Google Acquiring Fitbit: The Battle for the Personal Health Record starts with a Skirmish for Consumer Wearables
By: Travis May
Tags: Healthcare

Google’s acquisition of FitBit has resulted in many great stories recounting the ins and outs of the fitness tracker and smartphone wars, Google’s troubled attempts to get a toehold in the wearables space, and the pending showdown with the Apple Watch. Commentators highlight the personal health data that Google will have access to through Fitbit as a regulatory and commercial risk — with FitBit users concerned that Google will now use their sensitive health information to strengthen its advertising business.

With this framing, it is possible to miss the central point of the acquisition: Google’s acquisition of FitBit is all about health data, and — specifically — about the path to the personal health record.

Here are my top 3 takeaways from the FitBit announcement.

Takeaway 1: The Battle for the Personal Health Record is Back

A personal health record (PHR) is an electronic application through which you, the patient, can manage and maintain all of your health information in a private, secure and confidential environment. In contrast to an electronic health record (EHR), PHRs are focused on giving patients — rather than physicians — control of their health information. The argument for a PHR is that a patient is cared for by many healthcare providers and, therefore, no single EHR will provide a full picture of a patient’s health status. The PHR concept has been around for decades, but earnest attempts to create a PHR did not take off until the mid-2000s. Here are a few highlights from attempts from a decade ago:

After a pilot with patients at the Cleveland Clinic, Google released Google Health in 2008. Patients could volunteer their health records from different providers and store them in one centralized PHR with Google. Google retired the product in 2011 due to lack of adoption.

In 2007, Microsoft launched HealthVault, its first attempt at a PHR, which would store and maintain personal health information. The product has floundered for years and will be officially retired in the next few weeks.

The leading open-source effort was Indivo, which generated some excitement among academics and health data wonks, but also never gained traction among users.

All of these early attempts to create a PHR floundered. Ten years later, the market is giving the concept a second shot, with Google and Apple now making big bets in this direction (as well as patient portals from startups like Ciitizen and Picnic Health). There are good reasons to think that this time someone will succeed:

First, 9 in 10 physicians use electronic health record systems, more than twice the rate in 2009.

Second, government interoperability mandates and initiatives have the teeth to make it easier for health information to flow from one EHR system to another than ever before — and there has been meaningful progress around interoperability APIs and data portability requirements.

Third, since Google Health was announced in 2008, many hundreds of new digital health companies have been launched, and investment has poured into the space from the private sector.

In short, there is more digitized health data than ever before, and there is more interoperable health data than ever before (though we still have a long way to go). This is causing the industry to take a second shot.

Takeaway 2: Many of the hard challenges around building a PHR still exist. Wearables mitigate some of them.

The $100 billion question is not whether Google or Apple will win the skirmish in wearables, which is a highly fragmented ~$25 billion market. The question is whether enough has changed in the last ten years to allow someone to succeed in the battle for the PHR, and who that winner will be.

Two challenges from a decade ago still are true today. First, the underlying business incentives to share data are often weak. Keeping data in one software product, platform or company is a way to drive patients to that particular product or company, and make it harder to switch. Health systems and health tech vendors often have incentives against data portability, which is why interoperability is being mandated by government initiatives (at CMS, HHS, etc.) rather than developing naturally in the market. Getting the incentives to share data right is critical because individual health data is extremely fragmented. Creating a PHR requires pulling data from a variety of sources, including electronic health records, claims, diagnostic labs, genetic tests, fitness trackers, and smartwatches. While there are technical and regulatory challenges to pulling this data together, the more daunting challenge is a commercial one.

Another challenge PHR is that there is yet to be an amazing patient-facing application for having all of your health records in one place. The flywheel of Google’s business is that its search capabilities are so valuable that it can passively gather data on its users’ interests and preferences, which can then be fed into the most effective advertising machine ever created. In health, there is no “search”. No one company has found a way to create so much value for patients that they can passively collect comprehensive health information and build products on top of that information.

Wearables and fitness trackers might be the closest that anyone has come to the valuable patient-facing application that starts to create a flywheel of attracting patient interest. Apple did not attempt to launch Apple Health Records until it had successfully rolled out the Apple Watch to tens of millions of customers. While FitBit has struggled to compete with Apple, the company now has 28 million active users who interact with the application to track their activity and sleep patterns. That positions Google and FitBit well to begin signing up new health data partnerships, and ingest other interoperable health data to enhance the value of the product for users.

On a three year horizon, the success or failure of the FitBit acquisition will not hinge on its role as a fitness tracker. It will hinge on Google’s ability to evolve the product toward a PHR that tens or hundreds of millions of active users find valuable.

Takeaway 3: Google is Now A Real Player in the Battle for the Personal Health Record

It is still an open question whether companies can develop the amazing application that allows the PHR to take off and unlocks an enormous market for personalized health data. Bridging from fitness tracking to a general PHR is not trivial, and other companies (Backpack, Ciitizen, Picnic Health, etc.) are going at the problem more directly.

Assuming that winners do emerge, we predict that they will have a few key characteristics:

First, they will be brands that are extremely trusted by consumers. Consumers will be confident that the privacy and security of their information is protected, and that their information will not be misused.

Second, they will be companies that have mastered the user experience. If consumers have to spend hours porting information into a PHR by accessing different accounts (as they did in the first round of Google Health), they won’t do it. If consumers have to enter personal health data, they won’t do it. If consumers don’t receive immediate value from integrating their health data, they won’t use it.

Third, they will be companies that understand how to create value-added services from health data. Whether it’s benchmarking key health indicators against the relevant population and recommending specific actions to improve consumer health or allowing consumers to opt into and derive insight from thousands of real-world data studies, a simple dashboard won’t be enough.

If Google’s acquisition of FitBit is approved by regulators, Google will be well positioned for this battle. We will then see continued fierce competition in the wearables and other personal health information markets. But the more interesting question is who will reshape today’s competitive dynamics to get us to the PHR and to integrated health information more broadly.

(Conflict note: While Datavant is not in the personal health record market, we partner with many of the companies listed here on adjacent problems around protecting data privacy and creating data liquidity.)

Thanks to Shahir Kassam-Adams and Bob Borek for their support developing this piece.