Imagine trying to play an Instagram reel with a 2g internet connection. Sounds frustrating, right?
Well, that’s exactly what’s happening behind the scenes in healthcare today.
While medical treatments have advanced leaps and bounds, the technology that powers the industry—things like scheduling systems, billing platforms, and data-sharing networks—is stuck in the past.
Andreessen Horowitz (a16z) is calling for a change. Their latest report, It’s Time to Build: Healthtech Infrastructure, makes a compelling case for why healthcare’s digital backbone needs an urgent upgrade. The industry’s future depends on it, and so do patients’ lives.
This transformation is not just about upgrading legacy systems, but about laying the groundwork for a more efficient, interoperable, and patient-centric healthcare ecosystem.
Healthtech infrastructure: The hidden backbone of healthcare
We often think about healthcare in terms of doctors, hospitals, and prescriptions. But behind the scenes, an intricate web of software powers everything from booking appointments to processing insurance claims. This is what a16z calls the “Maslow’s hierarchy” of healthcare—basic yet essential.
The problem? Much of this infrastructure was built decades ago. While healthcare has evolved with telemedicine, AI diagnostics, and personalized treatments, the systems that keep everything running are stuck in the past.
Why outdated systems are a big problem
Many of today’s top healthtech infrastructure companies still rely on old-school methods—manual data entry, clunky software, and even fax machines (yes, really!). This outdated tech slows everything down, increases costs, and can even put patient care at risk.
Take data sharing, for example. In a world where you can instantly send money across the globe, hospitals still struggle to exchange patient records. The result? Delayed treatments, administrative nightmares, and missed opportunities for better care.
And it’s not just inefficiency—these legacy systems make healthcare more vulnerable. High-profile outages in recent years have shown just how fragile the industry’s digital backbone is. When systems go down, appointments are missed, insurance claims get stuck, and hackers get the opportunity to break in. This decreases public confidence in healthcare services.
The value proposition of modern infrastructure
a16z cites recent high-profile outages as proof of the complexity and vulnerability of the current system. There are gaps that offer significant chances for business development and innovation.
The global value-based healthcare services market is anticipated to reach USD 4.13 trillion by 2033. The healthcare industry is shifting towards value-based care (where providers get paid for patient outcomes, not just services), virtual healthcare, and AI-driven diagnostics.
This increasing demand emphasises the need for updated infrastructure, better interoperability and efficient data sharing. There’s massive potential for change.
But to make the most of these innovations, we need better infrastructure. Modern, tech-native systems come with huge advantages:
- Automation and interoperability: Systems that talk to each other seamlessly and efficiently share data.
- Faster transactions: No more waiting weeks for insurance approvals.
- Scalability: Platforms that grow with the industry and adapt to new healthcare models.
- Big business potential: Companies investing in next-gen healthtech infrastructure are seeing profit margins of 60–70%.
Better interoperability and efficient data sharing can result in improved patient outcomes and more effective operational processes, giving rise to a virtuous cycle of innovation and growth.
What makes a winning healthtech infrastructure company?
a16z outlines key characteristics of successful healthtech infrastructure companies:
- High-volume transaction nodes: They operate at critical points in the system, processing vast amounts of data and transactions.
- Payment integration: They streamline financial transactions between patients, providers, and insurers.
- Interconnectivity: They act as digital bridges between various health stakeholders.
- Systems of record: They function as core repositories of essential data.
- Network effects: They exhibit network effects, increasing in value as more users join.
These companies can act as “indexes” on high-growth market segments. They are the backbone of healthcare’s future, creating efficiency and reducing costs while opening lucrative business opportunities.
They also have the potential for high gross margins, particularly when built with modern, tech-native approaches that emphasise automation and interoperability.
Opportunities for new entrants and innovators
According to a16z, there are two main ways to build the next wave of healthtech infrastructure:
Upgrading legacy systems
This involves modernising legacy systems and challenging entrenched players. There is immense potential for overhauling existing infrastructure. By integrating modern APIs and automated processes, new entrants can significantly enhance the performance of entrenched systems.
Although tough, since big players dominate the space, success in this arena is not unprecedented. The report notes that recent ventures have achieved significant scale in recent decades, particularly by leveraging investment capital for faster growth.
Building de novo infrastructure
This focuses on developing new systems in emerging healthtech trends. Key opportunities include:
- Clinical interoperability: Creating systems for the seamless exchange of clinical data, making patient records more accessible and secure.
- Value-based care enablement: Building infrastructure to support providers transition to value-based payment models.
- Virtual care provider networks: Developing platforms for managing and administering virtual care networks—telehealth and home-based care.
- Novel benefits and payments: Creating infrastructure to support new payment mechanisms for innovative therapies and services.
The role of AI: A game changer
The report details the profound capability of AI technology in reshaping healthcare at an astonishing pace. The AI healthcare market is expected to reach $187.7 billion by 2030, growing at nearly 40% annually.
From predictive analytics to automated diagnostics, AI can transform how healthcare operates—but only if we have the infrastructure to support it.
The bottom line: Now is the time to build
The message from a16z is clear: now is the time to build modern healthtech infrastructure. Whether improving existing systems or developing new ones, the industry needs technology that prioritizes efficiency, connectivity, and patient outcomes.
For entrepreneurs, investors, and healthcare leaders, this is a once-in-a-generation opportunity. The companies that take on this challenge today will shape the future of healthcare tomorrow.
-By Alkama Sohail and the AHT Team
