The Health Catalyst-sponsored HASummit was last in person way back in 2019. Two successive years of virtual HAS and I was completely done with it. Virtual events simply do not hold a candle to in-person ones, where ad hoc conversations flourish in a gathering of attendees who want to dig deep on a variety of subjects of interest.
This year’s HASummit (HAS’22) was a success on many fronts, but especially in getting the inside scoop on Health Catalyst to portend what may be in this company’s future. It’s not all daisies.
The Good
Health Catalyst continues to do an excellent job in nurturing its customer base. Time and again, I heard from their clients that what they appreciated most about working with Health Catalyst is their partnership approach. Clearly, the company has taken a page out of the Epic playbook that has created a strong and devoted client base.
Several years ago, one long-time user of Health Catalyst confided to me that if Health Catalyst doesn’t watch their back, Epic will eclipse them with Cogito. At this year’s HAS, I asked him what he thought about Health Catalyst now:
“Health Catalyst is the only analytics vendor that allows us to combine financial, operational and clinical data together to truly understand what is going on.”
Clearly, Health Catalyst is maintaining a competitive edge. The 300 plus client success stories the company has published is also a testament to the company delivering value.
Part of maintaining that edge is not becoming complacent. With eighteen new solutions planned in the coming year, clearly the company is continuing to move forward. Their Labor Costing solution that was introduced at HAS’22 is one that should see rapid adoption in today’s challenging market for providers, where labor costs have jumped a whopping 37 percent since 2019.
The company also sees a tremendous opportunity in strategic outsourcing and is so confident in their abilities, that they are willing to go at-risk in such contracts. This is a bold move, but one need only remember that Health Catalyst has been pursuing such a strategy since its early beginning, when it signed such a deal with Allina Health in 2015. In today’s tight labor market, where it is nearly impossible for health systems to find data analytics talent, Health Catalyst should do well here.
In recent years, Health Catalyst has been on a buying streak, acquiring a number of companies representing many facets of health IT. Twistle, a consumer-facing text app, has experienced warm adoption across the Health Catalyst installed base. API Ninja is another that the company will leverage to move from batch data loads to streaming data. And from a financial perspective, Vitalware may be their most successful. One longtime company salesperson told me that in this financially very tight provider market, Vitalware is selling extremely well.
Issues that Give Me Pause
Three years is a long time not to have seen a company up close and personal, something that can only be done in person. HAS’22 delivered on that front. Yet, the outside veneer that was presented this year wore away quickly and the worn grey underside was revealed.
It began with the keynote, which may have been new to many in the audience, but having been to some seven previous HASummits, it seemed repetitive and lacking in vision. Coming out of the pandemic, I am seeking out those companies that are truly breaking new ground – that have a new vision of healthcare reflective of what we have all been through. Health Catalyst will not make that cut.
Granted, Health Catalyst is caught in the health tech downdraft, with share price down 80 percent from its one-time high. That downdraft may have led senior leadership to keep vision contained and focus more on the here and now – the burning issues of revenue and cost, while maintaining if not improving quality.
Fine, but I felt unfulfilled. Here’s one reason why:
Today, providers are reporting record losses in revenue and subsequently are clutching their purses and wallets tightly. This is leading most vendors to pivot and serve adjacent markets. Epic is doing a stellar job at this with payers and its Payer Platform. Arcadia.io, Cerner and a host of other vendors are also pivoting to life sciences in support of R&D.
In talking to senior execs at the company, not a single one saw them serving the payer market anytime soon. Health Catalyst did look to jump into the life sciences market by leveraging its Touchstone solution, but after landing a handful of clients, pulled the plug on the initiative earlier this year. Can Health Catalyst sustain itself, let alone grow in any significant fashion, if it is only focusing on the provider market? I think not.
Another was the inability of the company to begin seeing itself as not just an analytics vendor, but rather a platform vendor. With a strong foundation of clean and normalized data, Health Catalyst can become an integral part of an enterprise’s IT portfolio by providing a third-party application marketplace.
Not only can this deliver more value to clients, but it can also make Health Catalyst a “stickier solution” in client sites. It will also free up Health Catalyst’s resources to focus on its core competencies and allow others to do the rest.
With a record low stock price and strong cash reserves, I’m now beginning to wonder if the company is poised for acquisition by a P.E. firm. While the CEO stated that the company has no intention to sell, everything has its price – and this company is no different.
What Remains to be Seen
Health Catalyst does have some strong differentiators, especially in its ability to combine the three critical data assets of a healthcare enterprise: financial, operational, and clinical. The company also has a loyal and devoted customer base – albeit one that has seen little growth outside of its acquisitions.
The company is now in the process of a major transformation of its data architecture. First, the company is going down the same path of virtually everyone – moving to the cloud. Despite its long relationship with Microsoft Azure and more recent use of Snowflake, a majority of clients are still using an on-premise solution.
In addition to migrating to the cloud, at HAS’22 the company announced its intent to transition from its core architecture today, DOS, to something called Expert Data Collection (EDC). Like DOS, EDC is a data staging platform for aggregating and curating data. What is different is that EDC will be using API Ninja technology to move from batch data loading and processing to streaming data for the real-time enterprise.
Each of these transitions can cause issues for an existing client, but doing both together? What could possibly go wrong?
The company will need to execute flawlessly on each of these transitions to maintain its base, let alone grow it.
Now I’ve known this company and its leadership from its earliest beginnings and have always admired its ethos. Company leadership has done an excellent job in ushering Health Catalyst to the heights it has reached as one of the top best-of-breed vendors in the provider analytics market.
But this was the first HASummit where I walked away with some concerns.
I truly hope for both Health Catalyst and the broader healthcare market that the company does execute flawlessly, expanding their reach into adjacent markets where they can deliver further value and maintain their well-earned reputation. They have the team; they need the vision.
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