Health records giant Epic cracks down on startup for unauthorized sharing of patient data
The eponymous sign outside Epic headquarters in Verona, Wisconsin.
Source: Yiem via Wikipedia CC
Epic Systems, the largest provider of software for managing medical records, says a venture-backed startup called Particle Health is using patient data in unauthorized and unethical ways that have nothing to do with treatment.
Epic told customers in a notice on Thursday that it cut off its connection to Particle, hindering the company’s ability to tap a system with more than 300 million patient records. Particle is one of several companies that acts as a sort of middleman between Epic and the organizations — typically hospitals and clinics — that need the data.
Patient data is inherently sensitive and valuable, and it’s protected by the Health Insurance Portability and Accountability Act, or HIPAA, a federal law that requires a patient’s consent or knowledge for third-party access. One way Epic’s electronic health records (EHR) are accessed is through an interoperability network called Carequality, which facilitates the exchange of more than 400,000 documents a month, according to its website. Particle is a member of the Carequality network.
To join the network, organizations are vetted and have to agree to abide by clear “Permitted Purposes” for the exchange of patient data. Epic responds to requests for data that fall under the “Treatment” permitted purpose, which means the recipient is providing care to the person whose records they are requesting.
Epic said in its notice on Thursday that it filed a formal dispute with Carequality on March 21, over concerns that Particle and its participant organizations “might be inaccurately representing the purpose associated with their record retrievals.” The company suspended its connection with Particle that day.
“This poses potential security and privacy risks, including the potential for HIPAA Privacy Rule violations,” Epic said in the notice, which was obtained by CNBC.
In a blog post late Friday, Carequality said it takes disputes “very seriously and is committed to maintaining the integrity of the dispute resolution process as well as trusted exchange within the framework.” The organization said it can’t comment about the existence of any disputes or member activities.
Representatives from Epic and Particle didn’t respond to requests for comment. However, Particle published a blog post Friday evening and said it began “addressing this issue immediately” after Epic “stopped responding to data requests from a subset of customers” on March 21. Particle said in the post that a big challenge in such matters is that there is “no standard reference to assess the definition of Treatment.”
“These definitions have become more difficult to delineate as care becomes more complicated with providers, payers, and payviders all merging in various large healthcare conglomerates,” Particle wrote.
Epic, a 45-year-old privately held company based in Wisconsin, is the largest EHR vendor by hospital market share in the U.S., with 36% of the market, according to a May report from KLAS Research. Oracle is second at 25%, following the software company’s $28 billion purchase of Cerner in 2022.
As of July 2022, Particle had raised a total of $39.3 million from investors including Menlo Ventures, Story Ventures and Pruven Capital, according to a release. The New York-based startup said at the time that its technology “uniquely combines data from 270 million plus patients’ medical records by aggregating and unifying healthcare records from thousands of sources.”
Epic said Particle introduced thousands of new participant connections to Carequality in October, and asserted that they fell under the treatment use case. In the following months, all of Particle’s participant organizations claimed a permitted purpose of treatment for their requests, Epic said.
‘Non-treatment use case’
However, Epic began to notice some red flags. The company said it observed anomalies in the patient record exchange patterns, like requests for large numbers of records within a certain geographical region. Additionally, Epic said that the companies connected to Particle weren’t sending new data back from patients, which “suggests a non-treatment use case.”
Epic and its Care Everywhere Governing Council, consisting of 15 industry representatives, evaluated Particle’s new participant connections and determined that organizations like Integritort, MDPortals and Reveleer, which acquired MDPortals last year, “likely didn’t conform to a Treatment Permitted Purpose,” the notice said.
Epic said it learned that another Carequality member was planning to file a dispute, alleging that Integritort was using the patient data to try and identify potential class action lawsuit participants. On March 28, Epic said it discovered that a participant called Novellia claimed it was requesting records under treatment, despite publicly advertising its product as a “personal health tool.”
Integritort, Reveleer and Novellia didn’t respond to requests for comment.
Epic said it filed a formal dispute with Carequality at the Governing Council’s recommendation. On April 4, Epic asked Particle to provide additional information to illustrate how its participants qualify for the treatment use case, according to the notice.
Michael Marchant, director of interoperability and innovation at University of California Davis Health, serves as the chair of Epic’s Governing Council. He said it’s hard to know exactly why Particle might have provided these organizations with records, or whether it intentionally engaged in wrongdoing. But, he said, companies have to act responsibly even if pressured to deliver financial results.
“If they were selling to things that they knew were not treatment-related organizations in an effort to match VC funding or profit margins or revenue targets or what have you, then that would be really bad,” Marchant told CNBC in an interview.
In a statement on LinkedIn Wednesday, Particle founder Troy Bannister said Epic acted unilaterally, and that Particle has not seen “rationale, justification or official claims” surrounding these issues.
Bannister wrote that, to the company’s knowledge, “all of the affected partners directly support treatment.” He said these organizations pull data for care providers and share data back with the Carequality network.
“While we continue maintaining our connection with Carequality, the ability for one implementor to decide, without evidence or even so much as a warning, to disconnect providers at massive scale, jeopardizes clinical operations for hundreds of thousands of patients as well as the trust that is so critical to a trust-based exchange,” Bannister wrote.
Bannister didn’t address Epic’s April 4 request for additional information.
The formal dispute process is still ongoing. Marchant, who also serves as the co-chair of an advisory council at Carequality, said it’s the first time in the network’s history that a complaint has gotten this far.
U.S. artificial intelligence names were in negative territory in premarket trading on Friday, extending losses into their third day.
Oracle was 0.9% lower in premarket trading, paring earlier losses which saw it fall 1.3%. Nvidia shed 0.7%, Micron fell 0.9%, and CoreWeave was down 1.3% at 5:16 a.m. ET.
Broadcom, which reported a strong quarter on Thursday, was last seen down 5%.
The share price of cloud computing and database software maker Oracle plummeted on Thursday, ending the session around 11% lighter after revenue earnings missed analyst expectations on Wednesday.
It dragged other AI-related names down with it despite a record-breaking rally elsewhere on Wall Street, suggesting investors are rotating out of tech into other parts of the market.
The tech-heavy Nasdaq Composite fell 0.26% on Thursday, despite the Dow Jones Industrial Average and S&P 500 hitting fresh records at the end of the session.
Despite booming demand for Oracle’s artificial intelligence infrastructure, it posted mixed results this week. Revenue came in at $16.06 billion, compared with $16.21 billion expected by analysts, according to data compiled by LSEG.
It followed widespread speculation around the long-term health of the company, with investors cautious about its reliance on debt to execute its AI infrastructure build-out. The broader industry’s circular dealmaking has also raised eyebrows.
“We think recent investor scrutiny on artificial intelligence’s potential and circular GPU deals can be overly punitive to key AI suppliers like Oracle,” said Morningstar Equity Analyst Luke Yang. “Oracle remains a respectable cloud provider that enjoys strong switching costs across its database, application, and infrastructure lineup.”
That said, the firm reduced its fair value estimate for wide-moat Oracle to $286 per share, down from $340. Morningstar’s moat rating refers to its assessment of a company’s durable competitive advantage.
“We lowered our long-term earnings outlook as delivering Oracle’s planned capacity on time now proved to be a harder task. However, we continue to view shares as undervalued,” Yang added.
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