The use of artificial intelligence (AI) in healthcare is rapidly evolving and the demand for data is growing stronger. Life science companies are using AI to develop and improve products. Hospitals and insurers are using patient data for standards/baseline metrics for value-based arrangements and reimbursements. Data drives AI, and the more data the better. I believe the demand for de-identified patient health data is only going to grow. Data is a valuable commodity, and it will unlikely be exchanged for free.
Generally, the patient owns their medical file/chart and has legal privacy, security and accuracy rights related to their health information. However, once that information is captured and documented in written or electronic form (e.g., paper chart or electronic data file), and since the health care provider owns the media in which the information is recorded and stored, the health care provider gains the property right of possession of data, commonly referred to as intellectual property. Intellectual property laws protect “original works of authorship.” Medical records represent the professional medical opinions of a physician or a medical institution, and therefore may not necessarily be the patient’s property. The popular view and treatment of electronic patient files are that the health care provider becomes the legal custodian of the health care records and is given specific legal rights and duties relating to the possession and protection of that health record (i.e. intellectual property).
The most common scenario is a life science company acquiring de-identified electronic patient health data from a hospital. But how do you determine the FMV of data? You first must determine the character and substance of the transaction. Although data is considered an intangible asset, this type of exchange doesn’t rise to the level of a traditional asset sale. A seller of electronic health data (EHD) (i.e. healthcare organizations) typically will not relinquish exclusive rights to its EHD and would retain the right to sell or license it to another user/buyer. This type of transaction is most appropriately characterized as a licensing agreement transaction which is similar to the copyrights of intellectual property.
Estimating the FMV of a nebulous intangible asset, such as EHD, is very difficult and more imprecise than arriving at the market value of, say a business or piece of equipment. The appraiser employs the traditional valuation approaches – income, market and asset approaches. However, the indication of values will tend to be quite disparate. As a result, the compliance posture on a transaction for the purchase/sale of EHD will need to be a bit liberal. Meaning, the appraiser could arrive at 2 indications of value, and as long as the actual sale price is considerably lower than the highest indication value, then you’re safe.