Damian Hagge

Helping companies with Software and Technical Strategy

Disruption in Healthcare Software

by Damian Hagge on October 20, 2016
Disruption in Healthcare Software

I’ve spent 15+ years in software and approximately one third of that in healthcare software. I truly believe that healthcare software is due for disruption and I think there’s a very strong parallel with the disruption that has happened in other industries (e.g. finance, advertising, journalism, brick-and-mortar commerce) as well as the disruption that is currently occurring (e.g self-driving cars).

Why hasn’t the disruption happened yet?

I’m certainly not the first person to believe that healthcare is going to face significant disruption but to date it has been proven to be a sector relatively immune to disruption. While there are a myriad of factors that have worked together to prevent disruption the following three reasons are, in my opinion, the primary drivers.


Healthcare is, of course, a highly regulated business. HIPAA, MU, MACRA/MIPS and Value-Based Billing are just a few of the many regulations that healthcare software providers have to navigate and accomodate. In general the regulations fall into two categories: regulation that protects PHI/PII and regulation that reduces payments to providers.

If I where a lobbyist for EHR and PM companies in 2003 I could not have created better regulatory protection for my business than HIPAA Title II which essentially allowed those companies, and hospitals, to silo their data and wall it off from competition. Of course, the spirit of the law was to allow patients to “own” their health record, but in practice the regulation served to entrench EHRs and raise the barrier to entry for software companies looking to compete with the existing EHR/PM solutions. This has resulted in, quite frankly, antiquated and inflexible healthcare software solutions and products.


Healthcare is generally both consumed and administered by an older demographic. Patients, of course, require more care as they age but physicians also skew much older than other industries. Some studies have found that the average age for actively licensed physicians is 51 years old! This has resulted in a less technically savvy industry from both the consumer and provider side of the equation. Demographics are, however, destiny and as time progresses and younger doctors start requiring modern software solution (after all they experience modern technology everywhere else in their lives) as well as patients become more technology (especially smartphone) savvy.


One interesting feature of healthcare is that every practice or provider group I seem to encounter has a different business processes, in other words everyone thinks they’re a unique snowflake. It’s really an incredibly unstandardized industry. This causes two main issues: software solutions have to be far more flexible and it’s very slow to scale/sell a software solution into the industry. I’ve seen this firsthand, how difficult it is to sell and scale across the healthcare industry when compared to other industries. I’m my opinion EHRs aren’t much more than complex CRM systems but that is also an oversimplification of the differences between the types of systems.

Where will disruption come from?

So healthcare software is a morass and will never modernize? Not at all! I really do believe we’re seeing the seeds of change.

Consumerization of Healthcare

We are now in a country where high deductable health plans are the new normal. This is really a sea-change from the days when insurance paid our medical bills with minimal co-pays or balance bills. We are now usually accountable for 100% of our healthcare costs until we reach our deductible and cash pay is becoming cheaper than negotiated insurance rates.

Consumers may not be shopping around en masse yet but it will certainly become increasingly common since deductibles are only going up. Anecdotally, most people I talk to on high-deductible plans now ask what the cash-pay prices are and pay cash if it’s cheaper. This is better for many doctors as well since they don’t have to deal with the byzantine rules of healthcare payments when their customers are paying cash.

The net effect is that consumerization of healthcare will subject healthcare to the same pricing pressures that almost every other industry in America faces, and that is a huge catalyst for change.

Low cost services

So much of healthcare has operated like a steak restaurant without posting prices on the menu. In addition, there are virtually no actors in the industry that benefit from lower prices. However, due to consumerization of healthcare and high-deductible plans there is now a real possibility that if low-cost solutions are offered in the market consumers may be ready to consume them.

The convergence of telemedicine and doctors on demand (i.e. providers or nurse practicioners that come to your home and don’t have fixed office costs) could truly provide incredible gains to the company that can first bring the cost of a visit and/or diagnostics below the price of a co-pay. In addition, the companies that can truly deliver low-cost care could avoid payment-based regulation since they’re no longer reliant on insurance companies for their payments.

After all, low cost solutions is how much of the technology disruption in other industries occurred.

Maybe what providers do isn’t that complex?

A third reason why disruption may be closer than we think is a somewhat controversial topic. It is very possible that what healthcare providers do day-to-day isn’t nearly as complex as we are led to believe. Many of the providers I’ve spoken to, possibly with the exception of surgeons (although that may also be debatable), actually don’t have an extremely complex decision making process, and if there is one thing technology excels at it’s automating routine processes out of existence!

We’re still missing some of the key pieces before this can become reality, specifically lots of accessible data against which to apply machine learning, but in my experience many of the decisions and functions that are done today in healthcare could be done cheaper and with less error by automated processes. Of course the current generation of healthcare software probably won’t deliver this, but big data and machine learning are improving at astounding rates and there is certainly an inflection point at which algorithms will be able to perform these tasks as well, or better, than humans.

Eventually machine learning and automation will be able to perform much of the current healthcare model and processes, the question isn’t “if” but “when”, and “when” may well be sooner than we think.

The future of healthcare software

Google disrupted advertising, Amazon disrupted commerce, Netflix disrupted video rentals and cable, Uber/Lyft disrupted taxis, self-driving cars will disrupt trucking and the automobile industry. Healthcare may be complex but it’s not a unique industry that somehow cannot be disrupted. It will happen gradually at first, but, as seen in other disrupted industries, when critical mass is reached I believe it will change very quickly and many companies will go out of business due to antiquated systems and software.

Imagine a world where we can consume healthcare like we consume everything else, in the comfort of our own homes: digitally for things that don’t require physical interaction (most doctor visits), on-demand for those that do (e.g. mobile physicians, diagnostics, etc). All at a lower total cost than what we pay today, with better software-supported decision making and outcomes. This is the path that disruption has taken in other industries and also the path which I believe healthcare will inevitably take.

I truly think that the future of healthcare will be bright once the disruption starts. When will that be? Well I’ll have to dust off my crystal ball and get back to you on that one… but I do think that the seeds are already planted.

Tags: healthcare disruption