The Rising Stakes of Interoperability in Healthcare

Interoperability and seamless data exchange among patients, payers, and providers continues to be a major focus for all healthcare constituents seeking to provide the highest quality and most affordable patient care. Without access to a comprehensive view of patients and their medical records, providers are left partially blind to the status of the patients’ health. This can potentially lead to lower quality care, higher costs and worse medical outcomes. In response, the Office of the National Coordinator (ONC) and Centers for Medicare and Medicaid Services (CMS) have ramped their regulatory efforts in interoperability with their Information Blocking, Patient Access and Prior Authorization Final Rules rolling out in 2021 and beyond. In addition, M&A within data interoperability has recently experienced an uptick with several notable transactions. Going forward, TripleTree believes healthcare interoperability will become even more important, with the government and M&A playing a key role in how the space evolves. In this blog, we provide an overview of recent regulatory actions and summarize the recent, transformational, M&A transactions across the interoperability sector.

Regulatory Tailwinds Improve Interoperability Standards
The push to improve interoperability comes from multiple fronts, with regulators helping lead the way by implementing new rules to help drive change. The Fast Healthcare Interoperability Resource (FHIR) standards are continuously improving and driving standardized data exchange, while CMS and the ONC have used the 21^st Century Cures Act as a springboard to implement new final rules geared towards interoperability improvement. The 21^st Century Cures Act was signed into law in 2016 before being passed to the ONC and CMS for review. Upon review, the ONC and CMS produced two primary new rules, the Information Blocking final rule and Interoperability and Patient Access final rule. While these rules go into effect, CMS is now also implementing the Interoperability and Prior Authorization Final Rule. These regulations are driving real change in the space and creating a better healthcare system for all parties.
 
Information Blocking Final Rule
Passed by the ONC in March 2020, the Information Blocking Final Rule is intended to prevent information blocking and anti-competitive behaviors by constituents across the healthcare ecosystem. Increased data-sharing will facilitate new and more efficient models of care and helps give patients the ability to better manage their own health. Given the sensitive and confidential nature of healthcare data, the rule also outlined eight exceptions that don’t constitute information blocking:

1. Information can be blocked if the party has reason to believe sharing the information could cause harm
2. Information can be blocked if sharing would break HIPAA’s privacy policies
3. Information can be blocked if doing so will protect the security of the electronic health information (EHI)
4. It is not considered information blocking if the request for information is considered not feasible
5. Information can be temporarily blocked, or downtime can be taken, if doing so will benefit the overall performance of the health IT software or system
6. Parties can limit the content of their response to a request for EHI or the adjust the manner in which they fulfill the request in certain circumstances
7. Parties can charge fees with the expectation of making a profit for data requests as long as the fees are transparent and consistent
8. It is not information blocking for a party to license interoperability elements for EHI requests if it is done in a non-discriminatory way

Interoperability and Patient Access final rule (CMS-9115-F)
This rule went live in late 2020 and is going through a multi-stage implementation process through early 2022. Per CMS, the rule is “focused on driving interoperability and patient access to health information by liberating patient data using CMS authority to regulate Medicare Advantage (MA), Medicaid, CHIP, and Qualified Health Plan (QHP) issuers on the Federally-facilitated Exchanges (FFEs)”. Specifically, when fully rolled out, the rule will have implemented six new policies to achieve this goal (some of which are already in effect):

1. CMS-regulated payers will be required to maintain a secure application programming interface (API) which allows patients to access claims and encounter information, including cost
2. CMS-regulated payers will be required to make provider directory information publicly available via an API, enabling third-parties to develop software and services to improve care coordination and availability
3. CMS-regulated payers will be required to exchange certain patient information at the request of the patient, making it easier for the patient to switch payers
4. States will be required to exchange certain data for people eligible for both Medicare and Medicaid, ensuring proper services are available to patients, and minimizing billing mistakes
5. CMS will publicly report clinicians and hospitals that are potentially information blocking, helping patients choose providers offering maximum data interoperability
6. CMS is modifying Conditions of Participation (CoPs) to require hospitals to send electronic notifications of a patient’s admission, discharge, and/or transfer to another healthcare facility

Interoperability and Prior Authorization final rule (CMS-9123-F)
An additional rule in the interoperability space will go into effect in 2023 and require impacted payers to provide information about a patient’s prior authorizations as part of a patient access API, giving patients a better understanding of how the prior authorization process impacts their care. Also, payers will have to report quarterly metrics on use of the patient access API to give CMS feedback on the API’s impact and how to improve the platform. The current prior authorization process is notoriously burdensome and inefficient for providers, with substantial staff resources being used to navigate the process, which ultimately still often ends in delayed care or unnecessary out-of-pocket payment for patients. This improved transparency and documentation process is intended to alleviate many inefficiencies and uncertainties caused by prior authorization for both patients and providers. Further, this rule could ease challenges experienced in a pandemic environment where large swaths of patients visited different providers, increasing the need for solutions such as clinical direct messaging and data sharing.  Much like the patient access final rule, the prior authorization final rule includes a specific set of rules to improve the process for all constituents:

1. Impacted payers must build and maintain a Provider Access API for payer-to-provider data sharing of claims and encounter data
2. Impacted payers will be required to build APIs allowing payers to electronically send prior authorization requests and receive responses and allowing providers to easily locate payer-specific prior authorization requirements. Denial responses will be required to have a specific reason for denial
3. Urgent prior authorization requests will require a response within 72 hours, and standard requests will need to be responded to within 7 days
4. Impacted payers will have to publicly report prior authorization data, including approval rate, denial rate, and average time between submission and determination
5. Payer-to-payer data exchange API will allow payers to reference prior authorization decisions from other payers, with the intention of expediting the process in certain instances

Interest in Interoperability Drives M&A Activity   
Within the past year the space has experienced several transformational M&A transactions that continue to drive momentum, solidifying buyer interest and creating the next category leaders.

• Edifecs, a healthcare technology company, was acquired by Francisco Partners and TA Associates in a $1.8B+ deal in September 2020. Edifecs’ platform revolves around interoperability and data efficiency for payers and providers, with solutions for administrative simplification, revenue growth, value-based care, and data science. TripleTree acted as a financial advisor to Edifecs for this transaction.

• CarePort Health was acquired by WellSky from Allscripts in October 2020 for $1.35B. CarePort is a leader in the Admissions, Discharges, and Transfers (ADT) space, and its platform will enhance WellSky’s care coordination capabilities by improving its ability to manage the acute care discharge process and track patients across post-acute settings

• Verata Health was acquired by Olive in December 2020. Verata offers an AI-powered prior authorization platform for payers and providers. The technology integrates to EHRs and automatically initiates prior authorizations, retrieves payer rules, and helps submit clinical documentation. TripleTree acted as a financial advisor to Verata for this transaction.

• PatientPing, a care coordination platform, was acquired by Clearlake Capital-backed Appriss Health in June 2021. The combined platform will help healthcare professionals collaborate on shared patients across multiple care settings, allowing them to more fully support patients’ physical and behavioral health

• Datavant, a secure data connectivity platform, merged with Ciox, a clinical data exchange platform, in June 2021. The transaction was valued at $7B and created the nation’s largest health data ecosystem. The combined entity, called Datavant, is focused on interoperability between healthcare organizations for a multitude of use cases. TripleTree acted as a financial advisor to Ciox for this transaction.

Opportunities for Consolidation
TripleTree expects innovation and M&A momentum to continue in the interoperability space given regulatory changes and the rise in value-based care (VBC). Although there are multiple areas companies can address within interoperability, TripleTree believes a select series of attributes will establish the leading platforms and best-of-breed point solutions that command the strongest valuations. TripleTree anticipates that attractive M&A targets in the space will have many of the following capabilities (or a clear roadmap to achieve these capabilities):

• Providing access to data from many top EHRs and providers with data collection, sanitation, and improvement capabilities. True differentiators will move beyond collection and storage of data, and into improving data quality as well.

• Enabling quantifiable ROI for payers and/or providers through better data visibility. This can reduce administrative tasks and effort dedicated to non-reimbursable services while avoiding billing mistakes and noncompliance penalties.

• Aggregating patient data across multiple sources in an easily digestible manner for patient consumption.

• Improving and accelerating the ability to find true cost transparency for patients across different providers; bringing the ecommerce model into healthcare.

• Supporting VBC adoption by providing actionable data to risk-bearing providers and value-based payers.

• Providing semantic interoperability and standardization (common, clinically validated terminology) to ensure consistent diagnosis, procedure, medication, and lab data across all clinical systems.

The importance of interoperability is clear as drivers such as regulation, value-based care, and the pandemic require faster, more reliable data exchange between healthcare constituents. Top buyers across both the strategic and private equity space are also showing keen interest in interoperability. Companies that can be agile in a constantly shifting regulatory environment while continuing to provide real value to patients, payers, and providers will set themselves apart, seeing strong growth and garnering attention from the industry’s top consolidators. TripleTree believes this overall market momentum will lead to better interoperability solutions being developed and a more efficient, affordable healthcare system with better outcomes and quality of patient care.