Data Analytics: Silver Lining in a Big Black Cloud

Good economic news is almost impossible to find these days. Employment is not improving, and historically low interest rates are not promoting investments that will restore lost jobs any time soon. The political process is deadlocked, incapable of producing coherent changes in economic policy. The real estate market is so battered that experts doubt housing will be a sound investment for at least a decade. The birth rate has declined for the second straight year—one of the surest signs that consumers of childbearing age are not confident in the future. Even Wall Street’s occasional gains are seen as blips in a downward cycle. The share prices of health care stocks are falling, and the bond ratings for most non-profit hospitals have been downgraded in the past few months.


However, the value of one health care asset—information—is rising fast. Companies that store and analyze data are the hot commodity in today’s medical marketplace. Competitive bidding for several health data companies has doubled or tripled their share prices in the past few months. Major payers, IT companies, and private investors are all betting that information is a critical success factor in health care. Access to key data and appropriate analysis of the numbers is increasingly viewed as the coming differentiator between winners and losers in health care.

Is this data frenzy creating the next unsustainable bubble? No; it has sound economic foundations. I cannot think of another industry that has collected so much information and used it so poorly. Health care’s inefficiency and ineffectiveness are due in no small measure to mismanagement of its data. Conversely, state-of-the-art information systems and analytics were common attributes of health systems identified as models for reform (e.g., accountable care organizations, medical homes). We simply cannot reduce costs of acceptable health care without good numbers and intelligent analysis. Wall Street gets it.

My bullish view is not an unconditional endorsement of data and analytics. Some companies in the business will perform highly sophisticated manipulations of bad numbers, ignoring a lesson of the latest crash in the stock market (e.g., “quants” who failed to realize that collateralized debt obligations included a lot of mortgages that would not be repaid). Others will collect good numbers but analyze them with flawed statistical techniques.

Nevertheless, companies that mine accurate, meaningful, and timely numbers with the right analytical tools will strike gold. They have the opportunity to shape successful health reform in local marketplaces—faster and better than complicated federal laws with uncertain political futures in bad economic times. What do you think? Is health reform possible without good data and sound analysis? Are data stocks a good buy…or the next market bust?