Healthcare Interoperability in the Age of Cuts: Strategy, Not Surrender

I work in the digital healthcare business — helping healthcare organizations build systems that talk to each other, share data, and ideally reduce friction for both patients and care teams. I’ve also spent time working on digital front doors—the slick, app-like experiences many hospitals and other providers now use to engage patients. These solutions are effective, but they’re not too cheap, both in licensing costs and the services required to put them together.

Recently, I’ve been thinking about what happens to all of this infrastructure—the APIs, middleware, and patient portals—when the funding starts to disappear.

The signals are there: pressure on Medicaid, Medicare, VA services, and public health agencies is rising. In previous posts, I’ve explored the downstream risks (The Big Beautiful Bill, Can We Automate Our Way Out, The Cost of Early Death). But it’s clear that interoperability itself may also be in the crosshairs.

What Interoperability Meant—And Why It Might Be Changing
Interoperability has been around for a while, but was supercharged about 15 years ago with the HITECH Act (Health Information Technology for Economic and Clinical Health). The Office of the National Coordinator for Health Information Technology (ONC) define interoperability across four levels:

• Foundational: Data exchange between IT systems
• Structural: Standard formats and syntax (e.g., HL7, FHIR, CCD)
• Semantic: Shared meaning of data between systems
• Organizational: Consent, governance, legal agreements, workflows

(HealthIT.gov, 2023)

These definitions assume continued growth and investment—backed by Meaningful Use, Cures Act mandates, and adoption of EHRs. However, if federal reimbursement begin to shrink, this framework may no longer hold up.

Digital Front Doors—What Happens When the Budget Gets Tight?
Digital front doors, including mobile apps, chatbots, appointment engines, and patient access APIs, are not free. In fact, a 2023 Chilmark Research report noted that digital front door initiatives often exceed $500K in upfront investment for midsize systems—not including maintenance and integration costs (Chilmark Research, 2023).

If funding goes away, some possible outcomes may be:

• Front-end features dropped in favor of bare-bones portals
• Shifts toward payer-controlled ecosystems
• ​Use of white-labeled third-party tools that sacrifice customization for cost

This is not theoretical--state-level Medicaid agencies have already pulled back on HIE access in some cases (KFF, 2024).

Have We Engineered Ourselves Into a Privacy Trap?
Modern interoperability assumes real-time, cross-entity data sharing. The Trusted Exchange Framework and Common Agreement (TEFCA) is supposed to enable this while protecting consent and governance (ONC TEFCA Overview, 2024). But things have gotten messier.

• Weak HIPAA enforcement at the federal level has left state-level agencies scrambling with inconsistent protections
• Growing use of third-party apps under the 21st Century Cures Act creates new privacy risks—especially when developers fall outside HIPAA’s scope (GAO, 2023)
• Centralized architectures, like some cloud data lakes, create single points of failure—convenient but exposed

Interoperability doesn’t inherently weaken privacy, poor implementation and deregulation can.

What Happens When the Money Dries Up?
If proposed federal cuts materialize, the interoperability ecosystem will feel it in three key ways:

• Stalled Modernization: Small and rural providers may halt FHIR upgrades or delay EHR replacement cycles (CMS, 2024)
• Shrinking HIE Participation: Public health departments and Medicaid MCOs may exit expensive exchange networks
• Vendor Consolidation: Fewer dollars may push smaller integration vendors out, consolidating the market around major players

We should expect increased demand for cloud-native integration platforms, Pay-as-you-go API solutions, and simplified FHIR middleware that minimizes custom development.

How We As Consultants, Product Teams, and Strategists Can Respond

For Consultants & Integrators:

• Push modular architectures—ditch "all-in-one".
• Help clients develop interoperability tiers based on urgency and budget.
• Prioritize data governance and privacy early in the design phase.
• Create exit strategies for fragile HIEs and legacy networks.

For Vendors & Product Developers:

• Build tools that can scale down gracefully—not just up
• Make FHIR-native functionality the default, not a premium
• Explore federated data models and zero-trust architectures
• Data isn't always going to be great. Deliver value using imperfect, incomplete, or disconnected data—perfection will be rare

Where the Market Is Shifting
This took some research on my part, but it looks like a number companies are well-positioned for what’s next:

• Redox, Health Gorilla, Particle Health: - API-based  vendors with national reach (Redox, Health Gorilla, Particle Health).
• Skyflow, TripleBlind: Startups focused on privacy-preserving data exchange and federated AI (Skyflow, TripleBlind).
• AWS HealthLake, Google Cloud Healthcare API, and Microsoft Cloud for Healthcare offer elastic infrastructure for payers and providers trying to do more with less.

Final Thought: Strategy Over Nostalgia
Interoperability isn’t collapsing—but it looks like it is evolving. Consultants, technologists, and product leaders will need to adjust expectations, revise architectures, and help clients prioritize privacy and value over perfection.

This new era we are in is marked by constrained budgets, decentralization, and (not always strategic) tradeoffs. We are going to have to build things differently.

Sources & Citations

• ONC – What is Interoperability?
• ONC TEFCA Overview (2024)
• Chilmark Research – Digital Front Door Trends (2023)
• CMS – Strategic Vision 2024 (Not sure how much this vision will evolve)
• KFF – Medicaid & HIE Participation Trends
• GAO – Privacy Gaps in App Ecosystems (2023)
• Redox
• Health Gorilla
• Particle Health
• Skyflow
• TripleBlind