Death of the Walled Garden

I was listening to NPR's Marketplace last night, and I heard them talking about a settlement that had just been reached in New York. In this settlement, UnitedHealth Group will close a proprietary database run by their Ingenix subsidiary, and spend $50m to start a new, open database in its place.

The database in question is a gigantic repository of claims and payments, and Ingenix made a tidy living over the years by selling subsets of this data to insurers for really large sums of money. But for the insurers, the data is crucial, and they were the only game in town. The barriers to entry for another player were just too prohibitive for someone else to try to break into this business.

So what's the problem?

The problem is that insurers made many of the decisions about how they were going to reimburse for services based on this database, and they were the only ones who could check the numbers. They were able to mine and manipulate the data to their advantage, and providers and insureds had no choice but to trust that the insurance companies were treating them fairly.

Thus, a lawsuit was born.

But what does this have to do with software? The Ingenix database was one of the biggest remaining walled data gardens out there, and it's history. One by one, businesses that were in business only because of proprietary information are going the way of the dodo.

This is a really encouraging development for the health care industry - what's the next walled garden to fall?

5 Replies to “Death of the Walled Garden”

Thanks for your comments on this important story. As more of these low profile deals are brought to the public's attention, the pressure on the remaining data garden walls will continue to grow—clearing the way for new providers, techniques and business philosophies. Increasing the options for improving healthcare delivery (and other) systems is bound to be very good news for all of us. Good job Dave!

dlambert says:

January 15, 2009 at 10:36 am

Thanks, George. I especially liked this one because it was a two-for-one special: not only was this a proprietary database, but it was also enabling some rather customer-unfriendly practices in the insurance industry. I really hope that the new open database sparks some innovation in health insurance – they need it!