Canopy’s valuations implied a greater than 20-to-1 price to earnings (P/E) ratio, far exceeding your typical financial service provider’s P/E. What was it about the health spending accounts administered by Canopy that promised big scalable growth? What was it that promised to make Canopy the next Google or Microsoft? Two words: health data. While Google and Microsoft reinvent themselves with their own proprietary personal health record formats, Canopy had a stable system for collecting this data through the auspices of major financial institutions. The Google and Microsoft network has a great many nodes, many of which require costly business development efforts. Canopy, on the other hand, could touch hundreds of thousands of individuals healthcare transaction records through integration with a single bank. Those individuals’ millions of transactions are like the millions of individual decisions that Google’s search engine crawls to make the web meaningful. Canopy was going to out-Google Google on health, 1/7th of the U.S. economy.
Consumers using the Canopy platform had the ability to tag specific health spending account transactions with a particular category of medical care for a particular beneficiary, and electronically attach receipts to support tax deductions. This metadata was laborious for the accountholders to compile, but very valuable once compiled. In aggregate, it was the beginning of a cost-of-care database that spanned a variety of health plan designs.
Health plans have long been in the business of collecting cost information, but according to Dr. John Langefeld of Claremont Partners, health plans typically confound price sensitivity data by making macro benefit design changes in response to macro utilization trends. The constantly permutating benefit designs make it tough to have valid longitudinal data about individuals’ decisions for a particular clinical procedure. Canopy’s data, on the other hand, cut across multiple major health plans and geographies, and typically with a focus on pre-deductible spending.
This morning I learned from a former Canopy executive that at least one of its forward-looking bank clients looked to process of HRA and FSA substantiation to feed price data back from its accountholders back to its accountholder community. For the most part, however, Canopy’s clients were wowed by Canopy’s health data in theory rather than in practice. While Canopy’s bank and insurance clients were enticed by health data capabilities during the sales process, these clients seldom took full advantage of the capabilities that existed.
One hindrance to full realization of the potential of aggregate health data from bank transactions is concerns about privacy. Even once HIPAA compliance is assured, advances in technology create an arms race of technology to secure the data. Recent research at the University of Texas showed that the data must be anonymized to near meaninglessness in order to prevent skilled deanonymization. Nonetheless, aggregate health cost and quality information provides tremendous utility to society and individuals, and the transactional side of health care is the most scalable way to collect it.
For readers interested in porting over Canopy’s health data and/or developing a road map for consumer-participatory healthcare, please contact me here. As mentioned in previous postings, I am putting together a remediation team with experience in addressing these issues.
