The Silo Tax

Healthcare data lives behind walls by design.

The walls were designed for protection, and that is not inherently a bad thing. Protecting personal health information is sacrosanct and should be built into every system by default. There are also the walls and moats around the data that the public is less familiar with. These legacy protections are an unruly hybrid of happenstance and design, fortified so long ago that you can barely see where the walls are. Like the castle of the evil Queen in Snow White, the entire edifice is overgrown with brambles and weeds, guarded by rusted gargoyles and stone steps so slippery and cracked that none dare tread.

This system has an immense price tag, paid by all of us in both dollars and minutes, a price we are paying for a system that does not actually provide the privacy it claims to. Just the logistical and procurement system failures cost the United States approximately $25 billion a year in our hospitals. This is dollars spent on the wrong thing, at the wrong time, and the cost of empty beds and unused operating rooms. It is the expense of the missed opportunities that our locked-up healthcare supply chain data costs each year. Those brambles and moats and walls cost each and every one of us. That is the spread between what coordinated, shared data can deliver, and what fragmented, redundant, manually verified data delivers today. It is the gap between knowing and guessing.

Why is the bill so high? It is because the data intelligence layer is so low.

Every claim, every order, every patient encounter, and all the tools and supplies that power that care are verified, re-verified, and verified again across systems that do not talk to each other. Inventory counts go stale as manufacturing facilities sit idle, unsure of what to produce for a system with far too few accurate feedback loops. Data that should flow among the people who make things, the people who sell them, and the clinicians, researchers, and first responders who use them is stuck in aging databases and software programs. Much never makes it into the system at all, instead riding around in the heads of people who do this work every day. It goes unrecorded and at best is guessed at, anecdotal and apocryphal, the white whale of truly accurate healthcare data. The albatross around our necks.

The SKU cross-referenced against a manufacturer part number, a new use for an existing treatment, the brilliant idea that transforms an operating room for a single procedure, and could inform the next great piece of surgical equipment. Each of these is a person doing manual work that is not recorded, data that is not shared, and lives that will not be saved. Each is a cost that an integrated, verifiable, privacy-preserving data layer would handle in milliseconds for fractions of a penny. Instead, we look at the castle walls and think about the singing brambles to pull and say, "It's too much work."

Here is the part that really stings: we are not getting more security in exchange for the silo tax. We are getting less.

A dusty shelf in a far-off storage room hides an uncounted, now-expired item. It is either used anyway or a procedure is skipped; either way, the patient’s health security is compromised. An opaque procedure code and an outdated system for allocating hospital resources create inertia that leads to mistakes. An insurance claim that has to be re-keyed, re-verified, and re-explained across five disconnected systems is a claim with five points of human exposure. A patient record that lives in a dozen partial copies across a dozen partial vendors is a record with a dozen points of breach. And the distributor who thinks that keeping their products and prices siloed keeps their margins safe, overlooks that the rest of the system will just guess at whatever price sheet they last had for you and move on.

No one is more secure in the current system. We are all less well off in terms of health, privacy, and cost.

Patients are not safer because their records are fragmented across systems. Manufacturers are not better informed because demand signals are siloed within their distributors. The distributor has gained nothing and lost new sales opportunities due to partial data. Payers and providers are not getting protection for their patients or their business model because their billing requires three rounds of clarification.

We are paying for inertia. We have built a system that confuses isolation with protection, and we are calling the cost of that confusion the price of doing business. We are paying more in time and dollars for everything. And the fix is not as expensive as it seems. The brambles we have been tugging at for half a decade at base86 are not that sharp. The results of throwing open the shutters to let in all of the light will impress you.

The tools to share data without exposing it exist. Data pipelines stripped of the truly sensitive or protected by the strongest encryption, as well as hashing of data that a particular party does not need to do their work, could be implemented in the second phase. Verifiable two-way pipelines can be opened now to transmit demand and supply signals back and forth across the entire supply chain. Distributed blockchains and ledgers, along with anonymous identifiers, can stand up within a few years, not decades. Our health data can be made truly portable and interoperable.

That is the conversation we are not really having yet. Let’s start talking, in depth, about the silo tax and everything it costs us. The true cost remains hidden in line items someone else owns. The system is still supported by people who think it somehow helps improve their bottom line or at least protects it from shrinking. I am here to tell you there is no real arbitrage in a system this fragmented; whatever gain you have this quarter is lost the next.

Top-line revenue is stagnant, while true bottom-line costs grow. Let's stop paying for a system of silos that costs an extraordinary amount while giving surprisingly little. Looking for more? Let us know in the comments, or throw us a follow or like on LinkedIn:

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Jess McCarter