It’s Time to Build: Healthtech Infrastructure

In the “Maslow’s hierarchy” of the healthcare industry’s needs, the infrastructure layer is the foundational workhorse of the system. Healthtech infrastructure refers to the utilities and systems-of-record that underpin all of the core operational transactions, financial transactions, data exchange, and interoperability actions that occur across the healthcare system everyday. Appointment booking? Powered by a practice management system. Claims processing? Powered by a clearinghouse. Purchasing Medicare Advantage health insurance? Powered by an underwriting and enrollment engine. These are examples of infrastructure systems underlying the healthcare experiences we encounter in our everyday lives, let alone all that happens behind the scenes to make the healthcare system go ‘round on a regular basis.

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This post largely focuses on healthtech infrastructure companies that relate to payor and provider operations, all of which ultimately impact how consumers access, pay for, and experience the healthcare system. The figure below (though certainly not comprehensive) illustrates some of the major categories of established, legacy healthtech infrastructure companies that have achieved at least $1 billion of enterprise value.

The healthcare industry has faced a number of significant (and unfortunate) outage events ¹ in recent years that shed light on the scale, complexity, and fragility of some of the core, but often legacy, infrastructure systems on which the industry relies. Emerging business models (e.g. value-based care, consumers as payors) and novel care delivery models (e.g. virtual care, home-based care, remote patient monitoring) have also elucidated zones of the market where systematic technology infrastructure doesn’t even exist yet. These areas represent major company building opportunities, and also some of the strongest business models, as we’ll describe below.

The healthtech infrastructure greats

Many of the largest and most important companies in the history of healthcare technology and services have been infrastructure companies – in fact, the companies denoted in the figure above ² collectively represent at least ~$160 billion in enterprise value as of December 2024, and did a collective ~$60 billion in revenue in 2023.

But most are built on legacy, last-generation technologies (or aren’t even technology businesses to begin with) — for instance, many don’t have APIs (application programming interfaces), so integration requires proverbial duct tape in the form of manual labor or asynchronous data exchange modalities, e.g. asynchronous file sharing, phone calls, faxes. Much of the inefficiency and friction experienced by providers and consumers as they perform their jobs and interact with the healthcare system, respectively, can be linked back to those deficiencies — e.g. the difficulty in knowing what a service will cost, the lack of on-demand access to one’s comprehensive medical records, or the challenges surrounding booking appointments in a timely manner.

What makes them great?

Successful infrastructure companies tend to exhibit a number of characteristics, such as:

• Sitting at a high-volume transaction node in the industry (e.g. Change Healthcare processes 15 billion operational and financial transactions annually)
• Sitting in or being closely tied into the payments flow
• Serving as connective tissue between 2 or more stakeholders in the industry (e.g. many of the players depicted above facilitate connectivity between payors and providers)
• Serving as a core system of record
• Exhibiting network effects

What’s compelling about a strong infrastructure company is that it can behave like an index on a large, high-growth segment of the market. For instance, as overall utilization of behavioral healthcare services grows, revenue cycle companies that serve behavioral health providers also grow, since they are tethered to claims and payment volumes in that space. Great infrastructure companies also tend to achieve ubiquity — the most successful infrastructure companies are seemingly embedded everywhere, despite not necessarily being an end-user-facing product, e.g. Surescripts, Epic, Change, UKG/Kronos.

Healthtech infrastructure companies also have the potential to be high gross margin businesses, since they can essentially be software businesses, if built in a tech-native manner that embraces automation and interoperability. Even the more services-heavy legacy infrastructure players often exhibit 60-70% gross margins, because they’re able to capture significant value by serving as mission-critical utilities.

But not all infrastructure companies are created equal — in order to succeed, they do need to pick a sufficiently “high heft” node of the ecosystem to which to tether itself, and have a product surface area big enough to be able to capture enough value and have enough growth potential to make it VC-backable. These companies also typically require a two-sided network motion to be built over time, and thus may require more time and capital to unleash the full potential of the platform.

Opportunities for company building

For builders, opportunities exist to either:

a) massively upgrade existing areas of the infrastructure stack, or

b) build de novo utilities and backend systems in emerging areas of the market where infrastructure doesn’t yet exist.

In the former category, we acknowledge that it can be very non-trivial to unseat a legacy, entrenched player in such mission-critical areas of transactional flow, especially those that have been ossified over decades. But a handful of the companies (all worth at least $1 billion) depicted in the map above were born in the last 20 years, demonstrating that it’s possible to break in and get to significant scale in a reasonable amount of time, especially if able to leverage investment capital to achieve higher growth rates than those legacy players, which were generally either private equity-backed or bootstrapped.

In the latter category, some whitespace opportunities for infrastructure builders include:

• Clinical interoperability – most mature interoperability systems focus on administrative and financial data exchange, but clinical data exchange is an emerging area of activity; this space has significant regulatory tailwinds that are propelling the emergence of clinical data-oriented interoperability engines, poised to create a new layer of interchange between stakeholders in the system (including consumers), as well as more clinical context embedded in other legacy workflows.
• VBC enablement – while payors have established core competencies in taking and managing risk, more risk is being delegated to providers, who lack those capabilities as tuned for the provider-based setting. New payment models (e.g. GUIDE) also require novel infrastructure to administer.
• Virtual care provider networks – the composition of provider networks now includes virtual medical groups, home- and community- based care providers, and remote patient monitoring programs, all of which require new rails for network contracting and clinical program administration.
• Novel benefits and payments – new payment mechanisms for healthcare products (e.g. cell and gene therapies, preventative interventions) and services (e.g. ICHRA, BNPL) require new infrastructure to operate.

These whitespace opportunities correlate with the 5 bottom-up market forces described in “The Coming Healthcare Revolution,” which represent the ongoing shifts towards novel care models, novel payment models, new sites of care, platform consolidation, and emergent care provider types that are pushing the boundaries of the status quo definition of the “healthcare system,” and that require new infrastructure to operate. As we’ve talked about, most, if not all, of these categories are also enabled by regulatory tailwinds of some sort.

The combination of a) the mission-critical nature of infrastructure to the healthcare industry, b) the scale of the healthtech infrastructure market, c) the attractiveness of the high-quality business models that can be built in healthtech infrastructure, and d) the fact that most infrastructure systems are aging and fragile, or non-existent in emerging areas that also have regulatory tailwinds, make this is a compelling time to build a healthtech infrastructure company. Those conditions also intersect with our commentary on leveraging AI for infrastructure use cases to achieve 10x better performance and operational efficiency, which can be how upstarts gain a competitive advantage relative to entrenched incumbents. We believe these motions could result in the creation of an infrastructure business that could ultimately become the biggest company in the world.

Healthtech infrastructure canon

Healthtech infrastructure

• Consumers as a New Class of Payor
• Grand Challenges in Healthcare AI
• The New Drug Delivery Challenge: How Will Cures Reach Patients?
• When Two Giants Intersect: Healthcare Meets Fintech
• Healthcare Marketplaces, Where Art Thou?
• Healthcare x Fintech’s Biggest Prize: The Financial OS of Healthcare
• Consumer Health: Areas of Opportunity
• Payvidors, Unbundled: Opportunities in Healthcare Fintech
• The New Tech Stack for Virtual-First Care

Digital health builders diaries

• Superstaffing in Healthcare with Hippocratic AI
• Health Benefits 2.0: Tailored to a Mobile Workforce
• Lessons from Healthcare Infrastructure Pioneers with Jeff Margolis, Founding CEO of TriZetto
• Regulation as a Catalyst for Company Creation in Healthcare
• The Most Interesting Healthcare Platform Companies You’ve Never Heard of, with Julie Klapstein
• Building an AI-Native Health Plan with Mario Schlosser
• Putting the “Pro” in Provider Networks, With Dan Rosenthal

Thanks to Daisy Wolf, Jay Rughani, and Jen Walsh for their contributions to this piece. We’re deeply appreciative to the numerous experts who reviewed, commented on, and contributed to this piece, including: Dan Rosenthal, Julie Klapstein, Margaret McKenna, Himanshu Arora, Sid Bothra, and Ed Park.