query and receive data in a standard format from any other organization via API. Therefore, it is crucial for leading organizations to develop better interoperability infrastructure and more sophisticated data manipulation and analysis tools to stay ahead.
Each healthcare verticals’ and organizations’ needs and capabilities are different. In addition to these core questions, here are some other questions to consider as you plan for interoperating tomorrow:
| Term | Payer | Provider | Pharma | HCIT |
| Short | How can we transition FHIR compliance into a modernization opportunity? What changes to our interoperability and data strategy need to change today to set us up for success tomorrow? How do we use better data access to improve quality (STARs, VBC, etc.)? | How can we transition FHIR compliance into a modernization opportunity? How do we transition to value-based models? | How do we benefit from new interoperability use-cases and data sharing? How do new tools and formats improve drug discovery, research, digital experiences, and supply chains? | What opportunities exist today to enable interoperability and modernization efforts for payers, providers, and pharma today?What key aspects of our business will be commoditized by the upcoming standardizations? |
| Long | How can we stay differentiated long-term? What value-add services and products will still be needed in an “open-sharing” world with a unified format? | How do we retain our strategic advantage in a world of open data sharing and “turn-key” cloud infrastructure? What aspects of our core businesses will need to adjust as data liquidity becomes a norm? | How can we stay differentiated long-term? What value-add services and products will still be needed in an “open-sharing” world with a unified format? | How do we view the roles of our partners? Do open formats change our needs from HCIT, CROs, and other technical partners? How do data transparency and broad sharing impact our role in the market? |
As interoperability becomes a base expectation of the healthcare sector, winning organizations will approach the new data environment with a clear strategic vision and the infrastructure to make that vision a reality. Organizations that derive unique insights and value from the ever-growing pool of accessible data will be best-positioned to succeed in the next decade of healthcare sector development.
